Chesapeake Appalachia, LLC v. Suppa

91 F. Supp. 3d 853, 2015 U.S. Dist. LEXIS 26166, 2015 WL 966326
CourtDistrict Court, N.D. West Virginia
DecidedMarch 4, 2015
DocketCivil Action No. 1:14CV159
StatusPublished
Cited by3 cases

This text of 91 F. Supp. 3d 853 (Chesapeake Appalachia, LLC v. Suppa) is published on Counsel Stack Legal Research, covering District Court, N.D. West Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chesapeake Appalachia, LLC v. Suppa, 91 F. Supp. 3d 853, 2015 U.S. Dist. LEXIS 26166, 2015 WL 966326 (N.D.W. Va. 2015).

Opinion

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 5] AND DENYING DEFENDANTS’ MOTION PARTIAL SUMMARY JUDGMENT [DKT. NO. 36]

IRENE M. KEELEY, District Judge.

Pending before the Court are cross-motions for partial summary judgment, in which the parties seek a ruling on whether, in this case, class arbitrability is a question for the Court or for an arbitrator. For the reasons that follow, the Court GRANTS the motion of the plaintiffs, Chesapeake Appalachia, LLC and Chesapeake Operating, LLC (collectively, “Chesapeake”), and DENIES the motion of the defendants, Deloris Suppa and Charles Bunner (collectively, the “Defendants”).

I.

On June 15, 2011, each of the Defendants, who are joint owners of the subject mineral rights, entered into separate leases with Chesapeake that allowed Chesapeake to drill for, collect, and produce their oil and gas. In addition to lump sum bonus payments, the Defendants were to receive royalty payments equal to one-eighth of Chesapeake’s gross proceeds on the gas produced, less its post-production costs incurred between the wellhead and the point of sale. Importantly, the leases provided that:

In the event of a disagreement between Lessor and Lessee concerning this Lease or the associated Order of Payment, performance thereunder, or damages caused by Lessee’s operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association. Arbitration shall be the exclusive remedy and cover all disputes, including but not limited to, the [855]*855formation, execution, validity and performance of the Lease and Order of Payment. All fees and costs associated with the arbitration shall be borne equally by Lessor and Lessee.

(Dkt. No. 36-5 at 6; Dkt. No. 36-6 at 4).

In August 2014, the Defendants brought a putative classwide arbitration action against Chesapeake, alleging that it had artificially inflated its production costs, thereby resulting in reduced royalty payments. The class was defined as “All West Virginia lessors having oil and gas leases in which Chesapeake Appalachia, LLC was a party during the period August 3, 2010 through the present and has made deductions from the lessor’s royalty payments.” The Defendants asserted claims for breach of contract, unjust enrichment, and conversion.

A month after the Defendants initiated the arbitration proceeding, Chesapeake filed an action in this Court seeking a declaratory judgment (1) that “the Court, not arbitrator(s), is to decide whether class arbitration is available pursuant to the [subject leases],” and (2) that “class arbitration is not available pursuant to the [subject leases].” (Dkt. No. 1 at 2). The parties then filed cross-motions for partial summary judgment as to the first of these issues. The motions are fully briefed and ripe for review. The Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332(a).1

II.

“Class arbitration is a matter of consent: An arbitrator may employ class procedures only if the parties have authorized them.” Oxford Health Plans, LLC v. Sutter, — U.S. -, —, 133 S.Ct. 2064, 2066, 186 L.Ed.2d 113 (2013). To be sure, Chesapeake has raised this issue in its complaint, and much of the ease law discussed below bears on its outcome. At this stage, however, the parties are interested solely in the antecedent issue: Who decides whether they have authorized class procedures — the district judge or the arbitrator?

Although the Fourth Circuit has not decided this exact question, two other circuit courts have. See Opalinski v. Robert Half Int'l, Inc., 761 F.3d 326, 330 (3d Cir.2014); Reed Elsevier, Inc. v. Crockett, 734 F.3d 594, 597-99 (6th Cir.2013). According to the two-step analysis utilized by both courts, the first question is whether the availability of class arbitration falls under the category of issues generally decided by courts rather than arbitrators. If so, the court then must determine whether the presumption favoring judicial determination can be overcome by the parties’ clear and unmistakable intent to submit the question to arbitration.

A.

Courts label issues surrounding arbitration under one of two headings: “questions of arbitrability” or “procedural questions.”2 See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). Questions of arbitrability involve gateway disputes about “whether the parties are bound by a given arbitration clause.” Id. They represent the

[856]*856narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing the parties to arbitrate a matter that they may well not have agreed to arbitrate.

Id. Importantly, “ ‘the question of arbitra-bility ... is undeniably an issue for judicial determination.’ ” Peabody Holding Co. v. United Mine Workers of Am., 665 F.3d 96, 102 (4th Cir.2012) (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). That said, parties may agree to submit questions of arbitrability to an arbitrator, but their intent to do so must be clear and unmistakable. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Peabody Holding, 665 F.3d at 102.

In contrast, procedural questions are presumptively decided by an arbitrator. See Dockser v. Schwartzberg, 433 F.3d 421, 426 (4th Cir.2006). These questions “grow out of the dispute and bear on its final disposition.” Howsam, 537 U.S. at 83, 123 S.Ct. 588 (internal quotation marks and citations omitted). They involve issues such as “waiver, delay, ... notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.” Id. (quotation marks and citations omitted).

In 2003, the Supreme Court of the United States addressed whether the question of “who decides” the availability of class arbitration is an issue of arbitrability or procedure. In Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 448, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003), a commercial lender and its customers had entered into agreements, each of which contained the following provision:

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Cite This Page — Counsel Stack

Bluebook (online)
91 F. Supp. 3d 853, 2015 U.S. Dist. LEXIS 26166, 2015 WL 966326, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chesapeake-appalachia-llc-v-suppa-wvnd-2015.