Eighth Circuit Hears Fight Over Pipeline Land Deals

ST. PAUL, Minn. (CN) – The Eighth Circuit heard oral arguments Thursday over whether pipeline company Dakota Access pressured landowners into easement agreements and lied to them about how much money they could get for sections of their property.

In this Oct. 5, 2016, file photo, heavy equipment is seen at a site where sections of the Dakota Access Pipeline were being buried near the town of St. Anthony in Morton County, N.D. (Tom Stromme/The Bismarck Tribune via AP, File)

Twenty-one landowners in Morton County, North Dakota, and one partnership filed a lawsuit last year accusing Dakota Access LLC and Contract Land Staff LLC of coercing them into easement agreements when they were approached by the companies in 2014.

Dakota Access needed the easements to run a pipeline carrying crude oil from oilfields in western North Dakota to a terminal in Illinois.

According to the lawsuit, Dakota Access offered the landowners $180 per 16.5 feet (or one rod) per easement in addition to a 20 percent signing bonus, for a total of $216 per rod if the owners signed up within 30 days.

“Dakota Access informed the Morton County landowners that $216 per rod was the best price that would ever be offered and the price would never be more for other landowners in Morton County,” the complaint states.

In reality, however, the landowners allege Dakota Access paid other landowners as high as $2,000 per rod.

They also claim they were told that if they did not sign the easement agreement, their land would be condemned by eminent domain or the pipeline would simply be moved to different land.

Chief U.S. District Judge Daniel L. Hovland dismissed the case in October 2017, finding that the landowners did not identify any specific misrepresentation of material fact.

He also ruled that their claims were barred by the integration clause in the easement agreements.

Representing the landowners, attorney Peter Zuger with Serkland Law Firm tenaciously argued Thursday before an Eighth Circuit panel that while fraud requires proof of actual intent, North Dakota’s unfair-tactics statute is not grounded in fraud.

The majority of his argument relied on that statute, which was enacted in the 1970s to protect landowners from being treated unfairly by public utility companies trying to acquire easements from landowners.

“The statue in this particular case says it prohibits a plethora of actions. One of those is fraud. But the statue says any unfair tactics, any intimidation, any harassment, cannot occur. It is not allowed in North Dakota,” he said.

However U.S. Circuit Judge David R. Stras said the lawsuit contains numerous allegations of fraud.

“My understanding of the other allegations, unfair competition, harassment, etc….there is less specificity as to those allegations,” Stras said. “Am I wrong about that?”

“Less specificity would be required to meet the standard,” Zuger replied.

“I guess what I am really getting at,” Stras continued, “is that when you get to the complaint itself, all it does from what I can see, is it repeats the language of the statute. In other words, I don’t see any specific allegations other than the fraud allegations.”

“I don’t see those allegations. I see a bunch of fraud allegations that are trying to pigeon hole into those other categories,” like negligent misrepresentation, he added.

Zuger responded sharply, saying he disagreed.

“Landowners were deceptively told that their land could be condemned and were deceptively told $216 per rod was the best price that would ever be offered,” he said.

In addition to other allegations in the complaint, Zuger continued, “those acts were intimidating, harassing and unfair.”

Dakota Access’ attorney, Amy Miller with Buchanan & Ingersoll, said the district court did not find the North Dakota statute as a whole sounded in fraud, but that the specific allegations in this case sounded in fraud.

“I think this is a very important distinction,” she said.

Miller continued, “In terms of the counsel’s point, if you don’t plead with particularity, certain claims that are fraud-like, then you basically eviscerate the policy reasons for having this requirement in the first place.”

She also said it is “very telling that in this case there are 21 plaintiffs and there are many, many right-of-way agents who act on behalf Dakota Access and not one single name is mentioned.”

The “who said what to whom is not addressed at all in this complaint,” Miller said.

U.S. Circuit Judges Bobby Shepherd and Jane Kelly rounded out the panel. It is unclear when a ruling will be issued.

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