MEMORANDUM DECISION Jul 22 2015, 10:00 am
Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited before any court except for the purpose of establishing the defense of res judicata, collateral estoppel, or the law of the case.
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEES Alan S. Brown G. Daniel Kelley Maggie L. Smith Thomas E. Mixdorf Bryan S. Strawbridge Ice Miller LLP Jenai M. Brackett Indianapolis, Indiana Abigail T. Rom Frost Brown Todd LLC Indianapolis, Indiana
IN THE COURT OF APPEALS OF INDIANA
Hameck Oil Company, Ltd., July 22, 2015 TWE Management, LLC, Court of Appeals Case No. Eckard Global, LLC, and 49A02-1409-PL-635 Troy W. Eckard, Appeal from the Marion Superior Court Appellants-Defendants, The Honorable Michael D. Keele, v. Judge Cause No. 49D07-1311-PL-40165 J Group Energy I, LLC and Bakken Oil & Gas Management, Inc., and HOC Bakken Legacy I, LLC,1
1 We include HOC Bakken Legacy I, LLC in the caption because it was added as a plaintiff on September 8, 2014, when the trial court granted Plaintiffs’ request to file a second amended complaint. Pursuant to Indiana Appellate Rule 17(A), a party of record in the trial court shall be a party on appeal.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 1 of 18 Appellees-Plaintiffs.
Kirsch, Judge.
[1] In 2011, Hameck Oil Company, Ltd. (“Hameck Oil”), J Group Energy I, LLC
(“J Group”) and nonparty Eckard Global Energy, LLC (“EGE”) executed a
Company Agreement (“Company Agreement”) forming HOC Bakken Legacy
I, LLC (“Legacy I” or “the Company”), a Delaware limited liability company,
involved in the business of acquiring oil and gas leases in North Dakota.
Disputes arose, and this lawsuit ensued. J Group, and Bakken Oil and Gas
Management, Inc. (“Bakken Oil”) (collectively, “Plaintiffs”) filed a complaint,
later amended, against Hameck Oil, TWE Management, LLC (“TWE”),
Eckard Global, LLC (“Eckard Global”), and Troy W. Eckard (“Eckard”)
(collectively, “Defendants”), seeking injunctive relief and, later, damages.
Defendants sought to compel arbitration pursuant to a section of the Company
Agreement, and after the trial court denied Defendants’ Motion to Compel
Arbitration, Defendants now appeal and raise several issues, of which we find
the following restated issue to be dispositive: whether the trial court erred when
it determined that the Company Agreement’s arbitration provision did not
apply to Hameck Oil, the Company’s Manager.
[2] We affirm.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 2 of 18 Facts and Procedural History2 The Parties
[3] Eckard is a Texas businessman, and in October 2011, he traveled to Indiana
several times to discuss a business investment proposal with individuals, some
or all of whom comprised Plaintiff J Group, an Indiana limited liability
company.3 J Group likewise traveled to Texas and attended meetings and
conferences on the subject. According to the complaint, Eckard’s proposal was
that he, through companies he owned, and J Group would form a limited
liability company for purposes of acquiring oil and gas leases. Eckard would be
a minority stakeholder in the company, but would serve as its Manager; J
Group would be majority stakeholder, would fund the venture, and would have
certain rights to participate in key decisions, but would not be involved in the
day-to-day operations of the business. Appellees’ App. at 7.
[4] Following in-person meetings and oral and written communications, Legacy I
was formed pursuant to the Company Agreement, which was executed on
December 19, 2011. Generally speaking, Legacy I’s purpose was to acquire
oil/gas/mineral leases that would generate income and revenue for the
investment venture. Legacy I was formed as a limited liability company
2 We held oral argument on June 17, 2014 at Purdue University’s Krannert School of Executive Management. We thank counsel for their preparation and argument, and we commend them on their outstanding advocacy. We also thank the students for their insightful questions and comments posed after, but not specifically related to, the oral argument. 3 The record before us indicates that J Group has four members: Ethan Jackson, and his sons, Wessley Jackson, Blake Jackson, and Mark Jackson. Appellants’ App. at 203, 213.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 3 of 18 organized under the laws of the State of Delaware with its principal place of
business in Indianapolis. J Group owns a 95% ownership interest in Legacy I
and is classified as a “B Member.” It has contributed 100% of the capital to
Legacy I, which exceeds $10 million. EGE owns a 5% ownership interest in
Legacy I and is classified as an “A Member.” EGE has contributed no capital
to Legacy I, and it is not a party to this lawsuit. Eckard is manager of, and he
owns and controls, EGE. The Company Agreement named Hameck Oil as
Manager of Legacy I. Hameck Oil is a limited partnership organized under the
laws of Texas with its principal place of business in Texas. The Company
Agreement was signed by three entities: (1) Manager Hameck Oil (Eckard
signed in his capacity as president of TWE, which is a general partner of
Hameck Oil); (2) Class A Member EGE (Eckard signed as manager of EGE);
and (3) Class B Member J Group (Ethan Jackson signed as manager of J
Group).
[5] On July 28, 2013, Eckard sent an email to representatives of J Group stating
that Hameck Oil would be resigning as Manager of Legacy I effective August
15, 2013.4 On November 14, 2013, Plaintiff Bakken Oil was appointed as the
new Manager of Legacy I. Bakken Oil is a corporation organized under the
4 Section 4.3 of the Company Agreement provides that “[a] Manager may resign at any time in writing setting forth the effective date of the resignation and sending it to all Members. The resignation need not be accepted in order to be effective.” Appellants’ App. at 36.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 4 of 18 laws of the State of Delaware with its principal place of business in
Indianapolis.
The Lawsuit
[6] Plaintiffs filed their complaint on November 1, 2013, amended December 2,
2013, seeking, initially, preliminary and permanent injunctive relief, namely
that Defendants be ordered to turn over books, records, and other materials to
allow for the orderly transition of company business from Hameck Oil to
Bakken Oil, the new Manager of Legacy I. In addition to naming Eckard and
Hameck Oil as Defendants, Plaintiffs also named Defendants TWE and Eckard
Global,5 which are limited liability companies organized under the laws of
Texas with principal places of business in Texas. Plaintiffs did not name Class
A Member EGE as a defendant in the lawsuit.
[7] The complaint alleges that Hameck Oil, as the Manager of Legacy I, had access
to and control over the books, records, and accounts of Legacy I and that TWE,
as the General Partner of Hameck Oil, also had access and control over the
books and records of Legacy I. The complaint claims that Eckard Global “has
been used by the other Defendants” to conduct management duties with respect
to Legacy I and, like the others, had access to the books and records of Legacy
I. Appellees’ App. at 8. It further asserts that at all material times Eckard
directed and controlled the actions of the other named Defendants and that
5 Eckard is manager and sole member of Eckard Global.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 5 of 18 Hameck Oil has failed to discharge its responsibilities, refused to cooperate, and
violated fiduciary duties under the provisions of the Company Agreement.
Plaintiffs contend in the complaint, “Defendants have routinely ignored and
manipulated the corporate forms for their own purposes,” including, but not
limited to, failing to keep corporate records, comingling assets and affairs, and
misdirecting revenues of Legacy I. Id. at 9-10.
The Company Agreement’s Arbitration Provisions - Original and Amended
[8] In December 2013, Defendants filed a Motion to Dismiss and a Motion to
Compel Arbitration pursuant to the Company Agreement. The Motion to
Dismiss sought dismissal of Defendants Eckard and Eckard Global because
they did not sign, and were not parties to, the Company Agreement. Appellants’
App. at 95, 101. Alternatively, Defendants argued that Plaintiffs’ claims against
all Defendants should be subject to arbitration. In support of arbitration,
Defendants relied on Section 13.10 of the Company Agreement, entitled
“Binding Arbitration,” which provides in part:
Any controversy, claim or dispute between or among the Company and any Member or among the Members arising out of or relating to this Company Agreement or any other matters pertaining to the Company, shall be settled by binding arbitration in Newcastle County, Delaware, in accordance with the applicable rules of the American Arbitration Association (“AAA”) then in effect. . . . The Members expressly agree that the provisions of this Section 13.10 shall be valid and enforceable to the greatest extent possible under the laws of the United States of America or the State of Delaware. . . . Notwithstanding the foregoing, the Company may pursue suit for injunctive relief against any Member who violates the Member’s covenants in Article 11.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 6 of 18 Appellants’ App. at 48.
[9] In January 2014, the trial court granted the parties’ joint motion to stay the
litigation as they pursued settlement negotiations. During the stay, Defendants
produced additional records for Legacy I, and Plaintiffs claim that this revealed
that Defendants’ actions caused in excess of $1.7 million in harm to Legacy I
and J Group.
[10] On May 7, 2014, Bakken Oil and J Group amended the Company Agreement
to delete Section 13.10 (the binding arbitration provision).6 The
amended/replacement section reads:
All provision [sic] of this Company Agreement relating to or requiring arbitration of any controversy, claim, dispute or anything else which has to date arisen with respect to, or which in the future may arise or relate to this Company Agreement, or to any other matter pertaining to the Company, including but not limited to Article 13.10 and Article 4.10, are deleted and shall have no force or effect whatsoever. Id. at 204.7
[11] On May 12, 2014, five days after Plaintiffs’ May 7 amendment to the Company
Agreement that deleted the arbitration provision, Plaintiffs filed a Motion to
Lift Stay, which motion the trial court granted on May 13. Also on May 13,
6 Plaintiffs assert that they amended the Company Agreement pursuant to Section 13.6, which permits amendment “by the Manager with consent of a Majority of the Members.” Appellees’ App. at 38. 7 Bakken Oil and J Group also amended the Company Agreement to delete former Section 13.2, which stated that Delaware law was the governing law, and replaced it with a new Section 13.2 that provided the laws of Indiana shall govern the Company Agreement and all issues, claims, or matters arising under it. Appellants’ App. at 204. The amendments also provided that Legacy I “shall wind up.” Id.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 7 of 18 Plaintiffs sought to file a second amended complaint, but the trial court denied
the request pending determination of Defendants’ December 2013 Motion to
Dismiss and Motion to Compel Arbitration. A few days later, on May 16,
Defendants filed a Renewed Motion to Dismiss and Motion to Compel
Arbitration.
[12] On May 22, 2014, Defendants Hameck Oil and EGE filed a complaint in a
Texas state court against the four individuals that comprise J Group – Ethan
Jackson, Wessley Jackson, Blake Jackson and Mark Jackson – as well as other
individuals and entities. The forty-three-page complaint alleges that the
Jacksons, their attorney and their accountants gained access to confidential and
propriety information during the formation and operation of Legacy I,
including access to confidential lease summaries and exclusive and unique
mapping and trend analysis, and that they used this information to, among
other things, engage in fraud, misappropriation of confidential trade secrets,
and unfair competition over a three-year period. They also allege tortious
interference with the Legacy I Company Agreement and breach of fiduciary
duties. The lawsuit was subsequently removed to, and is pending in, Federal
District Court for the Eastern District of Texas.
Trial Court’s August 14, 2014 Order
[13] The trial court held a hearing on Defendants’ motions on July 23, 2014, at
which counsel for both parties presented argument. Thereafter, on August 14,
2014, the trial court denied Defendants’ Motion to Dismiss, finding that
Plaintiffs did not sue Eckard or Eckard Global strictly in their capacities as Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 8 of 18 signatories to the Company Agreement, but rather because they had access to
and control over the books and records of Legacy I and that Eckard Global, in
addition to having access to books and records, had been used by other
Defendants to conduct management duties with respect to Legacy I. The trial
court determined that Defendants failed to carry the requisite burden for a
motion to dismiss and denied it.
[14] With regard to Defendants’ Motion to Compel Arbitration, the trial court found
that “[t]he plain terms of the Company Agreement do not provide the Manager
with a right to arbitrate the dispute before the Court.” Appellants’ App. at 13.
More specifically, the trial court determined that Section 13.10 regarding
Binding Arbitration, identifies the Company and the Members as the entities
that are subject to arbitration, not the Manager. Id. at 14. Having determined
that the plain terms of the Company Agreement did not provide for arbitration
of the dispute in this case and denying Defendants’ motion on that basis, the
trial court declined to address Plaintiffs’ arguments that the Company
Agreement was amended to remove arbitration provisions and that Defendants
waived any right to compel arbitration by having filed the Texas lawsuit.
[15] On August 18, 2014, Plaintiffs filed a renewed motion for leave to file a second
amended complaint that added Legacy I as a named plaintiff and sought
damages in addition to injunctive relief. Appellees’ App. at 1-2. The trial court
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 9 of 18 granted their request on September 8, 2014.8 Defendants timely filed an
interlocutory appeal9 and, at Defendants’ request, the trial court stayed the
proceedings pending resolution of this appeal.
Discussion and Decision [16] Defendants assert that the trial court erred when it denied its Motion to Compel
Arbitration. We review a trial court’s denial of a motion to compel arbitration
de novo. Smith Barney v. StoneMor Operating LLC, 953 N.E.2d 554, 557-58 (Ind.
Ct. App. 2011), aff’d on reh’g, 959 N.E.2d 309 (Ind. Ct. App. 2011); Norwood
Promotional Prods., Inc. v. Roller, 867 N.E.2d 619, 623 (Ind. Ct. App. 2007), trans.
denied. A party seeking to compel arbitration must satisfy a two-pronged
burden of proof. Daimler Chrysler Corp. v. Franklin, 814 N.E.2d 281, 284 (Ind.
Ct. App. 2004). The party must first demonstrate the existence of an
enforceable agreement to arbitrate the dispute; second, the party must prove
that the dispute is the type of claim that the parties agreed to arbitrate.
Norwood, 867 N.E.2d at 623 (citing Showboat Marina Casino P’ship v. Tonn &
Blank Constr., 790 N.E.2d 595, 597 (Ind. Ct. App. 2003)).
[17] When determining whether parties have agreed to arbitrate a dispute, we apply
ordinary contract principles. Daimler Chrysler, 814 N.E.2d at 285-86. Words
used in a contract are to be given their usual and common meaning unless,
8 Our reference to “Plaintiffs” throughout this decision includes Legacy I. 9 See Ind. Code § 35-57-2-19(a)(1) (appeal may be taken from order denying application to compel arbitration); Ind. Appellate Rule 14(D).
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 10 of 18 from the contract and the subject matter thereof, it is clear that some other
meaning was intended. Id. at 285; see also Smith Barney, 953 N.E.2d at 558
(when interpreting arbitration clause, court is to give language of contract its
plain and ordinary meaning). Every doubt is to be resolved in favor of
arbitration, and the parties are bound to arbitrate all matters, not explicitly
excluded, that reasonably fit within the language used. Norwood, 867 N.E.2d at
623-24 (quotations omitted). However, parties are only bound to arbitrate those
issues that by clear language they have agreed to arbitrate; arbitration
agreements will not be extended by construction or implication. Id. Arbitration
is a matter of contract and a party cannot be required to submit to arbitration
unless it has agreed to do so. MPACT Constr. Grp., LLC v. Superior Concrete
Constructors, Inc., 802 N.E.2d 901, 910 (Ind. 2004).
[18] Legacy I is a limited liability company organized pursuant to the Delaware
Limited Liability Company Act. 6 Del. Code § 18-101 et seq. (“the LLC Act”).
“It is the policy of [the LLC Act] to give the maximum effect to the principle of
freedom of contract and to the enforceability of limited liability company
agreements.” 6 Del. Code § 18-1101(b); see also Kuroda v. SPJS Holdings LLC,
971 A.2d 872, 880 (Del. Ch. 2009) (limited liability companies are creatures of
contract, and parties have discretion to use LLC agreement to define character
of company and rights and obligations of parties).
[19] Turning to the Company Agreement at hand, Defendants argue that the trial
court erred when it denied Defendants’ Motion to Compel Arbitration because
Section 13.10 of the Company Agreement is a valid and enforceable arbitration
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 11 of 18 provision that “covers the subject matter of Plaintiffs’ complaint[.]” Appellants’
Br. at 4-5. Again, it reads:
Any controversy, claim or dispute between or among the Company and any Member or among the Members arising out of or relating to this Company Agreement or any other matters pertaining to the Company, shall be settled by binding arbitration in Newcastle County, Delaware, in accordance with the applicable rules of the American Arbitration Association (“AAA”) then in effect. . . . The Members expressly agree that the provisions of this Section 13.10 shall be valid and enforceable to the greatest extent possible under the laws of the United States of America or the State of Delaware. . . . Notwithstanding the foregoing, the Company may pursue suit for injunctive relief against any Member who violates the Member’s covenants in Article 11. The Members will continue to perform their respective obligations under this Company Agreement pending the final resolution of any dispute, unless to do so would be impossible or impractical under the circumstances. Appellants’ App. at 48.
[20] Defendants’ position is that Section 13.10 applies, and arbitration should be
ordered, because the section provides that it applies to any controversy, claim
or dispute “arising out of or relating to this Company Agreement or any other matter
pertaining to the Company” and that Plaintiffs’ claims – alleging that Hameck Oil,
as Manager, has not and will not turn over the books and records, has breached
its fiduciary duties, and that it thereby has caused economic damages – clearly
arise out of or relate to the Company Agreement. Id. (emphasis added).
Therefore, Defendants contend, the dispute should be settled by arbitration.
[21] This position, however, overlooks the prior modifying language in Section
13.10 stating that any controversy, claim or dispute “between or among the
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 12 of 18 Company and any Member or among the Members” shall be settled by arbitration.
Id. (emphasis added). Other language, appearing later in Section 13.10,
likewise focuses on the Members, stating, “The Members expressly agree that the
provisions of this Section 13.10 shall be valid and enforceable to the greatest
extent possible under the laws of the United States of America or the State of
Delaware[.]” Id. (emphasis added). The section concludes with the statement
that, while any arbitration proceeding is pending, “The Members will continue to
perform their respective obligations under this Company Agreement pending
the final resolution of any dispute[.]” Id. (emphasis added). In this case,
Plaintiffs’ claim is against Hameck Oil, former Manager, as well as affiliated
Defendants Eckard, Eckard Global, and TWE. Section 13.10 does not list or
identify the Manager as an entity with whom disputes are arbitrable. As with
any contract, the court must give the language of the contract its plain and
ordinary meaning, and the parties are only bound to arbitrate those issues that
by clear language they have agreed to arbitrate. Norwood, 867 N.E.2d at 623-24.
We agree with the trial court that disputes with the Manager are not within the
scope of Section 13.10. Had the parties intended to include disputes with the
Manager in the arbitration provision of 13.10, they could have done so. They
did not, and we cannot rewrite the arbitration provision to impose new or
different obligations on the parties.10
10 Defendants argue that, in addition to Hameck Oil being able to enforce the arbitration clause, the non- signatory Defendants Eckard Global, TWE, and Eckard are entitled to enforce the arbitration clause pursuant to the doctrine of equitable estoppel given that J Group asserted allegations of interdependent and
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 13 of 18 [22] On appeal, Defendants assert that, even if the Manager is not expressly
included by the language of Section 13.10, the Company Agreement, when
construed in its entirety, reflects that Manager “Hameck Oil is the Company,
Member, or both,” based on the fact that Hameck Oil executed the Company
Agreement beneath the words “the undersigned Members” and also because
the Company Agreement gives such power to the Manager that, not only does
it act on behalf of the Company, but that the Manager is the Company.
Appellants’ Br. at 10.
[23] Plaintiffs assert that this “extraordinary argument” was not made to the trial
court, and, thus, it is waived. Appellees’ Br. at 17. Regardless of waiver, we are
not persuaded that, as Defendants’ claim, the Manager is the legal equivalent of
a Member and/or the Company. The Company Agreement identifies the
“Company” as Legacy I. Appellants’ App. at 30. It identifies Hameck Oil as the
Manager. Id. at 36 (“The initial Manager shall be Hameck Oil Company, Ltd.,
a Delaware limited partnership”). The Company Agreement defines a Member
as “any person who owns units and who has signed the Company Agreement,”
id. at 31, and Hameck Oil does not own units. Furthermore, the Members are
specifically identified on the addendum to the Company Agreement as the
following: (1) J Group, a Class B Member; and (2) EGE, a Class A Member.
concerted misconduct by Defendants. Appellants’ Br. at 5, 14-15. Having determined that the Company Agreement does not provide Manager Hameck Oil with a right to compel arbitration, we find that equitable estoppel does not apply here, because the non-signatories’ rights to arbitration, if any, would be derivative of Hameck Oil’s right.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 14 of 18 Id. at 51. The Company Agreement assigns various duties and responsibilities
to the Manager. For example, Section 4.1 gives the Manager the power to
“exclusively exercise the powers of the Company and shall manage the business
and affairs of the Company,” and that any substantial decisions shall be made
only by the Manager. Id. at 34. Other sections of the Company Agreement
outline the Manager’s responsibilities, such as: Section 1.1 (Manager’s
responsibilities regarding capital accounts); Sections 4.1-4.10 (Manager’s fees
and responsibilities); Section 6.1(c) (Manager’s ability to request additional
capital contributions); Sections 9.1-9.5 (Manager’s responsibility regarding
books and records, tax returns, tax elections, and financial statements); Section
12.1 (wind up procedures). Id. at 29, 34-37, 37, 42-43, 45. Based on the
foregoing, we do not accept Defendants’ suggestion that Hameck Oil, as
Manager, was also a Member and/or the Company.
[24] Defendants urge that, even if it is determined that disputes with the Manager
are not included in the language of Section 13.10 and that the Manager is
neither the Company nor a Member, another section of the Company
Agreement – Section 4.10 – expressly addresses disputes between the Manager,
the Company, and the Members and states that such disputes are arbitrable.
Section 4.10 provides:
The rights, compensation, and ownership of the Manager and its Affiliates creates several and various conflicts of interest. The Manager has not developed, and does not expect to develop, any formal process for resolving conflicts of interest. While the conflicts of interest that exist between the Manager, the Company, and the Members, and that could later develop, could materially and adversely
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 15 of 18 affect the Members, the Manager, in its sole judgment and discretion, will try to mitigate such potential adversity by the exercise of business judgment in an attempt to fulfill its fiduciary obligations. There can be no assurance that such an attempt will prevent adverse consequences resulting from the numerous conflicts of interest. If such conflicts cannot be resolved, then the dispute will be resolved by arbitration, pursuant to Section 13.10 below. Id. at 37 (emphasis added). We find that the language of the arbitration
provision in Section 4.10 identifies only a single class of disputes involving the
Manager that are arbitrable: conflicts of interest. Plaintiffs do not seek
resolution of a conflict of interest between a Member (or the Company) and the
Manager, and we find Section 4.10 is not applicable to the present dispute.
[25] Defendants have failed to show that the trial court erred when it determined
that the plain language of the Company Agreement did not provide Manager
Hameck Oil with a right to arbitrate the dispute.11
[26] Affirmed.
Friedlander, J., concurs.
Baker, J., concurs in result with separate opinion.
11 Because we resolve this case on the basis that the plain language of the Company Agreement did not give Hameck Oil the right to enforce arbitration of the dispute with Plaintiffs, we do not address the effect, if any, of Plaintiffs’ May 2014 amendment of the Company Agreement, deleting the arbitration clause language of Section 13.10, nor do we reach Plaintiffs’ argument that Defendants waived any right to arbitration by suing members of J Group and affiliated individuals in Texas.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 16 of 18 IN THE COURT OF APPEALS OF INDIANA
Hameck Oil Company, Ltd., Court of Appeals Case No. 49A02-1409-PL-635 TWE Management, LLC, Eckard Global, LLC, and Troy W. Eckard, Appellants-Defendants,
v.
J Group Energy I, LLC, Bakken Oil & Gas Management, Inc., and HOC Bakken Legacy I, LLC, Appellees-Plaintiffs
Baker, Judge, concurring in result.
[27] While I concur in the result reached by the majority, I respectfully part ways
with the analysis it applies to get there. Specifically, I disagree with the
majority’s interpretation of the Company Agreement. In my view, it is readily
apparent that the parties to the contract intended that all disputes related to the
Company should be submitted to binding arbitration. I concede that the
drafting of the arbitration provision is somewhat inartful, but I still believe that
the Company Manager is bound to arbitrate disputes just as Members and the Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 17 of 18 Company are bound. The Manager is a signatory to the contract, and the
Manager was empowered to—and charged with—acting as the Company and
conducting its day-to-day business. Furthermore, Section 4.10 of the Company
Agreement provides that the Manager must abide by certain procedures when a
conflict of interest arises. If those procedures do not resolve the conflict, then
the binding arbitration provision governs. The clear import of Section 4.10 is
that, in all cases except for conflicts of interest, disputes involving the Manager
are to be submitted to binding arbitration. Consequently, I disagree with the
majority’s conclusion that disputes involving the Manager are not covered by
the binding arbitration provision.
[28] Although in my opinion the Defendants had a right to arbitration granted by
the Company Agreement, I believe that the Defendants waived that right by
filing a lawsuit related to the Company in Texas. It is well established that a
contractual right to arbitrate can be waived, and that participation in litigation
supports a finding of waiver. St. Mary’s Med. Ctr. of Evansville, Inc. v. Disco
Aluminum Prods. Co., 969 F.2d 585, 587, 589-91 (7th Cir. 1992) (applying
Indiana law). Here, the Defendants not only participated in litigation, they
filed their own lawsuit regarding matters that, on their face, arise out of or
relate to the Company and the Company Agreement. The Defendants cannot
have it both ways, and by instituting litigation, they waived their right to
enforce the binding arbitration provision in the lawsuit filed by the Plaintiffs.
As a result, I agree with the majority that the trial court’s judgment should be
affirmed.
Court of Appeals of Indiana | Memorandum Decision 49A02-1409-PL-635 |July 22, 2015 Page 18 of 18