plaintiffs claim as their undisputed right to immediately apply the recent overpayment toward future bills. However, plaintiffs mistakenly argue that the overpaid sum is their property because they erroneously view each lease payment as an isolated transaction. Consequently, when the nature of the ongoing relationship between the MMS and the plaintiffs is properly identified, at least at this time, plaintiffs have no recognizable property interest in the overpaid funds.
Pending the resolution of prior debts, plaintiffs have no property interest in overpaid royalties to the extent of the alleged prior debts. The MMS's determination that plaintiffs have overpaid recent royalties did not create an immediate entitlement to those funds that would implicate the Due Process Clause. The court finds that the plaintiffs are not entitled to the overpayment until prior debts have been resolved because it views the transactions between the plaintiffs and defendants as a continuing, ongoing transaction. Once the prior debts have been finally resolved, the overpayment can be applied to satisfy the debts and, at that point, plaintiffs will be entitled to any remaining funds.
The critical flaw in plaintiffs' argument that they have an immediate entitlement to the recent overpayment is that it assumes that once the MMS established that the plaintiffs have made recent overpayment, they automatically acquire property rights in the excess funds (or perhaps the plaintiffs never lost the property rights in their money). Yet this assumption ignores the fact that plaintiffs may owe at least that much in unpaid royalties from prior years. An example will help illustrate the problem. If, for example, plaintiffs overpaid by one million dollars in 1993, but still owed two million dollars in unpaid royalties from 1992, plaintiffs could not claim that they have a property right in the one million dollars. The only way plaintiffs could claim rights in the one million dollars would be to artificially separate 1992's debt from 1993's overpayment. However, all of the debts owed stem from the same leases. The nature of the MMS' relationship with the plaintiffs is an ongoing, continuous one. As such, the court will view the transactions between plaintiffs and the MMS as a whole. If plaintiffs owe a sum from previous years' underpayment, plaintiffs cannot claim to be entitled to the recent overpayment. Plaintiffs have already received benefits from the leases in the previous years without compensating the MMS; therefore, plaintiffs have no right to overpaid amounts on the same leases because plaintiffs cannot overpay until the prior debts have been satisfied.
Plaintiffs claim that courts have recognized a property interest in money held by the government, but owing to a party. See, e.g., Marcello, 574 F. Supp. at 595 (tax refunds); Goldberg v. Kelly, 397 U.S. 254, 25 L. Ed. 2d 287, 90 S. Ct. 1011 (1970) (welfare benefits); Sniadach v. Family Finance Corp., 395 U.S. 337, 340, 23 L. Ed. 2d 349, 89 S. Ct. 1820 (1969) (wages); Toney v. Burris, 650 F. Supp. 1227, 1234 (N.D. Ill. 1986) (wages). Plaintiffs argue that, as with a tax refund, the MMS has determined that plaintiffs have overpaid their royalties, thus establishing an entitlement or recognizing an existing property interest in the funds.
Indeed as the cases cited by the plaintiffs show, before the government can appropriate money owing to a party and apply it to another, unrelated debt, the government must give the party process. See, e.g., Marcello, 574 F. Supp. at 595. However, in this case, the MMS is not seeking to appropriate the overpayment in order to apply them to another, unrelated debt. The prior debts are directly related to the overpaid funds and are all part of the same, continuing transaction. Moreover, unlike wages duly earned or a tax refund that the IRS has finally determined a party is entitled to receive, the MMS is still in the process of determining the amount of payment owed by the plaintiffs for prior years. Until all prior debts are finally resolved and satisfied, plaintiffs cannot be said to have rights in the temporarily withheld credits.
Because the court views the recent overpaid royalties as part of the same, continuing transaction as the prior, unpaid royalty debts, cases such as North Georgia Finishing, Inc. V. Di-Chem, Inc., 419 U.S. 601, 42 L. Ed. 2d 751, 95 S. Ct. 719 (1975), do not apply. In North Georgia Finishing, Inc., the Supreme Court struck down a Georgia garnishment statute that allowed any plaintiff in a pending suit to garnish the defendant's assets based solely upon a sworn affidavit with conclusory allegations as to the defendant's liability to the plaintiff. 419 U.S. at 603. The Court held that even the temporary garnishment of defendant's bank account implicated a property right protected by the due process clause. Id. at 606. "That the debtor was deprived of only the use and possession of the property, and perhaps only temporarily, did not put the seizure beyond scrutiny under the Due Process Clause." Id. Unlike the overpayment at issue in this case, the parties could not dispute that the defendant's bank account was his property. The plaintiff in North Georgia Finishing, Inc. attempted to appropriate defendant's property and apply it to satisfy another, unrelated debt. Such is not the case here. The MMS holds the recent overpayment in order to apply it to satisfy prior, unsatisfied debts on the same leases.
In light of the. court's determination that the MMS's decision to temporarily refuse to allow plaintiffs to credit the recent overpayment pending the resolution of prior underpayment does not implicate plaintiffs' property rights, the court does not reach the second step of the due process inquiry.
C. The preliminary injunction
In light of the court's holding on the merits of plaintiffs' constitutional and statutory claims, plaintiffs' renewed motion for a preliminary injunction will be denied as moot.
A separate order shall issue this date.
Royce C. Lamberth
United States District Judge
This matter comes before the court on the parties' cross-motions for summary judgment, and plaintiffs' renewed motion for a preliminary injunction. For the reasons set forth in the accompanying memorandum opinion, it is hereby ORDERED that
Plaintiffs' motion for summary judgment is DENIED;
Defendants' motion for summary judgment is GRANTED; and SUMMARY JUDGMENT is hereby entered for defendants, dismissing this action.
Plaintiffs' renewed motion for a preliminary injunction is DENIED as moot.
Royce C. Lamberth
United States District Judge