Magnum Gas Pipeline L L C v. Silver Oak Operating L L C et al

Filing 64

MEMORANDUM RULING re 57 MOTION to Vacate or Modify Arbitration Award, 58 MOTION To Correct Computational Error in Arbitration Award and Otherwise Enter Judgment on Arbitration Award, and 49 MOTION to Confirm and Enter Arbitration Award. A judgment consistent with this ruling shall be issued herewith. Signed by Judge Elizabeth E Foote on 4/24/2015. (crt,Keifer, K)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION
MAGNUM GAS PIPELINE, LLC

CIVIL ACTION NO. 11-0056

VERSUS

JUDGE ELIZABETH ERNY FOOTE

SILVER OAK OPERATING, LLC, ET AL.

MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING
Before the Court are three separate motions concerning the awards and findings
of an arbitration proceeding. After the arbitrators issued their decision, Silver Oak
Operating, LLC (“Silver Oak”), a Defendant, filed its Motion To Confirm Arbitration
Award [Record Document 49], which was soon followed by two other motions: a Motion
To Vacate or, Alternatively, Modify Arbitration Award [Record Document 57] from
Defendant Chesapeake Louisiana, LP (“Chesapeake”), and a Motion To Correct
Computational Error in Arbitration Award and Otherwise Enter Judgment on Arbitration
Award [Record Document 58] from Magnum Gas Pipeline, LLC (“Magnum”), the
Plaintiff. Given the interrelated nature of these motions, the Court will address each in
this ruling. For the reasons below, the motions filed by Chesapeake and Magnum are
hereby DENIED, and Silver Oak’s motion is hereby GRANTED.
I.

Background
On December 1, 2000, Silver Oak entered into a Gas Purchase and Gathering

Agreement (“2000 Agreement”) with Magnum Gas Pipeline, Inc., which was the
predecessor of the current Plaintiff, Magnum. Record Document 1, Ex. A, pp. 3-4. In the

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2000 Agreement, Silver Oak committed to deliver to Magnum for transportation all of the
natural gas it produced from particular leases and wells, including two leases in DeSoto
Parish, Louisiana. Id.1 The parties’ obligations were binding on the parties’ successors
and assigns under the 2000 Agreement, and an assignor was not relieved of its duties
unless it received the other party’s consent. Record Document 12, Ex. 2, p. 16. Later,
on September 27, 2002, Silver Oak and Red Rock Energy Partners, LTD, another
Defendant, entered into the Gas Gathering Agreement (“2002 Agreement”) that, inter
alia, dedicated to Magnum for transportation in its pipeline all of the natural gas
produced at specific wells in DeSoto Parish. See Record Document 49, Ex. A.2 Like the
previous agreement, the obligations set forth in the 2002 Agreement were binding upon
any successor or assign of the parties. Id. at p. 9.
The present dispute arose from a petition in Louisiana state court in which
Magnum claimed that Silver Oak, along with the other Defendants, conveyed to
Chesapeake in December 2008 certain natural gas interests subject to the 2000 and
2002 Agreements without requiring Chesapeake to honor the provisions in those

1

According to the 2000 Agreement, Silver Oak had entered into a letter agreement with
Halliburton Energy Services, Inc. (“Halliburton”), that permitted Silver Oak “to sell gas attributable to the
interests of [Halliburton] in certain wells and leases on the conditions and for the term described [in the
2000 Agreement].” Record Document 12, Ex. 2, p. 1.
This agreement was later amended on September 26, 2002, to add another section of DeSoto
Parish to the area previously dedicated under the contract. Record Document 1, Ex. A, p. 4.
2

On October 30, 2002, the 2002 Agreement was also amended to add two other portions of
DeSoto Parish to the area dedicated to the contract. Record Document 1, Ex. A, p. 4. Moreover, in a later
letter agreement between Silver Oak and Magnum in April 2004, Silver Oak obtained two additional
portions of DeSoto Parish in return for dedicating to the 2002 Agreement any production from the wells
that Silver Oak proposed to drill on that newly acquired land. Id. at pp. 4-5. Two other Defendants in this
case, Moon Operating, Inc., and Twojo, Inc., also dedicated to the 2002 Agreement their respective
interests in the production from wells drilled by Silver Oak in multiple sections of DeSoto Parish. Id.

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agreements that were in favor of Magnum. Record Document 1, Ex. A, pp. 4-5.
Magnum alleged that Chesapeake was “aware of the existence of the gas gathering
contracts at issue here, and of the specific requirements that any assignee of the
defendants would be bound by the dedication provisions thereof,” yet the Defendants
“intentionally negotiated and entered into assignments which violated these terms.” Id.
at p. 5. As such, besides claiming that the other Defendants breached their contractual
duties, Magnum sought both to enforce the dedication provisions of the agreements
directly against Chesapeake and to recover the lost profits that it would have earned
from transporting the natural gas from the dedicated leases and wells. Id.
On September 15, 2011, after the case had been removed to federal court, this
Court stayed the proceedings and ordered that the parties, including Chesapeake,
submit to alterative dispute resolution, as required by the 2000 and 2002 Agreements.
Record Document 28, pp. 8-9. Then, on January 6, 2015, the arbitration panel (“panel”)
issued the Award of the Arbitrators (“Award”) that was “in full settlement of all claims,
cross claims and counterclaims submitted” to it by the parties. Record Document 49,
Ex. B, p. 3. The Award made several factual findings, which are discussed more fully
below, and provided both damages to Magnum and attorney fees and costs to Magnum
and Silver Oak. Id. at pp. 2-3.
Given the panel’s decision, Silver Oak filed its Motion To Confirm Arbitration
Award based on the provision in the 2002 Agreement that permits a judgment on an
arbitration award to be entered in a court of competent jurisdiction. Record Document
49, p. 3. This motion was subsequently followed by both Chesapeake’s Motion To
Vacate or, Alternatively, Modify Arbitration Award and Magnum’s Motion To Correct
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Computational Error in Arbitration Award and Otherwise Enter Judgment on Arbitration
Award. Record Documents 57 and 58.
II.

The Federal Arbitration Act
Under the Federal Arbitration Act (“FAA”), district courts play a very limited and

deferential role in reviewing an arbitration panel’s award. Any review is “extraordinarily
narrow,” and “federal courts will defer to the arbitrators' resolution of the dispute
whenever possible.” Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918
F.2d 1215, 1218 (5th Cir. 1990) (quoting Antwine v. Prudential Bache Sec., Inc., 899
F.2d 410, 413 (5th Cir. 1990)). The FAA states:
If the parties in their agreement have agreed that a judgment of the court
shall be entered upon the award made pursuant to the arbitration, and
shall specify the court, then at any time within one year after the award is
made any party to the arbitration may apply to the court so specified for an
order confirming the award, and thereupon the court must grant such an
order unless the award is vacated, modified, or corrected as prescribed in
sections 10 and 11 of this title. If no court is specified in the agreement of
the parties, then such application may be made to the United States court
in and for the district within which such award was made.
9 U.S.C. § 9 (emphasis added). The Supreme Court explains that courts should view
the FAA, and particularly 9 U.S.C. §§ 9-11, as evidence of a clear national policy
favoring arbitration and that “[a]ny other reading opens the door to the full-bore legal
and evidentiary appeals that can ‘rende[r] informal arbitration merely a prelude to a
more cumbersome and time-consuming judicial review process.’” Hall Street Assocs.,
LLC v. Mattel, Inc., 552 U.S. 576, 588 (2008) (quoting Kyocera Corp. v. PrudentialBache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir. 2003)).
As such, mere errors by arbitrators with respect to the law will not subject an
award to vacatur or modification. Woods v. P.A.M. Transp. Inc., 440 F. App’x 265, 269
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(5th Cir. 2011). Rather, an award should be affirmed, even if a court disagrees “with the
arbitrator’s interpretation of the underlying contract as long as the arbitrator’s decision
‘draws its essence’ from the contract. In other words, [courts] must affirm the arbitrator's
decision if it is rationally inferable from the letter or the purpose of the underlying
agreement.” Timegate Studios, Inc. v. Southpeak Interactive, LLC, 713 F.3d 797, 802
(5th Cir. 2013) (quoting Anderman/Smith Operating Co., 918 F.2d at 1218).
III.

Law and Analysis
A.

Chesapeake’s Motion To Vacate or, Alternatively, Modify Arbitration
Award

In its motion, Chesapeake argues that the Award should be vacated or,
alternatively, modified to address the Award’s imperfection and lack of definitiveness,
which Chesapeake claims will inevitably result in future litigation. Courts are empowered
to vacate an arbitration award where “the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and definite award upon the subject
matter submitted was not made.” 9 U.S.C. § 10(a)(4).3 If an award is “clear and concise”
and lacks any ambiguity, however, it cannot be said that the award is so imperfectly
executed as to permit it to be vacated. Antwine, 899 F.2d at 412-13. Even the failure “to
address all issues [in an arbitration process] does not necessarily justify setting an

3
The Court must note that it appears that Chesapeake is under the impression that Louisiana law
applies here, given its reference to Louisiana Revised Statute 9:4210 in the motion’s “Standard of Review”
section. However, although the 2002 Agreement contains a choice-of-law provision that states Louisiana
law governs the contract, the FAA and its provisions are applied to any arbitration proceeding, unless the
contract’s arbitration clause unequivocally provides otherwise. See Action Indus., Inc. v. U.S. Fid. & Guar.
Co., 358 F.3d 337, 341-42 (5th Cir. 2004) (explaining the Supreme Court has “held that a choice-of-law
provision is insufficient, by itself, to demonstrate the parties’ clear intent to depart from the FAA’s default
rules”). Despite the apparent error by Chesapeake, the Louisiana provision on vacatur mirrors its federal
counterpart, and the Court’s analysis of the merits of Chesapeake’s motion is unaffected.

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award aside if the decision of the arbitration panel rests on an adequate basis.” Atl.
Aviation, Inc. v. EBM Grp., Inc., 11 F.3d 1276, 1281 n.8 (5th Cir. 1994) (citations
omitted). In this case, because the panel’s Award is “rationally inferable from the letter
[and] the purpose of the underlying agreement[s],” this Court must affirm the panel’s
decision and lacks the power to modify or vacate the Award. Timegate Studios, 713
F.3d at 802.
Chesapeake’s motion rests on the conclusion that the Award must be vacated for
three principal reasons, each relating to the Award’s imperfection. First, Chesapeake
claims that the Award does not clearly find what potential natural gas interests were
dedicated to Magnum for transportation through the 2002 Agreement. Conflicting
evidence, Chesapeake notes, was presented to the panel as to the “amount of the
interest and sections that could potentially have been dedicated pursuant to the [2002
Agreement],” and this uncertainty calls into dispute the accuracy of the $63,457.17
awarded to Magnum in damages to be paid by Chesapeake. Record Document 56, pp.
4-5. Second, Chesapeake argues that the panel’s finding that Chesapeake must deliver
to Magnum natural gas in accordance with Section VII of the 2002 Agreement is
ambiguous. Because the Award “does not strike or otherwise alter the language of . . .
Section 7.3,” which allows Magnum, at its option, to either accept or reject natural gas
that fails to meet the specifications set forth in Section VII, Chesapeake asserts that this
ambiguity creates the possibility of future disputes over the parties’ continuing
obligations. Id. at p. 5. Third, Chesapeake alleges that the panel failed to make a finding
as to the proper gathering fees under the 2002 Agreement, despite addressing the
issue at the arbitration hearing. Without clearer findings, Chesapeake claims litigation
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will undoubtedly ensue unless the Award is vacated to allow for the opportunity to
provide for greater clarity of the parties’ obligations.
In response, Magnum asserts that the Award is clear and that Chesapeake’s
arguments ignore the panel’s particular findings. Magnum explains that the findings in
the Award make clear what interests were dedicated to the 2002 Agreement, as well as
the fact that these dedications are binding on Chesapeake. Moreover, Magnum argues
that any dispute as to the award amount it received relates to a computational error and
has “nothing to do with which interests are subject to the dedication.” Record Document
61, p. 2. Magnum also explains that any argument that Section 7.3 of the 2002
Agreement requires clarification is merely an improper attempt by Chesapeake to
escape its obligation to deliver natural gas to Magnum for transportation at the
contractually defined specifications. According to Magnum, the panel did not accept
Chesapeake’s “strained and, indeed, absurd interpretation of the contract” that might
permit it to deliver non-merchantable, off-specification natural gas to Magnum. Id.
Magnum lastly reasons that the Award specifies what are the proper gathering fees
associated with the delivery and transportation of the natural gas, especially in light of
the reference in “Award No. 3” to the price structure of the 2002 Agreement.4
Here, the Court is of the belief that the Award and its findings are conclusive and
comprehensive of the issues that were presented in this case. See Antwine, 899 F.2d at
412-13. First, the panel made clear findings as to what natural gas Chesapeake was to

4

Award No. 3 explains that “[a]fter Chesapeake tenders merchantable natural gas attributable to
the [other Defendants’] interest to Magnum at an established Magnum Pipeline delivery point, then the
volumes transported by Magnum . . . will be subject to the price structure of the [2002 Agreement].”
Record Document 49, Ex. B, p. 2.

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tender to Magnum and what obligations Chesapeake continues to owe under the 2002
Agreement. “Finding A” is unambiguous and explains that the rights of the other
Defendants “in and to the natural gas produced from all depths in the sections of land
referenced in Paragraph VIII of the April 6, 2004 Letter Agreement . . . were dedicated
to the [2002 Agreement],” and “Finding B” states that this “dedication . . . was and is
binding on all successors and assigns . . . including Chesapeake.” Record Document
49, Ex. B, p. 1. With “Finding C” the panel likewise found that Chesapeake was obliged
to tender to Magnum natural gas produced by it that was attributable to the interests of
the other Defendants from the “Haynesville formation in the Benson Field” for
transportation in Magnum’s pipeline, which Chesapeake failed to do. These findings are
clear and definitive in this regard, and it cannot be said that the Award is ambiguous
enough to permit it to be vacated. See Antwine, 899 F.2d at 412-13. Second, given this
clarity, Chesapeake cannot reasonably imply that the amount the panel awarded to
Magnum is still in dispute because of the uncertainty surrounding what interests were
potentially dedicated to Magnum through the 2002 Agreement. As detailed more below,
this damages amount is grounded in evidence derived from the arbitration proceeding,
and any allegation to the contrary is without support or merit. See id. (noting arbitrators
are not even required to set forth the reasons underlying their award).
Furthermore, Chesapeake’s claim that the Award is ambiguous as to its
obligation to provide Magnum natural gas for transportation in accordance with the
specifications of Section VII of the 2002 Agreement is equally without merit. Section VII
governs the quality of the natural gas that Chesapeake is to deliver to Magnum, and
Magnum correctly characterizes Chesapeake’s argument as an attempt to sidestep its
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obligation to provide natural gas in compliance with these specifications. Although a
single arbitrator disagreed with the panel’s findings on this issue, the panel’s majority
found that Chesapeake is obligated to deliver natural gas to Magnum for transportation
in accordance with Section VII, which includes Sections 7.1 through 7.3. The mere fact
that Section 7.3 permits Magnum, at its discretion, to accept off-specification gas from
Chesapeake does not “leave open or for dispute the future obligation of the parties,” as
Chesapeake asks the Court to believe. See Record Document 56, p. 5. Instead, the
Award imposes on Chesapeake the obligation to provide Magnum with natural gas
meeting the detailed specifications of Section 7.1, and if the gas fails to meet these
specifications, Magnum may either accept or reject Chesapeake’s gas at its option. Not
only does the Court believe that the majority’s finding is definitive on this matter, but the
Court finds that the Award clearly draws its essence from the underlying contract that
binds Chesapeake to these provisions. See Timegate Studios, 713 F.3d at 802.
Chesapeake’s final claim–that the Award should be vacated because it fails to
detail what are the proper gathering fees under the 2002 Agreement–is without merit as
well. The Court agrees with Magnum that the Award unmistakably explains that the
natural gas that Chesapeake tenders to Magnum “will be subject to the price structure
of the [2002 Agreement].” Record Document 49, Ex. B, p. 2. The different sections of
that agreement outline the costs and responsibilities that the parties must incur,
including Chesapeake’s obligation to tender merchantable natural gas to Magnum and
the varying charges associated with that gas’s transportation, dehydration, and
compression. Even though the Award does not detail these provisions itself, the panel’s
findings and the parties’ differing obligations are clearly determinable in reference to
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that agreement’s underlying provisions. See Timegate Studios, 713 F.3d at 802. Thus,
for the reasons analyzed above, Chesapeake’s motion is hereby DENIED.
B.

Magnum’s Motion To Correct Computational Error in Arbitration
Award and Otherwise Enter Judgment on Arbitration Award

Pursuant to 9 U.S.C. § 11, Magnum requests that this Court correct what it
characterizes as a “computational error” that affects two of the panel’s awards, but
otherwise, Magnum asks this Court to leave the rest of the panel’s Award undisturbed.
A district court may modify or correct an arbitration award where “there was an evident
material miscalculation of figures.” 9 U.S.C. § 11(a). Such an “‘evident material
miscalculation’ occurs ‘where the record that was before the arbitrator demonstrates an
unambiguous and undisputed mistake of fact and the record demonstrates strong
reliance on that mistake by the arbitrator in making his award.’” Prestige Ford v. Ford
Dealer Computer Servs., Inc., 324 F.3d 391, 396-97 (5th Cir. 2003) (quoting Valentine
Sugars, Inc. v. Donau Corp., 981 F.2d 210, 214 (5th Cir. 1993)). Establishing an
“undisputed” mistake of fact requires courts to determine whether “there is any rational
basis for disputing the truth of the fact.” Valentine Sugars, 981 F.2d at 214. If a court
“cannot determine with certainty that the arbitrator relied on the unambiguous and
undisputed mistake of fact, the award must be affirmed.” Haag v. Infrasource Corp.
Servs., LLC, No. 3:07-cv-387, 2012 WL 718876, at *7 (S.D. Miss. Mar. 5, 2012) (citing
Valentine Sugars, 981 F.2d at 214); cf. Atl. Aviation, 11 F.3d at 1284 (finding that a
lower arbitration award that resulted from what in essence was a “clerical error,” which
neither party disputed, could be “corrected without disturbing the merits of the
arbitrators’ decision”).
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Magnum primarily contends that the panel erred in calculating its damages by
improperly subtracting the marginal operating costs from the revenue it was entitled to
as a result of Chesapeake’s failure to comply with the 2000 and 2002 Agreements.
Whereas the panel awarded Magnum damages in the amount of the revenue of the
natural gas produced by the interests attributable to Chesapeake’s operations on the
dedicated leases and wells, minus ¢12.62 per mcf,5 Magnum argues that the “evidence
at the arbitration hearing . . . indicated that the marginal cost to Magnum of carrying
additional gas [attributable to Chesapeake] was little or nothing.” Record Document 58,
pp. 2-3. Magnum explains that “[e]very witness recognized that, if the volumes had been
increased [in its pipeline due to the gas produced by Chesapeake], there would have
been insignificant marginal cost incurred.” Record Document 58-1, p. 3. As a result,
Magnum asserts that the panel’s inclusion of this marginal cost is a computational error
that should be eliminated from the damages calculation, because it effectively raised
Magnum’s operating expense, which lowered its net revenue and damages, despite
evidence presented at the arbitration hearing to the contrary. Instead of $63,457.17 in
“lost net revenues” from July 2011 to June 2014, Magnum reasons that it is entitled to
$582,204.74 in “lost revenues,” as that higher figure does not take into account the

5

In the natural gas industry, “mcf” represents a thousand cubic feet, and Magnum explains the
cost of ¢12.62 per mcf “was simply the product of a calculation in which the actual volume of gas carried
on the system during that period (which, of course, did not include any of the Chesapeake gas) was
divided by the actual operating expense for [Magnum’s pipeline system].” Record Document 58-1, p. 3.

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¢12.62 per mcf in marginal costs. Magnum additionally notes that this same alleged
computational error is found in “Award No. 2" of the panel’s decision.6
Conversely, Chesapeake argues that Magnum’s argument is a disingenuous
attempt to revisit the merits of the Award and the panel’s decision to reduce the
damages owed by Chesapeake to Magnum by Magnum’s marginal operating costs.
Chesapeake explains that Magnum submitted a substantially similar post-hearing
motion to the panel requesting revision of the damages awarded based on this alleged
computational error, which the panel rejected in a post-hearing order. See Record
Document 62, Exs. A, B. Chesapeake also notes that the panel specifically found that
the marginal operating costs for Magnum’s pipeline would have been ¢12.62 per mcf for
“all gas transported during the time at issue,” including the natural gas Chesapeake
should have provided to Magnum. Id. at p. 2 (emphasis added). Furthermore,
Chesapeake explains that there was, in fact, testimony by Jim Cantwell that countered
Magnum’s assertion that there would have been insignificant marginal operating costs
associated with transporting any extra gas attributable to Chesapeake. Taken together,
Chesapeake claims that the inclusion of these marginal operating costs goes to the
merits of the Award and can hardly be construed as a mere computational error.
In light of the arguments, the Court agrees with Chesapeake and finds that the
panel’s decision to reduce Magnum’s awards based on its marginal operating expenses

6

In “Award No. 2,” the panel explains that “[f]or the period July 2014 until such time as
Chesapeake tenders to Magnum merchantable natural gas attributable to the interests acquired by
Chesapeake from the [other Defendants] at an established Magnum Pipeline delivery point, Chesapeake
shall owe Magnum an amount equal to the monthly production attributable to the [other Defendants’]
interest at the monthly [2002 Agreement] rate then applicable for such volumes up to 3.5 million cubic feet
per day less operating expenses of 12.62 cents/mcf.” Record Document 49, Ex. B, p. 2.

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was not an undisputed “computational error.” Prior to Magnum’s instant motion, it
submitted the same arguments set forth above to the panel in a post-hearing motion,
and the panel clearly responded that the inclusion of these marginal operating expenses
was “specifically addressed by the panel as [a] substantive matter[] in this Arbitration”
and the expenses were “not mere computational errors.” Record Document 62, Ex. B, p.
1. The panel’s post-hearing order indicates that the inclusion of these marginal
operational costs was not a computational error, but rather a substantive decision. As a
result, this Court is hard-pressed to find that the panel’s Award illustrates a material
miscalculation of the figures. See 9 U.S.C. § 11(a). The panel’s decision on this matter
goes to the merits of the damages awarded to Magnum, and it cannot be construed as
a clerical error that otherwise does not alter the Award’s substance. See Atl. Aviation,
11 F.3d at 1284. Rather, as Chesapeake notes, the panel made a specific finding in its
decision based on the evidence presented regarding Magnum’s marginal operating
costs and then incorporated that finding when awarding damages. Even if the Court
were to disagree with this finding, which it does not, the panel’s decision must be
affirmed because it appears to be rationally inferred from the purpose of the underlying
agreements. Timegate Studios, 713 F.3d at 802.
Moreover, this decision by the panel was not an “undisputed” mistake of fact, as
required to modify or correct an arbitration award. See Prestige Ford, 324 F.3d at 39697. The panel heard from multiple witnesses concerning the likely additional operating
costs that would have been associated with transporting the natural gas attributable to
Chesapeake, including a witness who stated additional operating costs would be
incurred, and the panel then decided to incorporate those marginal expenses in the
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damages awarded to Magnum. Given the testimony presented to the panel, there are
rational arguments both for and against finding Magnum’s marginal operating costs
would have increased as it transported the additional volumes associated with
Chesapeake’s natural gas. See Valentine Sugars, 981 F.2d at 214. However, courts are
generally to defer to the arbitrators, and this Court cannot determine with any certainty,
given the limited record of the proceedings provided to the Court, that the panel relied
on any undisputed mistake of fact. See Timegate Studios, 713 F.3d at 802. As such,
Magnum’s motion is hereby DENIED.
C.

Magnum’s Request for the Court To Specify the Terms of the Award

Besides requesting that this Court correct the computational error described
above, Magnum also asks the Court to include specific provisions in its judgment
confirming the panel’s Award. Among other requests, Magnum explains that the
judgment should specify that Chesapeake must deliver to Magnum natural gas that is
merchantable and in accordance with the provisions of the 2002 Agreement, and
Chesapeake must do so “within thirty days of Magnum’s designation of an established
delivery point.” Record Document 58-1, p. 4. Magnum asserts that Chesapeake’s
arguments concerning the inevitability of future litigation concerning its delivery of offspecification natural gas to Magnum for transportation illustrates the importance of the
Court making specific findings as part of its judgment. Chesapeake counters that
Magnum’s request is improper, because Magnum seeks to broaden the Award by

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obligating Chesapeake to bear the cost of treating the natural gas, which Chesapeake
claims is absent from the Award.7
Although the Court disagrees with Chesapeake’s interpretation of the Award and
whether it bears any costs for treating the natural gas at issue, the Court does agree
with Chesapeake to the extent that Magnum is inappropriately seeking to broaden the
scope of the panel’s decision. As such, to the extent Magnum requests this Court to
broaden the terms of the Award, such as obligating Chesapeake to deliver natural gas
within thirty days of Magnum designating a delivery point, the Court refuses to do so.
This Court defers to the decision of the panel, and it would go against the purpose and
policy favoring arbitration to modify or expand the panel’s decision when it clearly draws
its essence from the underlying agreement. See Hall Street, 552 U.S. at 588; Timegate
Studios, 713 F.3d at 802. The Award is clear, as well as the parties’ obligations under it,
so the Court finds no need to re-articulate or broaden the provisions of the Award. Thus,
any request by Magnum to specify or broaden the provisions of the panel’s Award is
hereby DENIED.
D.

Silver Oak’s Motion To Confirm Arbitration Award

Finally, the Court must address Silver Oak’s Motion To Confirm Arbitration
Award, which requests this Court confirm the panel’s Award. As explained above, the
Court has found no basis for vacating, modifying, or correcting the panel’s Award.

7

It should be noted that Magnum’s fear of future litigation is not unfounded, since in response,
Chesapeake admits “the certainty that Chesapeake will deliver off-spec gas results in a situation that will
inevitably create future disputes and possible litigation between the parties.” Record Document 63, p. 4.

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Consequently, pursuant to the 2002 Agreement’s dispute resolution provision, as well
as 9 U.S.C. § 9, Silver Oak’s motion to confirm the panel’s Award is hereby GRANTED.
IV.

Conclusion
For the foregoing reasons,
IT IS ORDERED that Chesapeake’s Motion To Vacate or, Alternatively, Modify

Arbitration Award [Record Document 57] and Magnum’s Motion To Correct
Computational Error in Arbitration Award and Otherwise Enter Judgment on Arbitration
Award [Record Document 58] be and are hereby DENIED.
IT IS FURTHER ORDERED that Silver Oak’s Motion To Confirm Arbitration
Award [Record Document 49] be and is hereby GRANTED. A judgment consistent with
this instant memorandum ruling shall be issued herewith.
THUS DONE AND SIGNED on this 24th of April, 2015.
__ day
________________________________
ELIZABETH ERNY FOOTE
UNITED STATES DISTRICT JUDGE

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