Forest Oil Corp. v. El Rucio Land & Cattle Co.
446 S.W.3d 58
Tex. App.2014Background
- ranch spans 27,289.5 acres in Hidalgo County; Forest Oil held a mineral lease on ~1,500 acres and operates a 5.75-acre gas plant on the Ranch
- McAllens sued Forest Oil in 2005 for environmental contamination including mercury-containing waste and NORM-contaminated pipe used for rhinoceros pens
- Settlement and Surface Agreements from 1999 require arbitration for environmental claims; Tribunal awarded declaratory relief and damages
- Arbitration panel consisted of three arbitrators (Bristow, Ramos, Hoover); majority found for McAllens; Bristow dissented
- Trial court confirmed the award, vacated the bond portion; Forest Oil moved to vacate; court denied vacatur except for bond
- Forest Oil appeals on grounds of Railroad Commission jurisdiction, arbitrator partiality, excess of powers, damages grounded in gross mistake/manifests disregard, and punitive-damages limits
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Railroad Commission exclusive/primary jurisdiction negates arbitral award | Forest Oil argues exclusive/primary RCJ over remediation disputes | McAllens argue common-law remedies coexist with RCJ | No exclusive/primary RCJ; award affirmed on jurisdictional grounds |
| Whether Arbitrator Ramos exhibited evident partiality requiring vacatur | Forest Oil asserts nondisclosure creates reasonable impression of partiality | Ramos unaware of Santillana mediation; evidence supports no evident partiality | No evident partiality; trial court's decision affirmed |
| Whether arbitrators exceeded their powers in declaratory relief under Surface Agreement | Declarations invade RCJ and rewrite Surface Agreement | Declarations are rationally inferable from contract | Arbitrators did not exceed authority; declarations valid |
| Whether damages were gross-mistake or manifest disregard of law; vacatur warranted | Awards for $15M, $500K and $500K exemplary damages flawed | Record supports damages; not gross mistake or manifest disregard | No gross mistake or manifest disregard; exemplary-damages review not warranted absent clear agreement; award affirmed |
| Whether exemplary damages review was improperly broadened beyond contract terms | Arbitration clause allowed punitive damages; should be reviewed for errors | No clear agreement for expanded judicial review | No expanded judicial review; exemplary damages affirmed |
Key Cases Cited
- Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212 (Tex. 2002) (exclusive vs. primary jurisdiction requires statute-based parsing)
- CVN Group, Inc. v. Delgado, 95 S.W.3d 234 (Tex. 2002) (public policy limits on vacatur; deference to arbitration process)
- Amarillo Oil Co. v. Energy-Agri Prods., Inc., 794 S.W.2d 20 (Tex. 1990) (inherently judicial claims; open courts not foreclosed by regulation)
- Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011) (arbitration agreement may define review for legal error; essence test for awards)
- Port Arthur Steam Energy LP v. Oxbow Calcining LLC, 416 S.W.3d 708 (Tex. App.—Houston [1st Dist.] 2013) (evident partiality standards; burden on movant; de novo review on appeal)