Goodrich Petroleum Co. v. MRC Energy Co.

137 So. 3d 200, 2013 La.App. 4 Cir. 1435, 2014 WL 1509205, 2014 La. App. LEXIS 1033
CourtLouisiana Court of Appeal
DecidedApril 16, 2014
DocketNo. 2013-CA-1435
StatusPublished
Cited by12 cases

This text of 137 So. 3d 200 (Goodrich Petroleum Co. v. MRC Energy Co.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Goodrich Petroleum Co. v. MRC Energy Co., 137 So. 3d 200, 2013 La.App. 4 Cir. 1435, 2014 WL 1509205, 2014 La. App. LEXIS 1033 (La. Ct. App. 2014).

Opinion

PAUL A. BONIN, Judge.

[jTwo petroleum producing companies, Matador Resources Company and Goodrich Petroleum Company, LLC, entered multi-faceted, agreements by which they could elect to jointly engage in oil explora[202]*202tion projects. The prominent feature, for our purposes, of those agreements was the parties’ broad and unconditional agreement to submit any and all disagreements they might have with each other to binding arbitration. The parties agreeably submitted their disagreement over how to calculate contributions under the Louisiana Risk Fee Statute on three wells. By further agreement, they agreed to submit their disputed contentions to three attorneys who are well-respected in the field of mineral law, subject to returning to arbitration in the event of any follow-up accounting disputes, which the parties did not anticipate.

The arbitrators decided the interpretation or application of the Risk Fee Statute favorably to Goodrich. Subsequently, as best as we can determine from this very limited record, Goodrich began to claim credits in the accounting process for certain of its previous contributions, to which Matador objected. Matador |2contended that Goodrich was not entitled to the claimed credits because of an agreement between them not based upon or related to the Risk Fee Statute matter. Thus, Matador submitted the dispute to the same arbitrators who, over the initial objections of Goodrich, agreed that they would consider the issues raised by Matador. This time the arbitrators ruled favorably for Matador.

Litigation was commenced in the district court concerning the arbitrators’ awards. Both parties were agreeable to the confirmation of the decision on the application of the Risk Fee Statute, and that matter is not before us. While Matador sought the confirmation of the arbitrators’ so-called second award, however, Goodrich sought to vacate and annul it on the statutory ground that the arbitrators exceeded their authority. The district judge vacated the second award in favor of Matador; Matador now appeals.

After our de novo review of the matter, we conclude that the district judge was legally incorrect in concluding that the arbitrators exceeded their authority to arbitrate the dispute that arose during the accounting process following the initial Risk Fee Statute award. Accordingly, we reverse the district court’s judgment, and confirm the arbitrators’ award in favor of Matador.1 We explain our decision in considerably greater detail below.

I

At the outset of our detailed explanation, we emphasize that we begin with the important premise that arbitration awards are presumed to be valid. See Dicorte |3 v. Landrieu, 08-0249, p. 3 (La.App. 4 Cir. 9/10/08), 993 So.2d 799, 801. A district court may not vacate an arbitrators’ award unless specifically authorized by statute. See La. R.S. 9:4210. An arbitration award, therefore, must be confirmed by a district court unless statutory grounds for vacating the award exist. See Johnson v. 1425 Dauphine, L.L.C., 10-0793, p. 7 (La.App. 4 Cir. 12/1/10), 52 So.3d 962, 967.

We also importantly note that throughout our discussion, and especially when we are describing factual and legal issues submitted to and decided by the arbitrators, we do not imply or suggest that we have considered the merits of the parties’ disputes beyond the discrete legal issue presented to us in this appeal, which is whether the arbitrators exceeded their powers. By consensually substituting ar[203]*203bitration for litigation, the parties are presumed to accept the risk of procedural and substantive mistakes of either fact or law by the arbitrators, which mistakes are not reviewable by the courts. Id.

II

In this Part we describe the parties’ relationship and their agreements, the nature of their disputes, and the procedural developments before the arbitrators and the district court.

A

Matador decided in 2008 to induce another producer to help it jointly develop several Caddo Parish mineral leases in its Central Pine Island Prospect. |4Goodrich accepted Matador’s offer later that year.2 The parties then entered into two, interrelated contracts: a Participation Agreement and a Joint Operating Agreement. Neither the Joint Operating Agreement nor the four exhibits attached to the Participation Agreement are in the record before us. We understand, however, that the two contracts are substantially similar, and we note that the Participation Agreement provides that its provisions govern and control in the event that there is a conflict between the two documents.

Significantly, the Participation Agreement, which is dated June 8, 2008, provides that Matador was obligated to commence operations on an initial test well on or before June 1, 2008. On the other hand, Goodrich, upon its execution of the Participation Agreement, agreed to make several payments to Matador, one of which comprised seventy-five percent of the estimated costs to drill the initial test well. Thereafter, the parties agreed to split equally future costs attributable to the initial test well. After completion of the initial test well, Matador agreed to assign fifty percent of its interest in the well to Goodrich.

With respect to subsequent wells, the Participation Agreement allows either party to propose subsequent wells in a section and afforded Goodrich the option to participate in these wells on a fifty percent working interest on a section by section basis. Should it elect to participate in a well, Goodrich agreed to pay Matador a Lease Bonus of $1000.00 per net mineral acre, proportionately reduced to fifty percent of Matador’s net mineral acreage leased per section. With each well I,^proposal covering the first subsequent well in a section, Matador was obligated to inform Goodrich as to those leases in the lease schedule, which is not made a part of the record before us, reflecting the net mineral acreage requiring a Lease Bonus payment. Goodrich was obligated to pay the Lease Bonus on a section by section basis within five days prior to the start date of drilling the first subsequent well in a section. After completion of the first subsequent well in each section, Matador would assign fifty percent of its interest in its mineral leases in that section to Goodrich. The assignment was to be made according to the same terms applicable to the initial test well. The Participation Agreement further notes that Goodrich could earn no other acreage or mineral interest in these leases except by paying the lease bonus and drilling of the first subsequent well in a section.

The Participation Agreement further provided for the establishment of an Area of Mutual Interest within the Central Pine Island Prospect upon completion of the initial test well. Within the Area of Mutual Interest, the parties granted each other [204]*204the right, but not the obligation, to acquire a fifty percent interest in all interests renewed or that may thereafter be acquired by the parties. The Area of Mutual Interest was to exist for a period of two years following the completion of the initial test well, although the Participation Agreement afforded the parties the option of terminating the Area of Mutual Interest upon their mutual agreement.

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Bluebook (online)
137 So. 3d 200, 2013 La.App. 4 Cir. 1435, 2014 WL 1509205, 2014 La. App. LEXIS 1033, Counsel Stack Legal Research, https://law.counselstack.com/opinion/goodrich-petroleum-co-v-mrc-energy-co-lactapp-2014.