H&T Fair Hills, Ltd., on behalf of themselves and all others similarly situated; Norman Zimmerman, on behalf of themselves and all others similarly situated; Donna Zimmerman, on behalf of themselves and all others similarly situated; Steven Wherry, on behalf of themselves and all others similarly situated; Valerie Wherry, on behalf of themselves and all others similarly situated; Robert Ruebel, on behalf of themselves and all others similarly situated; Mary Ruebel, on behalf of themselves and all others similarly situated; Larry Ruebel, on behalf of themselves and all others similarly situated; Mark Hein, on behalf of themselves and all others similarly situated; Debra Hein, on behalf of themselves and all others similarly situated; Nicholas Hein, on behalf of themselves and all others similarly situated v. Alliance Pipeline L.P., also known as Alliance USA
No. 22-1817
United States Court of Appeals For the Eighth Circuit
August 10, 2023
Before LOKEN, MELLOY, and KOBES, Circuit Judges. MELLOY, Circuit Judge.
Appeal from United States District Court for the District of Minnesota. Submitted: December 13, 2022.
I.
In 1997, Alliance entered into the State Agreements with North Dakota, Minnesota, Iowa, and Illinois to build a natural gas pipeline through the states.1 The State Agreements, entitled Agricultural Impact Mitigation Agreements, require Alliance “to mitigate, or provide compensation for, negative agricultural impacts that may occur due to Pipeline Construction” including damages or losses to crops. The State Agreements include provisions for Alliance to continue to compensate landowners for damages or losses caused after the construction of the pipeline. The states and Alliance negotiated and signed the State Agreements. The landowners were not parties to the State Agreements.
After Alliance signed the State Agreements, but before constructing the pipeline, Alliance negotiated the easements with individual landowners to give Alliance a right-of-way across the land. Alliance sent solicitation letters to and met with landowners to negotiate the easements. In addition to providing for an initial
After the pipeline became operational in 2000, Alliance created the “Crop Yield Program,” an optional program to assist in administering compensation to landowners. If landowners chose to participate in the program, Alliance would provide an agronomist to take crop samples and determine if there was a difference in yields between parcels on and off the pipeline right-of-way. Alliance and landowners would then negotiate both the compensable magnitude of any differential as well as any payment. Alliance began putting restrictions on the Crop Yield Program after only a few years. In 2003, Alliance put strict deadlines on applying for the program. In 2006, Alliance put more restrictions on how the samples were taken. In 2013, Alliance stated it would no longer provide complimentary agronomists to the landowners as part of the Crop Yield Program. And finally in 2015, Alliance ended the Crop Yield Program. After Alliance ended the Crop Yield Program, landowners continued to hire agronomists and submit crop-loss claims to Alliance in a decentralized manner. In the present complaint, Plaintiffs assert Alliance denied all claims for compensation after 2015. Reportedly, Alliance denied the claims because without any “operational activities” on the land Alliance could not determine causation.
II.
After the class was certified, Alliance filed a motion to compel arbitration. Plaintiffs opposed the motion for three reasons. First, Plaintiffs argued the arbitration provisions are limited to damages to crops, whereas the complaint seeks remedies for ongoing yield loss caused by soil injury. Second, Plaintiffs argued their causes of action arose under the State Agreements, which do not contain arbitration provisions. Third, Plaintiffs argued Alliance waived the right to enforce any arbitration provision by waiting to file the motion to compel arbitration until more than two years after the complaint was filed. The district court addressed the motion to compel arbitration in a March 2022 order.
The district court concluded the arbitration provisions are valid agreements to arbitrate which cover some of the issues in the case. The district court ordered the plaintiffs with easements containing arbitration provisions to arbitrate as to two issues related to damages, namely whether the pipeline had caused damages to crops and the value of any damages to crops. The district court found Plaintiffs could not keep these issues in court by claiming to sue under the State Agreements. The district court concluded that while Plaintiffs could enforce the State Agreements as intended
The district court did not order any plaintiff whose easement lacked an arbitration provision to participate in arbitration. Further, the district court ordered the case to continue in court for all plaintiffs as to three issues the district court “carved out” as non-arbitrable under the arbitration provisions: first, whether “Alliance breached its contractual obligations by announcing the termination of its Crop Yield Program;” second, whether “Plaintiffs are entitled to compensation for any diminution in crop yield on the Pipeline right-of-way even without showing that Alliance caused crop damage;” and third, whether Plaintiffs are entitled to “declaratory relief interpreting the requirements of the easements and [State Agreements].” Accordingly, the district court ordered a limited stay, staying only the damages issues discussed previously, for the parties subject to the arbitration agreement. However, in the order on the motion to compel, the district court did not order any issues be stayed for the plaintiffs it found were not subject to an arbitration provision.
Finally, the district court found Plaintiffs did not meet the burden of proof necessary to show Alliance waived the right to compel arbitration. The district court noted, “since no Named Plaintiffs are subject to the arbitration agreements, Alliance had no reason to raise arbitration as an affirmative defense in an Answer that preceded class certification.”
Alliance filed a timely appeal, arguing all issues are subject to arbitration for those plaintiffs whose easements contain an arbitration provision. Essentially, Alliance left unchallenged the district court‘s arbitration ruling other than the district court‘s carving out of three issues to preserve for litigation. Alliance also filed a motion in the district court to stay all proceedings pending appeal including proceedings for those plaintiffs whose easements do not contain an arbitration provision. The district court granted the broader stay pending appeal as requested by Alliance.
Plaintiffs now argue a cross-appeal is not necessary for this court to reverse that part of the district court‘s original stay that finds some issues arbitrable. Alliance asserts that reversing the district court‘s order to stay some issues for arbitration, in effect finding no issues are subject to arbitration, would reach beyond issues raised in Alliance‘s own timely filed appeal. According to Alliance, such a ruling would expand Plaintiffs’ rights in a manner that would be prohibited without a cross appeal. See East Iowa Plastics, Inc. v. PI, Inc., 889 F.3d 454, 459 (8th Cir. 2018). Because we conclude the district court properly ordered arbitration of damages issues but erred in carving out issues from arbitration, we essentially hold that the plaintiffs’ arguments concerning the scope of arbitration lack merit. As such we need not decide whether Plaintiffs’ request to appeal the decision to arbitrate damages issues was “fairly included” in Alliance‘s appeal. See Donelson v. Ameriprise Fin. Servs., Inc., 999 F.3d 1080, 1087 (8th Cir. 2021) (citation omitted).
III.
We review the district court‘s decision to deny or grant a motion to compel arbitration de novo. Triplet v. Menard, Inc., 42 F.4th 868, 870 (8th Cir. 2022). Because there is no question that valid agreements exist, “[t]he party resisting arbitration bears the burden of showing either that the arbitration provision is invalid or that it does not encompass the claims at issue.” Id.; but see Ballou v. Asset Mktg. Servs., LLC, 46 F.4th 844, 851 (8th Cir. 2022) (holding “party seeking to compel
As a preliminary matter, Plaintiffs argue Alliance waived the right to enforce any arbitration provision. “Waiver . . . ‘is the intentional relinquishment or abandonment of a known right.‘” Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1713 (2022) (citation omitted). “To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right; the court seldom considers the effects of those actions on the opposing party.” Id. Alliance did not act inconsistently with its right to arbitrate. As the district court noted, none of the named plaintiffs in this class action have arbitration provisions in their easements. Therefore, a motion to compel arbitration prior to class certification would have been a motion to bind parties who were not yet part of the case. Alliance acted consistently with its right to arbitrate by filing a motion to compel arbitration quickly after the class was certified to include some plaintiffs whose easements have an arbitration provision.
A.
We agree with the district court that the damages issues are subject to arbitration for the plaintiffs whose easements contain an arbitration provision. Plaintiffs make two arguments against sending any issues to arbitration: (1) Plaintiffs’ claims cannot be within the scope of the arbitration provisions because the claims allege lack of compensation for “ongoing yield losses” not “damages to crops” and (2) Plaintiffs’ claims arise under the State Agreements, which do not have arbitration provisions. We find the arbitration agreements to be enforceable and to cover all issues.
Under the easements, Alliance must pay for “damages to crops, . . . which may arise from the laying, constructing, maintaining, operating, repairing, replacing or removing of the said pipeline.” The easements with arbitration provisions go on to state: “[s]aid damages, if not mutually agreed upon, shall be determined by arbitration[.]” Plaintiffs argue no landowners whose easements contain an arbitration provision are subject to arbitration because the provisions are limited to “damages to crops” and do not cover “diminished crop yield.” Nowhere in either the State Agreements nor the easements do parties differentiate between “diminished crop yield” and “damages to crops.” Plaintiffs’ attempt to draw such a distinction lacks any textual basis. Any distinction between “diminished crop yield” and “damages to crops” is subtle and, for purposes of determining arbitrability, the dispute about whether a distinction exists must be resolved in favor of arbitration. It will be up to the arbitrator to determine the nature and extent of any crop loss and to what extent “crop yield loss” is included in “damages to crops.”
Second, Plaintiffs argue in essence that the State Agreements either invalidate any arbitration provision in the easements or provide a separate avenue for Plaintiffs’ arguments to end up in court. Because we find the issues in this case fall under the arbitration provisions, the question becomes whether the State Agreements prohibit the use of arbitration provisions in the easements. We conclude they do not. The State Agreements set a baseline level of protection for landowners but require landowners to negotiate the details of their own protections through easements.
B.
In addition to finding damages issues are subject to the arbitration provisions, we conclude that the three issues carved out by the district court to remain in litigation are also subject to the arbitration provisions. The issues carved out by the district court are integral to the issues subject to arbitration. If the court determines a contract shows the parties intended to arbitrate grievances “then it is for the arbitrator to determine the relative merits of the parties’ substantive interpretations of the agreement.” AT&T Techs., Inc. v. Commc‘ns Workers of America, 475 U.S. 643, 651 (1986).
The first question carved out by the district court, whether Alliance is required to continue the Crop Yield Program, is inextricably intertwined with the damages issues that are to be arbitrated. Neither the State Agreements nor the easements expressly require the use of the Crop Yield Program. Alliance created the Crop Yield Program to help manage its duty to compensate landowners. How Alliance fulfills its duties under the easements, including whether Alliance was required to run the Crop Yield Program, is an issue to be arbitrated. If a court were to decide this issue it would be “rul[ing] on the potential merits of the underlying claims.” Crown Cork & Seal Co. v. Int‘l Ass‘n of Machinists & Aerospace Workers, AFL-CIO, 501 F.3d 912, 917 (8th Cir. 2007) (citation omitted). Something that should be avoided. Id.
The second question, whether Plaintiffs must show the damages to crops were caused by Alliance, is likewise bound together with the issues of damages. The
Finally, the arbitration provisions cover the question of declaratory relief. The complaint asks for declaratory relief “to require the ongoing payment of crop yield loss damages starting from the 2015 cancellation of the Crop Loss Program, and continuing for the operational life of the Pipeline.” A finding on this issue would require the district court to define damages and the scope of said damages. Two issues clearly reserved for arbitration.
IV.
The district court order is affirmed in part and reversed in part. Essentially, the district court will be required to dismiss from the class those members subject to arbitration agreements. As to the arbitration class members, the claims should be dismissed without prejudice. As to the members of the class without arbitration provisions, we see no reason why these class members cannot proceed with the lawsuit in the normal course at the district court.