Forest Oil Corporation, Now Known as Sabine Oil & Gas Corporation v. El Rucio Land and Cattle Company, Inc., San Juanito Land Partnership, Ltd., McAllen Trust Partnership, and James Argyle McAllen
518 S.W.3d 422
| Tex. | 2017Background
- James A. McAllen (and related entities) owned >27,000 acres; Forest Oil leased ~1,500 acres and operated a processing plant on the Ranch for decades.
- Parties previously settled royalty/production disputes via a Settlement Agreement incorporating a Surface Agreement that (among other things) prohibited storage/disposal of hazardous materials and required Forest to remediate contamination it caused.
- McAllen later discovered contamination (including NORM on donated pipe) and sued Forest for contamination, personal injury, and related torts and contract breaches; Forest sought arbitration under the agreement.
- Arbitration proceeded before a three-arbitrator panel; the panel awarded McAllen substantial damages, declarations imposing ongoing remediation obligations on Forest, and a $10 million performance bond (later vacated by the trial court).
- Forest moved to vacate the award on multiple grounds: RRC (Railroad Commission) exclusive or primary jurisdiction over contamination claims; evident partiality of arbitrator Ramos due to nondisclosures; arbitrators exceeded their powers/manifest disregard of law; and that parties agreed to expanded judicial review of exemplary damages.
- The Texas Supreme Court reviewed and affirmed the court of appeals: it held the RRC does not have exclusive or primary jurisdiction over McAllen’s common‑law claims, rejected evident partiality and excess‑authority/failure‑to‑abate grounds for vacatur, and declined to expand judicial review of exemplary damages.
Issues
| Issue | Plaintiff's Argument (McAllen) | Defendant's Argument (Forest) | Held |
|---|---|---|---|
| Whether the RRC has exclusive jurisdiction over contamination claims | Court should allow common‑law claims; RRC actions do not bar judicial relief | RRC statutes and authority over oil/gas contamination show legislative intent to make RRC exclusive forum | No — statutes do not clearly abrogate common‑law rights; exclusive jurisdiction not shown |
| Whether RRC primary jurisdiction requires abatement of arbitr/ litigation | Common‑law claims (trespass, negligence, etc.) are inherently judicial and not for primary jurisdiction | RRC’s technical expertise and the Surface Agreement’s "if, as and when required by law" language mean agency should handle initial determinations | No — primary jurisdiction inapplicable to inherently judicial claims; abatement not required |
| Whether arbitrator Ramos’s nondisclosures required vacatur for evident partiality | Implicit: arbitration was fair; any nondisclosure was trivial | Ramos failed to disclose prior objection to his serving as mediator in another matter involving McAllen’s counsel, creating an appearance of partiality | No — trial court’s finding that nondisclosure was trivial or that Ramos was unaware is supported; no evident partiality shown |
| Whether arbitrators exceeded powers / award manifestly disregarded Texas law or parties agreed to expanded judicial review of exemplary damages | Arbitrators stayed within the Settlement Agreement’s broad arbitration grant; parties did not agree to expanded judicial review | Panel awarded damages and declarations exceeding what Texas law permits and parties intended limited judicial review | No — arbitrators had authority under the arbitration clause to decide scope and damages; no clear agreement to expand judicial review of exemplary damages |
Key Cases Cited
- Cash Am. Int’l Inc. v. Bennett, 35 S.W.3d 12 (Tex. 2000) (defines exclusive agency jurisdiction and need for clear legislative intent to abrogate common‑law rights)
- Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212 (Tex. 2002) (describes primary jurisdiction doctrine and abatement procedure)
- Hoskins v. Hoskins, 497 S.W.3d 490 (Tex. 2016) (limits vacatur to statutory grounds under Texas Arbitration Act)
- Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518 (Tex. 2014) (standards for evident partiality review)
- Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011) (parties may contract for expanded judicial review of arbitration only by clear agreement)
- Burlington N. R.R. Co. v. TUCO Inc., 960 S.W.2d 629 (Tex. 1997) (evident partiality and nondisclosure principles)
- Jackson Cty. Vacuum Truck Serv., Inc. v. Lavaca‑Navidad River Auth., 701 S.W.2d 12 (Tex. App.—Corpus Christi 1985) (context on agency jurisdictional allocation)