Chesapeake Appalachia, L.L.C. v. Scout Petroleum, LLC
73 F. Supp. 3d 488
M.D. Penn.2014Background
- Chesapeake Appalachia sued Scout seeking (1) a declaration that a court — not an arbitrator — decides whether the lease permits class arbitration (“who decides”) and (2) a declaration that the leases do not permit class arbitration (“clause construction”).
- Scout initiated AAA arbitration and the AAA panel ruled it could decide the “who decides” issue and found the contract permitted class arbitration; Chesapeake moved to vacate that award.
- After the Third Circuit decided Opalinski (holding classwide arbitrability is a question of arbitrability presumptively for courts absent clear and unmistakable evidence otherwise), the district court granted Chesapeake’s motion for partial summary judgment on the “who decides” issue and vacated the arbitrators’ award under 9 U.S.C. § 10(a)(4).
- Scout moved for reconsideration and for recusal/vacatur of the court’s October 16, 2014 order; the court denied those motions, certified an interlocutory appeal under 28 U.S.C. § 1292(b), and stayed the action pending appeal.
- The court distinguished the separate question of clause construction (whether the contract permits class arbitration) from the threshold “who decides” question, concluding the contract was not a clear-and-unmistakable delegation of the gateway question to the arbitrator.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides availability of class arbitration (gateway question) | Court should decide; Opalinski requires courts to decide classwide arbitrability absent clear & unmistakable delegation | Arbitrator should decide because leases incorporate AAA rules and are not silent | Court: Held for Chesapeake — availability of class arbitration is a question of arbitrability for courts absent clear & unmistakable evidence delegating it to arbitrator (followed Opalinski) |
| Whether contract clearly & unmistakably delegates the gateway question to arbitrator | Lease language (incorporating AAA rules) does not clearly & unmistakably delegate class arbitrability | Incorporation of AAA rules and broad arbitration clause shows delegation | Court: Not clear & unmistakable; incorporation of AAA rules insufficient to delegate gateway question |
| Vacatur of AAA award | Award should be vacated because arbitrators exceeded authority by deciding gateway question | Arbitration panel’s decision should stand; due process argument | Court: Vacated award under 9 U.S.C. § 10(a)(4) because arbitrators decided an issue reserved for courts under controlling law |
| Recusal / appearance of impropriety | N/A for plaintiff; Scout argued judge should recuse because judge’s former firm and relatives have connections that could be adverse | Scout argued appearance of partiality under 28 U.S.C. § 455 | Court: Denied recusal — no reasonable informed person would conclude impartiality compromised; found recusal motion speculative and possibly judge-shopping |
Key Cases Cited
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (U.S. 2003) (plurality addressing whether arbitrator or court decides if contract permits class arbitration)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (U.S. 2010) (class-action arbitration cannot be imposed without contractual basis; parties’ silence does not create consent)
- Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (U.S. 2013) (arbitrator’s decision on class procedures survived review; discussed whether classwide availability may be a question of arbitrability)
- Opalinski v. Robert Half Int’l Inc., 761 F.3d 326 (3d Cir. 2014) (Third Circuit: availability of classwide arbitration is a question of arbitrability for courts absent clear & unmistakable delegation)
- Reed Elsevier Inc. v. Crockett, 734 F.3d 594 (6th Cir. 2013) (court held classwide arbitrability is presumptively for courts; incorporation of AAA rules insufficient to show clear & unmistakable delegation)