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SWN Production Company, LLC v. Long

Supreme Court of West Virginia

November 7, 2017

SWN PRODUCTION COMPANY, LLC, Defendant Below, Petitioner
v.
RICHARD E. LONG and MARY D. LONG, Plaintiffs Below, Respondents

          Submitted: October 18, 2017

         Appeal from the Circuit Court of Marshall County The Honorable David Hummel, Judge Civil Action No. 16-C-67

          Ancil G. Ramey, Esq. Steptoe & Johnson PLLC Huntington, West Virginia Kristen Andrews Wilson, Esq. Steptoe & Johnson PLLC Wheeling, West Virginia Allison J. Farrell, Esq. Steptoe & Johnson PLLC Bridgeport, West Virginia Counsel for the Petitioner

          James G Bordas, Jr., Esq. Jeremy M. McGraw, Esq. James B. Stoneking, Esq. Bordas & Bordas, PLLC Wheeling, West Virginia Counsel for the Respondents

         SYLLABUS

         1. "An order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine." Syllabus Point 1, Credit Acceptance Corp. v. Front, 231 W.Va. 518');">231 W.Va. 518, 745 S.E.2d 556 (2013).

         2. "When an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo." Syllabus Point 1, West Virginia CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., 238 W.Va. 465');">238 W.Va. 465, 796 S.E.2d 574 (2017).

         3. "Under the Federal Arbitration Act, 9 U.S.C. § 2, parties are only bound to arbitrate those issues that by clear and unmistakable writing they have agreed to arbitrate. An agreement to arbitrate will not be extended by construction or implication." Syllabus Point 10, Brown v. Genesis Healthcare Corp., 228 W.Va. 646');">228 W.Va. 646, 724 S.E.2d 250 (2011), overruled on other grounds by Marmet Health Care Ctr., Inc v. Brown, 565 U.S. 530 (2012).

         4. "Under the Federal Arbitration Act, 9 U.S.C. § 2, and the doctrine of severability, only if a party to a contract explicitly challenges the enforceability of an arbitration clause within the contract, as opposed to generally challenging the contract as a whole, is a trial court permitted to consider the challenge to the arbitration clause. However, the trial court may rely on general principles of state contract law in determining the enforceability of the arbitration clause. If necessary, the trial court may consider the context of the arbitration clause within the four corners of the contract, or consider any extrinsic evidence detailing the formation and use of the contract." Syllabus Point 4, State ex rel. Richmond American Homes of West Virginia, Inc. v. Sanders, 228 W.Va. 125, 717 S.E.2d 909 (2011).

         5. "The mere fact that parties do not agree to the construction of a contract does not render it ambiguous. The question as to whether a contract is ambiguous is a question of law to be determined by the court." Syllabus Point 1, Berkeley Co. Pub. Serv. Dist. v. Vitro Corp., 152 W.Va. 252, 162 S.E.2d 189 (1968).

          WALKER, Justice:

         Petitioner SWN Production Company, LLC and Respondents Richard and Mary Long are parties to an oil and gas lease that includes an arbitration provision. When Respondents sued Petitioner to recover payments to which they claim to be entitled under the lease and various other damages, Petitioner urged the circuit court to dismiss the case and compel arbitration. Respondents countered that references in other parts of the lease to "any court of competent jurisdiction" or "a civil action" invalidated the arbitration provision. The circuit court agreed. However, we find that the arbitration provision is clear and unambiguous and thus reverse the circuit court's order and remand with directions that the case be dismissed and referred to arbitration.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         This case involves a dispute between the parties regarding Respondents' mineral interests underlying real property located in Marshall County, West Virginia. Respondents allege that pursuant to the provisions of an oil and gas lease (Lease) with Petitioner's predecessor in interest executed on December 15, 2008, they are entitled to an up-front bonus payment of $113, 710.00 ($1, 000 per acre) in consideration for execution of the Lease but only received $44, 544.00.[1] Respondents' complaint seeks (1) a declaration that the Lease is invalid as a result of Petitioner's failure to pay the full bonus amount; (2) rescission of the Lease and damages for unjust enrichment; (3) damages for trespass and conversion; (4) damages for intentional infliction of emotional distress; (5) an injunction to prohibit any re-entry onto their property; and (6) punitive damages. Petitioner filed a motion to compel arbitration and to dismiss Respondents' complaint, relying on the following arbitration provision in the Lease:

ARBITRATION. In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee's operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association. All fees and costs associated with the arbitration shall be borne equally by Lessor and Lessee.

         In its order denying Petitioner's motion to compel arbitration, the circuit court found ambiguity in the Lease's arbitration provision, explaining:

18. Upon review of the lease language . . . the Court has determined that the lease language regarding arbitration is indeed ambiguous.
19.To be clear, the Plaintiffs have not argued that the entire lease is invalid, therefore the arbitration clause is invalid. The Plaintiffs' underlying case may make that allegation, but the challenge to the arbitration clause does not. The challenge to the arbitration provision is limited to the issues of ambiguity and assent.
20. The references to "courts of competent jurisdiction" and "civil actions" demonstrate ambiguity as to the ability to proceed with disputes in the civil court system as opposed to arbitration.[2]

         Finding that ambiguous contract provisions must be construed against the drafter, the circuit court held that "[t]he ambiguous contract language at issue here much like the ambiguous language in [State ex rel.] Richmond American Homes [of West Virginia, Inc. v. Sanders, 228 W.Va. 125, 717 S.E.2d 909 (2011)] demonstrates a failure of clear and unmistakable assent as to the issue of arbitration." On this basis, the circuit court denied Petitioner's motion to compel arbitration.

         II. STANDARD OF REVIEW

         "An order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine."[3] With respect to the applicable standard of review, this Court has held that "[w]hen an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo."[4] Additionally, with respect to our review of contractual issues, this Court has stated, "we apply a de novo standard of review to [a] circuit court's interpretation of [a] contract."[5] With these standards in mind, we proceed to consider the parties' arguments.

         III. ANALYSIS

         The issue before us is whether the arbitration clause contained in the Lease is ...


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