IN THE SUPREME COURT OF THE STATE OF DELAWARE
CORONADO COAL II, LLC, § § No. 209, 2022 Plaintiff-Below, § Appellant, § § Court Below: Superior Court v. § of the State of Delaware § BLACKHAWK LAND AND § C.A. No. N21C-10-136 RESOURCES, LLC, § CCLD § Defendant-Below, § Appellee. §
Submitted: December 7, 2022 Decided: March 3, 2023
Before SEITZ, Chief Justice; VALIHURA, and VAUGHN, Justices.
ORDER
On this 3rd day of March 2023, it appears to the Court that:
(1) The plaintiff-appellant, Coronado Coal II, LLC (“Coronado”) appeals
from a Superior Court order dismissing its complaint for lack of subject matter
jurisdiction. The complaint alleges that defendant-appellee, Blackhawk Land and
Resources, LLC, (“Blackhawk”) breached a sub-sublease agreement between the
parties when it would not allow Coronado to conduct retreat coal mining1 in a seam
1 In its complaint, Coronado describes “Retreat mining” as “the part of ‘room and pillar’ method of underground coal mining in which remaining pillars of coal are mined, or ‘pulled’ as mining operations exit the mining area.” App. to Opening Br. at A7. of coal in West Virginia known as the Powellton “A” seam. The Superior Court
found that an arbitration clause that was part of the sub-sublease required that
Coronado’s claim be arbitrated.2 On appeal, Coronado claims that the Superior
Court misconstrued the arbitration clause. It also makes a second argument to the
effect that reversal is required if this court finds that the arbitration clause is
ambiguous.
(2) Coronado is a subsidiary of Coronado Global Resources Inc., a company
that produces metallurgical coal. Blackhawk holds interests in leases for tracts of
coal in West Virginia for the purpose of coal mining. On December 21, 2015, the
parties entered into a sub-sublease in which Blackhawk, sublessor, subleased to
Coronado, sublessee, the right to mine coal in the Powellton “A” seam in West
Virginia. The original lease between the lessor and lessee was created in 1937
(“1937 Lease”) and through various assignments and subleases Blackhawk was the
sublessee of the lease when it entered into its sub-sublease with Coronado. The sub-
sublease between Blackhawk and Coronado was made subject to the terms and
conditions contained in the 1937 Lease. One of those terms, contained in Article
Twenty, was an arbitration clause, which reads, in pertinent part:
Should any question arise between the parties hereto as to the performance by the Lessee of Articles Six, Seven, Eight, Nine, and Ten hereof, or any of them, or of any
2 Coronado Coal II, LLC v. Blackhawk Land and Res. LLC, 2022 WL 1772246, at *5 (Del. Super. May 31, 2022).
2 covenant contained in said Articles, or any of them, every such question shall be determined by arbitration in the manner provided for in this Article . . . .3
(3) Article Six of the 1937 Lease provides that:
The Lessee shall have the right to mine any merchantable seam of coal and covenants that in mining any such seam it will mine the same in such a manner as to recover the greatest possible amount of coal therefrom and in such manner that the mining thereof shall not injure or destroy any other vein or seam of coal not mined, or prevent the convenient and proper mining thereof.4
(4) The sub-sublease requires Coronado to submit mining plans to Blackhawk
for approval, and to conduct mining according to these plans, so as “[t]o protect the
properties and coal reserves included herein from waste, injury or damage[.]”5
Without Blackhawk’s approval, Coronado could not begin mining.6
(5) Between 2016 and 2020, Coronado submitted mining plans reflecting its
plans for retreat mining to Blackhawk in accordance with the sub-sublease, which
Blackhawk approved. However, on December 15, 2020, Blackhawk informed
Coronado by letter that Blackhawk no longer approved of Coronado’s plans to
conduct pillar mining underneath Blackhawk’s nearby mining operations at Coal
Branch mine. In its letter, Blackhawk asserted that Coronado’s retreat mining plans
were “problematic for the continued development and safety of the Blackhawk Coal
3 App. to Opening Br. at A134. 4 Id. at A128. 5 Id. at A73-74. 6 Id. at A74.
3 Branch Mine which is situated above the Powellton mine.”7 As a result of this
disapproval, Coronado claims that it “left in place at least 100,000 tons of
metallurgical coal, which is among the most valuable coal in the United States.”8
(6) Coronado also filed the complaint in this case, in which it asserted claims
for breach of contract and promissory estoppel. As to its breach of contract claim,
Coronado alleged that Blackhawk’s rejection of Coronado’s mining plans in the area
of the Coal Branch mine “was meritless”9 because “Coronado’s operations in the
Powellton [“A”] Seam did not present any unusual risk[;]”10 and, therefore, the
objection violated Coronado’s rights under the sub-sublease. Coronado cites Article
Six of the 1937 Lease, which grants Coronado the right to mine the Powellton “A”
Seam “in such a manner as to recover the greatest possible amount of coal therefrom
. . . .”11 As to its alternative promissory estoppel claim, Coronado alleged that: (1)
Blackhawk’s previous approval of Coronado’s mining plans constituted a promise
by Blackhawk “that Coronado could perform retreat mining in the Powellton [“A”]
Seam[;]”12 (2) Coronado had been foreseeably induced “to invest considerable time
and significant resources in implementing”13 its retreat mining plans by Blackhawk’s
7 Id. at A93. 8 Opening Br. at 9 (citing App. to Opening Br. at A9). 9 App. to Opening Br. at A20. 10 Id. 11 Id. at A19; see id. at A128. 12 Id. at A20. 13 Id.
4 alleged promise; and (3) “Blackhawk’s subsequent objection to Coronado’s mining
plans”14 caused Coronado to sustain damages for which it was entitled to
compensation.
(7) Blackhawk moved to dismiss Coronado’s complaint for lack of subject
matter jurisdiction on the ground that the arbitration clause divested the Superior
Court of the authority to hear Coronado’s claims. In response, Coronado asserted
that the arbitration clause did not “directly relate”15 to its claims because the dispute
arose out of Blackhawk’s actions, namely Blackhawk’s refusal to approve
Coronado’s retreat mining plan. Coronado focused on the arbitration clause’s
phrase, “the performance by the Lessee[,]”16 arguing that that phrase limited the
scope of the arbitration clause only to circumstances in which the dispute arises out
of actions on the part of Coronado, not actions by Blackhawk.
(8) In granting the motion to dismiss, the Superior Court found that the
“unambiguous terms” of the arbitration clause “demonstrate[ed] an agreement to
arbitrate all claims regarding the Lessee’s performance under Article Six” of the
1937 Lease; and both Coronado’s breach of contract and promissory estoppel claims
14 Id. at A21. 15 Id. at A112. 16 Id. at A106 (emphasis omitted); see id. at A113; see id. at A134.
5 “directly relate[d] to Coronado’s performance of rights and obligations” under
Article 6 of the 1937 Lease.17
(9) Coronado contends on appeal that the Superior Court erred by
misapplying well-established principles of contract interpretation when it
determined that the “unambiguous terms” of the arbitration clause “required
Coronado to arbitrate all claims set forth in the Complaint even though Blackhawk
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IN THE SUPREME COURT OF THE STATE OF DELAWARE
CORONADO COAL II, LLC, § § No. 209, 2022 Plaintiff-Below, § Appellant, § § Court Below: Superior Court v. § of the State of Delaware § BLACKHAWK LAND AND § C.A. No. N21C-10-136 RESOURCES, LLC, § CCLD § Defendant-Below, § Appellee. §
Submitted: December 7, 2022 Decided: March 3, 2023
Before SEITZ, Chief Justice; VALIHURA, and VAUGHN, Justices.
ORDER
On this 3rd day of March 2023, it appears to the Court that:
(1) The plaintiff-appellant, Coronado Coal II, LLC (“Coronado”) appeals
from a Superior Court order dismissing its complaint for lack of subject matter
jurisdiction. The complaint alleges that defendant-appellee, Blackhawk Land and
Resources, LLC, (“Blackhawk”) breached a sub-sublease agreement between the
parties when it would not allow Coronado to conduct retreat coal mining1 in a seam
1 In its complaint, Coronado describes “Retreat mining” as “the part of ‘room and pillar’ method of underground coal mining in which remaining pillars of coal are mined, or ‘pulled’ as mining operations exit the mining area.” App. to Opening Br. at A7. of coal in West Virginia known as the Powellton “A” seam. The Superior Court
found that an arbitration clause that was part of the sub-sublease required that
Coronado’s claim be arbitrated.2 On appeal, Coronado claims that the Superior
Court misconstrued the arbitration clause. It also makes a second argument to the
effect that reversal is required if this court finds that the arbitration clause is
ambiguous.
(2) Coronado is a subsidiary of Coronado Global Resources Inc., a company
that produces metallurgical coal. Blackhawk holds interests in leases for tracts of
coal in West Virginia for the purpose of coal mining. On December 21, 2015, the
parties entered into a sub-sublease in which Blackhawk, sublessor, subleased to
Coronado, sublessee, the right to mine coal in the Powellton “A” seam in West
Virginia. The original lease between the lessor and lessee was created in 1937
(“1937 Lease”) and through various assignments and subleases Blackhawk was the
sublessee of the lease when it entered into its sub-sublease with Coronado. The sub-
sublease between Blackhawk and Coronado was made subject to the terms and
conditions contained in the 1937 Lease. One of those terms, contained in Article
Twenty, was an arbitration clause, which reads, in pertinent part:
Should any question arise between the parties hereto as to the performance by the Lessee of Articles Six, Seven, Eight, Nine, and Ten hereof, or any of them, or of any
2 Coronado Coal II, LLC v. Blackhawk Land and Res. LLC, 2022 WL 1772246, at *5 (Del. Super. May 31, 2022).
2 covenant contained in said Articles, or any of them, every such question shall be determined by arbitration in the manner provided for in this Article . . . .3
(3) Article Six of the 1937 Lease provides that:
The Lessee shall have the right to mine any merchantable seam of coal and covenants that in mining any such seam it will mine the same in such a manner as to recover the greatest possible amount of coal therefrom and in such manner that the mining thereof shall not injure or destroy any other vein or seam of coal not mined, or prevent the convenient and proper mining thereof.4
(4) The sub-sublease requires Coronado to submit mining plans to Blackhawk
for approval, and to conduct mining according to these plans, so as “[t]o protect the
properties and coal reserves included herein from waste, injury or damage[.]”5
Without Blackhawk’s approval, Coronado could not begin mining.6
(5) Between 2016 and 2020, Coronado submitted mining plans reflecting its
plans for retreat mining to Blackhawk in accordance with the sub-sublease, which
Blackhawk approved. However, on December 15, 2020, Blackhawk informed
Coronado by letter that Blackhawk no longer approved of Coronado’s plans to
conduct pillar mining underneath Blackhawk’s nearby mining operations at Coal
Branch mine. In its letter, Blackhawk asserted that Coronado’s retreat mining plans
were “problematic for the continued development and safety of the Blackhawk Coal
3 App. to Opening Br. at A134. 4 Id. at A128. 5 Id. at A73-74. 6 Id. at A74.
3 Branch Mine which is situated above the Powellton mine.”7 As a result of this
disapproval, Coronado claims that it “left in place at least 100,000 tons of
metallurgical coal, which is among the most valuable coal in the United States.”8
(6) Coronado also filed the complaint in this case, in which it asserted claims
for breach of contract and promissory estoppel. As to its breach of contract claim,
Coronado alleged that Blackhawk’s rejection of Coronado’s mining plans in the area
of the Coal Branch mine “was meritless”9 because “Coronado’s operations in the
Powellton [“A”] Seam did not present any unusual risk[;]”10 and, therefore, the
objection violated Coronado’s rights under the sub-sublease. Coronado cites Article
Six of the 1937 Lease, which grants Coronado the right to mine the Powellton “A”
Seam “in such a manner as to recover the greatest possible amount of coal therefrom
. . . .”11 As to its alternative promissory estoppel claim, Coronado alleged that: (1)
Blackhawk’s previous approval of Coronado’s mining plans constituted a promise
by Blackhawk “that Coronado could perform retreat mining in the Powellton [“A”]
Seam[;]”12 (2) Coronado had been foreseeably induced “to invest considerable time
and significant resources in implementing”13 its retreat mining plans by Blackhawk’s
7 Id. at A93. 8 Opening Br. at 9 (citing App. to Opening Br. at A9). 9 App. to Opening Br. at A20. 10 Id. 11 Id. at A19; see id. at A128. 12 Id. at A20. 13 Id.
4 alleged promise; and (3) “Blackhawk’s subsequent objection to Coronado’s mining
plans”14 caused Coronado to sustain damages for which it was entitled to
compensation.
(7) Blackhawk moved to dismiss Coronado’s complaint for lack of subject
matter jurisdiction on the ground that the arbitration clause divested the Superior
Court of the authority to hear Coronado’s claims. In response, Coronado asserted
that the arbitration clause did not “directly relate”15 to its claims because the dispute
arose out of Blackhawk’s actions, namely Blackhawk’s refusal to approve
Coronado’s retreat mining plan. Coronado focused on the arbitration clause’s
phrase, “the performance by the Lessee[,]”16 arguing that that phrase limited the
scope of the arbitration clause only to circumstances in which the dispute arises out
of actions on the part of Coronado, not actions by Blackhawk.
(8) In granting the motion to dismiss, the Superior Court found that the
“unambiguous terms” of the arbitration clause “demonstrate[ed] an agreement to
arbitrate all claims regarding the Lessee’s performance under Article Six” of the
1937 Lease; and both Coronado’s breach of contract and promissory estoppel claims
14 Id. at A21. 15 Id. at A112. 16 Id. at A106 (emphasis omitted); see id. at A113; see id. at A134.
5 “directly relate[d] to Coronado’s performance of rights and obligations” under
Article 6 of the 1937 Lease.17
(9) Coronado contends on appeal that the Superior Court erred by
misapplying well-established principles of contract interpretation when it
determined that the “unambiguous terms” of the arbitration clause “required
Coronado to arbitrate all claims set forth in the Complaint even though Blackhawk
prohibited Coronado’s retreat mining and Coronado’s claims arise from the Sub-
Sublease . . . and the 1937 Lease.”18 Coronado contends that the arbitration clause
governs only claims arising out of an action executed by the lessee.19 “[B]ecause
Coronado did not actually perform any rights, obligations, or covenants therein that
underlie its claims[,]” Coronado argues, its claims “do not arise from Coronado’s
performance of Article Six” and are therefore not arbitrable.20
(10) Coronado further explains its contention as follows. It argues that the
articles within the scope of the Arbitration Clause do not address the lessor’s
conduct, but instead address only the lessee’s conduct.21 It further claims that the
arbitration clause itself should be read consistently to “make arbitrable” only those
17 Coronado Coal II, LLC v. Blackhawk Land and Res. LLC, 2022 WL 1772246, at *5 (Del. Super. May 31, 2022). 18 Opening Br. at 14, 15. 19 Id. at 16-17, 20. 20 Id. at 22 (emphasis omitted). 21 Id. at 3-4.
6 “disputes arising from the ‘performance by the Lessee’ of its mining operations.”22
It further claims that the Superior Court failed to apply the phrase “performance by
the Lessee” according to its plain meaning.23 Coronado argues that, when the
dictionary definitions of “performance” as “execution of an action”24 and of
“execute,” as “to carry [it] out fully: put [it] completely into effect”25 are applied to
the arbitration clause, only claims that arise because Coronado “fully carried out, or
put completely into effect, an action under Article Six of the 1937 Lease[,]” are
arbitrable.26 Coronado’s claims, it argues, are not arbitrable because they arise from
Blackhawk’s rejection of Coronado’s mining plans and not from any action
performed fully by Coronado.27
(11) Whether a court has subject matter jurisdiction is a question of law this
Court reviews de novo.28 Further, this Court “review[s] questions of contract
interpretation de novo.”29
22 Id. at 16. 23 Id. at 4. 24 Id. at 20-21; see Coronado Coal II, LLC v. Blackhawk Land and Res. LLC, 2022 WL 1772246, at *4 n.47 (Del. Super. May 31, 2022) (quoting Performance, https://www.merriam- webster.com/dictionary/performance (Feb. 22, 2022)). 25 Opening Br. at 21 (quoting Execute, Merriam-Webster, https://www.merriam- webster.com/dictionary/execute (last visited Aug. 5, 2022)) Merriam-Webster defines “execute” as “to carry out fully : put completely into effect[.]” Execute, Merriam-Webster, https://www.merriam-webster.com/dictionary/execute (last visited Mar. 1, 2023). 26 Opening Br. at 21. 27 Id. at 23. 28 Imbragulio v. Unemployment Ins. Appeals Bd., 223 A.3d 875, 878 (Del. 2018). 29 Salamone v. Gorman, 106 A.3d 354, 367 (Del. 2014) (en banc); see also Parfi Holding AB v. Mirror Image Internet Inc., 817 A.2d 149, 154 (Del. 2002) (en banc) (“This Court reviews de novo the [trial court’s] interpretation of the [agreement] as well as the application of relevant law.”).
7 (12) “Delaware courts lack subject matter jurisdiction to resolve disputes that
litigants have contractually agreed to arbitrate.”30 “A strong presumption exists in
favor of arbitration, and, accordingly, contractual arbitration clauses are generally
interpreted broadly by courts.”31 Arbitration is a “mechanism of dispute resolution
created by contract[,]” and Delaware courts apply “basic principles of contract
interpretation” to determine the scope of arbitration provisions.32
(13) We have concluded that the language of the arbitration clause does not
support the narrow interpretation of “performance by the Lessee” asserted by
Coronado. The parties’ dispute directly relates to Coronado’s performance of
Article Six, specifically, whether Coronado’s proposed retreat mining operations in
the vicinity of the Coal Branch mine might injure or destroy the Coal Branch mine,
or prevent the convenient and proper mining thereof, and whether Blackhawk’s
rejection of Coronado’s plans infringed upon Coronado’s right to perform its
operations so as to recover the greatest amount of coal from the Powellton “A” seam.
Blackhawk’s rejection of Coronado’s plans directly involves how Coronado may, or
may not, perform under Article Six. “Performance” is broader than an action already
completed. A party may propose to perform or assert a right to perform an action in
the future. If the original lessor and lessee had intended to give the phrase
30 NAMA Holdings, LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 429 (Del. Ch. 2007). 31 Id. at 430. 32 See Parfi Holding AB, 817 A.2d at 156; James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76, 78 (2006).
8 “performance by the Lessee” the narrow scope advocated by Coronado, it was
incumbent upon them to include language that made that intent clear, and no such
language was included. We see no error in the Superior Court’s grant of
Blackhawk’s motion to dismiss.
(14) Coronado also makes an argument that reversal is required if this Court
finds that the arbitration clause is ambiguous.33 We do not find that the clause is
NOW, THEREFORE, IT IS THE ORDER of the Court that the judgment of
the Superior Court is AFFIRMED.
BY THE COURT:
/s/ James T. Vaughn, Jr. Justice
33 Opening Br. at 23.