Energy Law

Texas Supreme Court Sends Parties to Arbitration in JOA Dispute

By Natalie Barletta

The Texas Supreme Court in, In re Gulf Exploration, LLC, No. 07-0055 (Tex. Apr. 17, 2009), addresses when mandamus relief is available in connection with an order compelling arbitration. In this case, several working interest owners sued Great Western Drilling, their operator, claiming an opportunity to participate in wells drilled by Great Western. The working interest owners moved to compel arbitration pursuant to the terms of the arbitration clause contained in their joint operating agreements. The trial court granted the motion to compel and Great Western sought mandamus relief in the court of appeals. The appellate court held that the trial court 'clearly and indisputably' abused its discretion and conditionally granted mandamus relief.
The primary issues before the Supreme Court were: (1) whether the appellate court had jurisdiction to review the trial court's order compelling arbitration; and, if so, (2) whether the appellate court erred in vacating the trial court's order on the ground that the claims were outside the scope of the arbitration clause. The court stated the general rule that there can be no immediate appeal of an order compelling arbitration if the order merely stays the underlying litigation. However, an appeal may be taken if the underlying case is dismissed. Here, the trial court merely stayed the case pending arbitration; therefore, there was no final judgment from which to appeal.
The court continued, however, stating that even though an order is not reviewable by interlocutory appeal, mandamus review is not necessarily precluded. The party seeking mandamus relief must show that it has no other adequate remedy by appeal. The adequacy of an appeal is determined on a case-by-case basis by balancing the benefits and detriments of arbitration. Because both federal and state arbitration acts exclude immediate review of an order compelling arbitration, the balance tilts 'strongly against mandamus review.' In this case, the court found that there were no counterbalancing legislative mandates indicating that the legislature weighed in on one side of the balance. The court did not reach the issue of whether the claims fell outside the arbitration clause, but even assuming that the claims were not within the arbitration clause, Great Western failed to show that its appellate remedy following arbitration is inadequate. The court directed the appellate court to vacate its judgment, reinstating the trial court's order compelling arbitration.
 

Full post as published by The Energy Law Blog on April 20, 2009 (boomark / email).