Heller v. TriEnergy, Inc.
877 F. Supp. 2d 414
N.D.W. Va.2012Background
- Oil and gas lease dated August 24, 2006 between Hellers and TriEnergy; multiple corporate successors/assigns including AB Resources and Chevron.
- Arbitration clause in Lease (paragraph 17) provides three arbitrators with final, conclusive award and mutual cost-sharing.
- AB Resources and Trout are non-diverse parties; AB Resources is alleged nominal, Trout allegedly fraudulently joined.
- Dispute removed to federal court based on diversity; Hellers seek remand arguing lack of complete diversity and insufficient amount in controversy.
- Court hears motions to compel arbitration and remand; court ultimately denies remand and compels arbitration, dismissing the case without prejudice for arbitration.
- Court holds subject matter jurisdiction exists after disregarding AB Resources and Trout; arbitration clause enforceability analyzed under FAA and WV law
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether diversity jurisdiction exists after disregarding AB Resources and Trout | Hellers contend AB Resources non-diverse or non-real party, Trout non-diverse | Chevron argues AB Resources is nominal and Trout fraudulently joined, creating diversity | Diversity exists; AB Resources nominal, Trout fraudulently joined, complete diversity achieved |
| Whether the amount in controversy satisfies the jurisdictional threshold | Hellers claim exceeds $75,000 | Pre-litigation settlement demand andfiled complaint show amount exceeds | Met the amount in controversy by preponderance of the evidence |
| Whether the arbitration clause is enforceable and governs the dispute | Arbitration clause unconscionable or unenforceable under WV law | FAA favors arbitration; clause broad and enforceable | Arbitration clause enforceable; claims compelled to arbitration |
| Whether any adequate state-law defenses prevent arbitration | Arbitration is barred by unconscionability or fraud in inducement | No valid defense shown; FAA preempts broad challenges | No adequate defense; clause enforced |
| Whether remand was appropriate or cases should be stayed/compelled to arbitration | Remand appropriate due to lack of jurisdiction | Arbitration required and federal court should stay/remand is inappropriate | Remand denied; arbitration compelled; case dismissed without prejudice to arbitrate |
Key Cases Cited
- Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002) (retains liberal FAA arbitration policy; elements for compelling arbitration)
- Hill v. PeopleSoft USA Inc., 412 F.3d 540 (4th Cir. 2005) (resolve doubts in favor of arbitration; scope of arbitrable issues)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (Sup. Ct. 1983) (FAA policy and contract defenses handled by state law)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (Sup. Ct. 1995) (contract defenses may be raised against arbitration)
- Green Tree Fin. Corp. v. Randolph, 531 U.S. 79 (Sup. Ct. 2000) (arbitration clause can fail to address fees/costs without invalidating)
- Snowden v. Checkpoint Check Cashing, 290 F.3d 631 (4th Cir. 2002) (grounds to avoid arbitration must relate to the arbitration clause)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (Sup. Ct. 2006) (FAA does not permit challenges to contract formation grounds outside arbitration clause)
- Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (Sup. Ct. 1941) (strict construction of removal jurisdiction; removal jurisdiction concerns)