2020 Ohio 4719
Ohio Ct. App.2020Background
- Plaintiffs (owners/lessors) leased oil and gas rights on a 175.7-acre farm in 2007; three leases contained a five-year term and extensions if oil/gas was produced.
- 2014 addenda modified the leases to (1) define “Commencement of Operations” (drilling permit + putting equipment/access roads and a rig on site) and (2) add a mandatory arbitration clause for questions concerning the lease or performance.
- Mason Dixon assigned the leases to Hess, which assigned them to Ascent; Ascent obtained drilling permits in April 2017 but performed no oil/gas development before the leases’ expiration dates in June/July 2017.
- Plaintiffs sued (1) for declaratory judgment that the leases expired because Commencement of Operations was not met and (2) slander of title based on Ascent’s 2018 filings asserting lease interests.
- Ascent answered, asserted arbitration as an affirmative defense, and counterclaimed for declaratory judgment; later moved to stay proceedings pending arbitration. The trial court denied the stay, holding the R.C. 2711.01(B)(1) exemption for title/possession disputes applied.
- The court of appeals reversed: it held the title/possession exemption did not apply because the leases grant only a mineral/leasehold interest (not title/possession of the real estate itself) and remanded for the trial court to decide whether Ascent waived arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether R.C. 2711.01(B)(1) exemption ("title to or possession of real estate") bars arbitration | Leases create an interest in real estate that clouds title; disputes over validity/termination are title-related and exempt from arbitration | Disputes concern lease performance (Commencement of Operations) not ultimate title/possession; arbitration clause covers these issues | Court: exemption narrowly construed; leases do not raise title/possession dispute over the land itself, so arbitration applies |
| Whether Ascent waived its right to arbitrate by litigating and filing a counterclaim | Waiver: Ascent delayed and invoked court jurisdiction via counterclaim and other litigation conduct | Ascent contends it preserved arbitration right; trial court must assess waiver facts | Court: trial court did not decide waiver; remanded for trial court to determine whether waiver occurred |
Key Cases Cited
- Blakemore v. Blakemore, 5 Ohio St.3d 217 (1983) (defines abuse-of-discretion standard for appellate review)
- Featherstone v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 159 Ohio App.3d 27 (2004) (trial court stay-pending-arbitration reviewed for abuse of discretion)
- Chesapeake Exploration, L.L.C. v. Buell, 144 Ohio St.3d 490 (2015) (oil-and-gas leases create a leasehold/mineral interest but do not equate to full title/possession of the surface estate)