Petrohawk Energy Corporation v. Overwatch Enterprises, LLC

Court of Appeals of Texas·Decided May 31, 2016·No. 04-16-00282-CV·Published

Opinion

ACCEPTED

04-16-00282-CV

FOURTH COURT OF APPEALS

SAN ANTONIO, TEXAS

5/31/2016 7:06:35 PM

KEITH HOTTLE

CLERK

04-16-00282-CV

IN THE COURT OF APPEALS FILED IN FOURTH JUDICIAL DISTRICT 4th COURT OF APPEALS SAN ANTONIO, TEXAS

SAN ANTONIO, TEXAS

5/31/2016 7:06:35 PM

KEITH E. HOTTLE

Clerk

Petrohawk Energy Corporation,

Defendant-Appellant,

v.

Overwatch Enterprises, LLC,

Plaintiff–Appellee.

ON INTERLOCUTORY APPEAL FROM THE 36th JUDICIAL DISTRICT COURT, MCMULLEN COUNTY, TEXAS, CAUSE NO: M-14-0051-CV-A

APPELLANT’S EMERGENCY MOTION FOR STAY PENDING APPELLATE REVIEW OF ORDER DENYING MOTION TO COMPEL ARBITRATION

This is an accelerated interlocutory appeal of an order denying a motion to compel arbitration.1 Appellant Petrohawk Energy Corporation (“Petrohawk”) filed the motion to compel arbitration on March 4, 2016. 2 On April 27, 2016, the motion to compel

1 Petrohawk submits in support of this Motion a sworn Appendix containing documents relevant to the Court’s determination of the issue presented here. A copy of the trial court’s order denying the motion to compel arbitration is provided in the Appendix at Tab A. The timely-filed notice of appeal, dated May 3, 2016, is attached at Tab B. 2 The motion, without its exhibits, is attached at Appendix Tab C. The Clerk’s Record and Reporter’s Record became available to Petrohawk on May 26, 2016, though as delivered they are incomplete in some respects. The Clerk’s Record in its present form is cited herein as CR ___ and the Reporter’s record as RR ___. The motion to compel arbitration, entitled Defendants’ Motion to Compel Arbitration and Stay Proceedings, appears with its exhibits at CR 111.

arbitration was heard before the Honorable Joel B. Johnson, visiting judge. At the hearing, counsel for Appellee Overwatch Enterprises, LLC (“Overwatch”) explicitly argued that Judge Johnson should deny Petrohawk’s motion because Petrohawk would be allowed to appeal:

If they want to check your decision, they have a right to go and check that decision on appeal . . . If they want to check your decision, they can. We can’t. We get sent off to arbitration, somebody in Houston, one man, will get to make a decision on this.3

Judge Johnson denied the motion to compel arbitration, on grounds of waiver, at the conclusion of the hearing.4 Trial is set for July 18, 2016, just seven weeks away.5 After attempting to confer with Overwatch’s counsel—who had stated to the court at the hearing that he was “not necessarily opposed to a continuation of the jury trial,”6 but ultimately did not agree to any continuation—Petrohawk on May 6, 2016, filed a motion asking the trial court to stay proceedings and continue the trial while Petrohawk pursued this appeal with respect to arbitration.7 That motion to stay and continue was denied by Judge Patrick Flanigan in an order signed May 25, 2016, which stated that “if Interlocutory Appeal is permitted in the case, the Court of Appeals may consider Defendant’s Motion for Stay.”8

3 Transcript, Appendix Tab D at 33:13–14, 34:3–5. 4 See id. at 34:14–19. 5 CR 107. 6 See Transcript, Appendix Tab D at 36:12–14. Counsel may have been referring to a continuance for a fixed time, as opposed to a continuance for the duration of the appeal. 7 See Appendix Tab E. 8 See Appendix Tab F. Petrohawk does not appeal this order of May 25, 2016.

Texas Rule of Appellate Procedure 29.3 allows this Court to “make any temporary orders necessary to preserve the parties’ rights” while an interlocutory appeal is under consideration. Petrohawk’s contractual right to arbitration will be irreparably damaged if this case proceeds to trial in a court rather than adjudication by the American Arbitration Association as called for in the contract at the center of Overwatch’s claims.9 Petrohawk accordingly files this Motion requesting a stay of all trial court proceedings pursuant to Rule 29.3.10 I. Background

Plaintiff Overwatch filed this case in McMullen County, Texas on October 20, 2014. Overwatch’s live pleading is the “Second Amended Original Petition” (herein “SAP”) filed August 24, 2015. 11 The SAP revolves around a 2012 Master Service Contract (“2012 MSC”)12 that Appellee Overwatch defines as “the Contract” at the outset of the SAP:

OTG Services, LLC (hereafter “OTG”) had an ongoing contractual relationship with Defendant, PETROHAWK ENERGY CORPORATION, for the provision of security and gate guard services at various oil and gas well locations in South Texas. On or about February 9, 2012, Defendant and OTG Services, LLC entered into a “Master Service Contract” (sometimes referenced herein as “the Contract.”), which was assigned to Plaintiff [Overwatch].

9 See Part I, infra. 10 To be clear, Petrohawk has not appealed the denial of its May 6, 2016 motion for stay and continuance pending appeal in the trial court. That motion was directed to the trial court’s continuing ability to make orders related to the case. See Tex. R. App. P. 29.5. This Motion, before this Court, is directed to this Court’s discretion. 11 See Appendix Tab G; CR 69. 12 See Appendix Tab H (as filed with business records affidavit).

SAP (Tab G) ¶ 4. Overwatch seeks to recover amounts that it claims to be owed in connection with the security and gate guard services it provided under the 2012 MSC. Overwatch alleges that Petrohawk breached the 2012 MSC and “fail[ed] to perform” it, and specifically that Petrohawk failed to pay for services under it, delayed payments, and otherwise failed in its contractual duties. See Id. ¶ 17. Overwatch also alleges misrepresentations (concerning outstanding invoices under the 2012 MSC) and breach of an alleged oral agreement (which Plaintiff asserts established a “custom, practice, and course of dealing” under the 2012 MSC). See id. at ¶¶ 5–6, 10. These allegations concern and arise out of Overwatch’s provision of security and gate guard services as set forth in the 2012 MSC. Prior to the SAP, filed August 24, 2015, Overwatch’s Petitions did not rely specifically on the 2012 MSC, but instead asserted a vague “ongoing contractual relationship.”13 Throughout 2015, the parties conducted some preliminary discovery, taking five depositions and serving a small number of discovery requests in both directions.14 As of August 25, 2015—the day after the SAP was filed—Overwatch stated in a discovery response that “[f]ormal discovery has just begun.”15 Shortly thereafter, the case entered into a period of inactivity—no discovery, no motions, no contested hearings—that continued for six months until Petrohawk moved to compel arbitration on March 4, 2016. During this time, the parties jointly represented to the Court that they needed additional time to mediate, and that further time and discovery

13 See Plaintiff’s First Amended Original Petition CR 37, at ¶ 4. 14 See also hearing transcript, Appendix Tab D, at 14:17–20 (discussing Petrohawk’s requests). 15 See Plaintiff’s Responses to Request for Disclosure, Appendix Tab I, at 9.

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