MATTHEW W. BRANN, District Judge.
Plaintiff, Chesapeake Appalachia, LLC, hereinafter "Chesapeake," commenced the instant civil action on April 1, 2014, against Defendants, Scout Petroleum, LLC and Scout Petroleum II, LP (hereinafter, collectively, "Scout"). The two-count complaint was filed after Scout initiated arbitration proceedings against Chesapeake with the American Arbitration Association (hereinafter "AAA").
Count I is a demand for a declaratory judgment requesting that the Court decide whether it or the arbitrator is tasked to interpret the contract, commonly referred to as the "who decides" question. Count II is a demand for a declaratory judgment contending that the contract does not permit class arbitration, commonly referred to as the "clause construction" question.
On October 16, 2014, I granted Chesapeake's motion for partial summary judgment on Count I and entered a declaratory judgment to the effect that the Court is to interpret the contract. Thereafter, I heard oral argument on Scout's motion for reconsideration, which I denied on December 19, 2014, and then certified that decision for interlocutory appeal. On January 27, 2016, the United States Court of Appeals for the Third Circuit affirmed my determination that a court, not an arbitrator, is charged with interpreting the clause at issue.
The parties are now before the Court for resolution of Count II, the "clause construction" question. Chesapeake moves for partial summary judgment requesting that the Court enter a declaratory judgment that the various contracts at issue do not permit class arbitration, only what is called individual or bilateral arbitration. Scout moves to dismiss the complaint arguing that Pennsylvania contract law permits class arbitration. Scout again requested oral argument on the motions and the parties were heard on April 5, 2017.
For the reasons that follow, Scout's motion will be denied, Chesapeake's motion will be granted, and final judgment will be entered in favor of Chesapeake.
A. Standard of Review
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."
The burden of establishing the nonexistence of a "genuine issue" is on the party moving for summary judgment.
Where the moving party's motion is properly supported, the nonmoving party, to avoid summary judgment in his opponent's favor, must answer by setting forth "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party."
"When opposing summary judgment, the non-movant may not rest upon mere allegations, but rather must `identify those facts of record which would contradict the facts identified by the movant.'"
In deciding the merits of a party's motion for summary judgment, the court's role is not to evaluate the evidence and decide the truth of the matter, but instead to determine whether there is a genuine issue for trial.
In 2008, Chesapeake entered into various paid-up oil & gas leases with landowners in several northeastern Pennsylvania counties to explore for, and produce natural gas from, the landowners' property. The leases at issue are standard natural gas leases, which consist of a basic boilerplate form contract, often together with an individually negotiated addendum. In 2013, Scout purchased the right to certain of the leases from certain landowners and has received royalties from Chesapeake on the gas produced from these mineral estates.
On March 17, 2014, Scout sought to commence a class arbitration against Chesapeake. Scout's attempt to pursue class arbitration is on behalf of themselves, together with a putative class of thousands of landowners. The claims deal with the calculation of royalties under the terms of the natural gas leases.
The leases at issue contain the following pertinent arbitration provision:
Chesapeake asserts that the above-cited lease term does not provide for, or otherwise contemplate, class arbitration; instead it envisions only individual arbitration. Chesapeake filed the instant action and motion for equitable relief seeking to have the Court declare that class arbitration is not available under the leases.
As it turns out, this exact issue was recently decided based on identical language from Chesapeake's leases. The Honorable John E. Jones III, of this Court, held in Chesapeake Appalachia, L.L.C. v. Ostroski, 199 F.Supp.3d 912 (M.D. Pa. 2016), that the lease language at issue does not permit class arbitration. In Ostroski, Judge Jones granted summary judgment in Chesapeake's favor and declared that the lease with
With that conclusion in mind, then, I turn my attention to the law of the case doctrine. "The law-of-the-case doctrine rests on a simple premise: `the same issue presented a second time in the same case in the same court should lead to the same result.'"
Considering the matter more broadly, I am also cognizant that the United States Supreme Court stated in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. that "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so."
The Supreme Court declined to allow class arbitration in Stolt-Nielsen where the contract referred explicitly to bilateral arbitration but was silent as to class arbitration. "An arbitrator chosen according to an agreed-upon procedure no longer resolves a single dispute between the parties to a single agreement, but instead resolves many disputes between hundreds or perhaps even thousands of parties."
Moreover, the United States Court of Appeals for the Sixth Circuit in Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett found that the clause
Scout in contrast attempts to construct its arguments on two cases, both inapposite. The first case hails from the Third Circuit, Opalinski v. Robert Half Int'l Inc., and known as Opalinski II.
Scout also cites to a Pennsylvania Superior Court decision, Dickler v. Shearson Lehman Hutton, Inc., 408 Pa.Super. 286, 299, 596 A.2d 860, 866 (1991) to support its argument. Dickler is incongruent for two reasons.
First, Dickler was decided in 1991, twelve years before the United States Supreme Court commenced its analysis in this area of law. As I noted in my Order of December 19, 2014, "The rocky path the issue of class arbitrability has traversed over the years began eleven years ago with the United States Supreme Court's plurality decision in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003)." The Supreme Court next decided Stolt-Neilsen in 2010. The Sixth Circuit later decided Reed-Elsiver in 2013. This Court then decided Ostroski in 2016.
Second, the Dickler contract clause language is distinguishable from the clause at issue while the Ostroski contract clause is identical. I can discern no plausible legal basis for this Court to rely on Dickler when decisions, contrary to it, have been made in this Court, various Courts of Appeals and by the United States Supreme Court. Even if I accept Scout's argument that I should find an implicit reference to class arbitration and therefore apply Pennsylvania contract law, including Dickler, I would still not find that the plain language of the contract permits class arbitration. "The fundamental rule in contract interpretation is to ascertain the intent of the contracting parties."
Dickler is compelling in one limited way, however. It stated "the Court has consistently reiterated this policy of respecting arbitration agreements."
The contracts at issue here clearly allow for arbitration; but what the plain language of the leases allow is individual or bilateral arbitration, not a class arbitration. The language in this matter is written in the singular, which indicates individual or bilateral arbitration, i.e.: "in the event of a disagreement between lessor and lessee concerning this lease."
The clause at issue in Dickler was drafted plurally, and states: "any controversy arising out of or relating to my accounts, to transactions with you, your officers, directors agents and/or employees for me . . . shall be settled by arbitration." This is what distinguishes Dickler — the actual language utilized in the contract.
The Dickler Court also wrote "we find that the broad agreement [ ] signed by the parties encompasses all controversies . . . which may continue through arbitration on a class-wide basis."
For all of the foregoing reasons, Chesapeake's motion will be granted.
A separate Order will issue granting Plaintiff's motion for summary judgment on Count II and denying Defendants' motion to dismiss Count II. Final judgment will be entered in favor of Plaintiff and against Defendants and this case is dismissed.
Except as provided below, any controversy, claim or counterclaim (whether characterized as permissive or compulsory) arising out of or in connection with this Order (including any amendment or addenda thereto), whether based on contract, tort, statute, or other legal theory (including but not limited to any claim of fraud or misrepresentation) will be resolved by binding arbitration under this section and the then-current Commercial Rules and supervision of the American Arbitration Association ("AAA").