Bird et al v. Turner et al

Filing 42

MEMORANDUM OPINION AND ORDER GRANTING 40 DEFENDANTS CHESAPEAKE APPALACHIA, LLC AND CHK UTICA, LLCS MOTION FOR LEAVE TO FILE EXCESS PAGES AND 23 MOTION TO COMPEL BILATERAL ARBITRATION, DENYING 41 PLAINTIFFS MOTION TO STRIKE DEFENDANTS MOTION FOR LEAVE TO FILE EXCESS PAGES AND GRANTING 25 DEFENDANTS CHESAPEAKE EXPLORATION, LLC, DEUTSCHE BANK TRUST COMPANY AMERICAS, P. NATHAN BOWLES, JR., ESQ., CHRIS TURNER AND KENYON ENERGY, LLCS MOTION FOR STAY PENDING ARBITRATION. Signed by Senior Judge Frederick P. Stamp, Jr. on 9/1/2015. (copy to counsel of record via CM/ECF) (nmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
JOHN L. BIRD and JACQUELINE G. BIRD,
his wife, individually and on behalf
of similarly situated West Virginia
citizens,
Plaintiffs,
v.

Civil Action No. 5:14CV97
(STAMP)

CHRIS TURNER, individually and
as an agent and/or employee of
Kenyon Energy, LLC,
Chesapeake Exploration, LLC,
Chesapeake Appalachia, LLC,
and/or CHK Utica, LLC,
KENYON ENERGY, LLC,
CHESAPEAKE EXPLORATION, LLC
CHESAPEAKE APPALACHIA, LLC,
CHK UTICA, LLC,
DEUTSCHE BANK TRUST COMPANY AMERICAS,
P. NATHAN BOWLES, JR., ESQ. and
JOHN DOES and any John Doe individually
or any entity acting in concert with
these defendants,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANTS CHESAPEAKE APPALACHIA, LLC AND
CHK UTICA, LLC’S MOTION FOR LEAVE TO FILE EXCESS PAGES
AND MOTION TO COMPEL BILATERAL ARBITRATION,
DENYING PLAINTIFFS’ MOTION TO STRIKE
DEFENDANTS’ MOTION FOR LEAVE TO FILE EXCESS PAGES
AND GRANTING DEFENDANTS CHESAPEAKE EXPLORATION, LLC,
DEUTSCHE BANK TRUST COMPANY AMERICAS,
P. NATHAN BOWLES, JR., ESQ., CHRIS TURNER AND
KENYON ENERGY, LLC’S MOTION FOR STAY PENDING ARBITRATION
I.

Background

In June 2011, the plaintiffs, John L. Bird and Jacqueline G.
Bird, executed a lease to defendant Chesapeake Appalachia, LLC

(“Chesapeake”) for oil and gas rights.
arbitration agreement.

The lease contained an

Chesapeake assigned a portion of the lease

to CHK Utica, LLC (“CHK”).

CHK then entered into a deed of trust

using the lease as collateral to secure a loan with defendants
Deutsche Bank Trust Company Americas and appointing P. Nathan
Bowles, Jr., Esq. as trustee.

When the plaintiffs attempted to

refinance their home, their application was denied because the deed
of trust constituted a lien on the property.
The plaintiffs filed this action in the Circuit Court of
Hancock County, West Virginia on June 19, 2014.

The plaintiffs’

complaint alleges that the plaintiffs and others within West
Virginia that are similarly situated were subject to fraudulent
common law liens in violation of West Virginia Code § 38-16-101.
The plaintiffs also alleged claims regarding the unlawful practice
of law, breach of fiduciary duties, intentional misrepresentation
and fraud, negligent misrepresentation, creation of a cloud on
title, slander of title, and civil conspiracy.
Chesapeake and CHK (collectively “arbitration defendants”)
filed a motion to compel bilateral arbitration under the lease’s
arbitration agreement and Section 4 of the Federal Arbitration Act
(“FAA”), 9 U.S.C. §§ 1-14. Defendants Chesapeake Exploration, LLC,
Deutsche Bank Trust Company Americas, P. Nathan Bowles, Jr., Esq.,
Chris Turner, and Kenyon Energy, LLC filed a motion to stay this
action

pending

that

arbitration.

2

Further,

the

arbitration

defendants moved to file a reply with excess pages to address the
validity issues raised by the plaintiffs and a recent opinion from
this Court.

In response, the plaintiffs filed a motion to strike

the arbitration defendants’ motion to file a reply with excess
pages.
In

All of these motions are now ripe for review.
their

motion

to

compel

bilateral

arbitration,

the

arbitration defendants assert that the FAA applies, that the
plaintiffs’ claims fall within the arbitration agreement, that the
arbitration agreement is enforceable under West Virginia law, and
that the parties only consented to bilateral rather than class
arbitration.
In

response,

the

plaintiffs

contest

the

arbitration

defendants’ claims, argue that validity and enforceability must be
reviewed by this Court, and assert that there are several problems
with the arbitration agreement that make it invalid.
In response to the plaintiffs’ assertions that the arbitration
agreement is unenforceable, the arbitration defendants moved to
exceed the page limit in their reply as the arbitration defendants
had not covered unconscionability in their initial motion and
sought to address a recent decision in this district bearing on
this case.

The plaintiffs’ motion to strike, they argue that this

motion to exceed the page limit should be stricken.

3

II.
A.

Discussion

Motion to File Excess Pages
The arbitration defendants moved this court, under Local Rules

7.02(a) and 7.02(b)(2), for leave to file excess pages in reply to
the

plaintiffs’

arbitration.

response
In

to

support

of

the

motion

their

to

compel

motion,

the

bilateral

arbitration

defendants state that the plaintiffs raised new issues regarding
the arbitration agreement’s validity.

The defendants also seek to

discuss a recent, similar opinion issued by this Court.

For good

cause shown, the defendants’ motion for leave to file a memorandum
of law in reply to the plaintiffs’ response in excess of 15 pages
is hereby GRANTED, and the plaintiffs’ motion to strike the
arbitration defendants’ motion to file excess pages is DENIED.
B.

Motion to Compel Bilateral Arbitration
The Federal Arbitration Act applies to “[a] written provision

in any . . . contract evidencing a transaction involving commerce
to settle by arbitration a controversy thereafter arising out of
such contract or transaction, or the refusal to perform the whole
or any part thereof . . . .”

9 U.S.C. § 2.

When a party seeks

enforcement of an arbitration agreement during proceedings in a
district court, a party sufficiently “invoke[s] the full spectrum
of remedies under the FAA.”

Choice Hotels Int’l, Inc. v. BSR

Tropicana Resort, Inc., 252 F.3d 707, 710 (4th Cir. 2001).

4

To compel arbitration under the FAA, the law of the United
States Court of Appeals for the Fourth Circuit provides that a
moving party must “demonstrate (1) the existence of a dispute
between the parties, (2) a written agreement that includes an
arbitration provision which purports to cover the dispute, (3) the
relationship

of

the

transaction,

which

is

evidenced

by

the

agreement, to interstate or foreign commerce, and (4) failure,
neglect, or refusal of the [opposing party] to arbitrate the
dispute.”

Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th

Cir. 2002) (citing Whiteside v. Teltech Corp., 940 F.2d 99, 102
(4th Cir. 1991)).

Further, while federal law determines the

arbitrability of issues, “[w]hether a party agreed to arbitrate a
particular dispute is a question of state law governing contract
formation.”

Id. at 501 (citing First Options of Chicago, Inc. v.

Kaplan, 514 U.S. 938, 944 (1995)).
As the parties have a dispute and the existence of the
arbitration agreement is not at issue, this Court is left to
determine

whether

the

FAA

applies,

whether

the

arbitration

agreement is enforceable, and whether this dispute is arbitrable.
1.

Application of the FAA

The FAA applies to any “written provision in . . . a contract
evidencing a transaction involving commerce.”

9 U.S.C. § 2.

“[T]he term ‘evidencing a transaction’ requires only that the
transaction in fact involved interstate commerce, not that the

5

parties contemplated it as such at the time of the agreement.”
Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690, 697
(4th Cir. 2012) (citing Allied-Bruce Terminix Cos. v. Dobson, 513
U.S. 265, 281 (1995)).

The FAA does not require the party moving

to compel arbitration to present specific evidence proving the
interstate nature of the transaction.

Id.

Moreover, this Court

“need not identify any specific effect upon interstate commerce, so
long as ‘in the aggregate the economic activity in question would
represent a general practice . . . subject to federal control.’”
Id. at 697-98 (internal quotation marks omitted) (quoting Citizens
Bank v. Alafabco, Inc., 539 U.S. 52, 56-57 (2003)).
By its terms, the lease provided the arbitration defendants
the right to drill wells, build roads and processing facilities,
construct a pipeline, and dispose of waste.

See ECF No. 1 Ex. D.

Moreover, the arbitration defendants note that the parties are
domiciled in different states and that the lease “concerns the
production of natural gas that will be necessarily transported in
interstate pipelines.”

ECF No. 24, at 6.

The plaintiffs assert that because their lease includes a
disposal provision,1 an activity not involving interstate commerce,

1

The plaintiffs state that their lease retained both the
conversion to storage and disposal provisions of the form lease.
See ECF No. 39, at 16-17. However, the addendum to the plaintiffs’
lease provides that the “premises shall not be used for the purpose
of gas storage as defined by the Federal Energy Regulatory
Commission.” ECF No. 1 Ex. D.
6

the agreement does not evidence commerce.

The plaintiffs attempt

to distinguish this case from Holmes v. Chesapeake Appalachia, LLC,
No. 5:11CV123, 2012 WL 3647674 (N.D. W. Va. Aug. 23, 2012), an
unpublished opinion wherein this Court concluded that a nearly
identical oil and gas lease evidenced commerce.

Id. at *10.

The

plaintiffs note that the Holmes lease did not include conversion to
storage or disposal provisions, while the plaintiffs’ lease does.
However, assuming that storage and disposal activities do not
involve interstate commerce (a generous assumption), the analysis
does not end there.

This Court must look to the transaction as a

whole, and not simply to what the parties contemplated at the time
of the agreement.

Rota-McLarty, 700 F.3d at 697 (citing Allied-

Bruce Terminix Cos., 513 U.S. at 281).

Based on the substance of

the lease and the arbitration defendants’ assertion that the lease
was intended for the extraction of natural gas to be transported in
interstate

commerce,

it

is

clear

that

the

plaintiffs’

“evidenc[es] a transaction involving commerce.”
Therefore,

this

Court

finds

that

the

FAA

lease

9 U.S.C. § 2.

applies

to

this

arbitration agreement.
3.

Enforceability of the Arbitration Agreement

The

plaintiffs

argue

that

the

arbitration

unenforceable because it is unconscionable.2

2

agreement

is

As stated above,

The plaintiffs also argue that the arbitration agreement is
ambiguous such that it must be construed against the arbitration
defendants, contributing to its unconscionability. However, this
7

“[w]hether a party agreed to arbitrate a particular dispute is a
question of state law governing contract formation.”
F.3d at 501.

Adkins, 303

Thus, this Court must look to West Virginia contract

law to determine whether the arbitration agreement is enforceable.
Under West Virginia law, a contract is unenforceable as
unconscionable if some level of both procedural and substantive
unconscionability are found, and the court must find a high degree
of “inequities, improprieties, or unfairness” in both the procedure
of the creation of the contract, and in the contents of the
contract itself.

Brown v. Genesis Healthcare Corp., 729 S.E.2d

217, 226-27 (W. Va. 2012) (hereinafter “Brown II”).

“[W]here a

party alleges that the arbitration provision was unconscionable
.

.

.

the

question

of

whether

an

arbitration

provision

was

bargained for and valid is a matter of law for the court to
determine by reference to the entire contract, the nature of the
contracting parties, and the nature of the undertakings covered by
the contract.”

Syl. Pt. 3, State ex rel. Wells v. Matish, 600

S.E.2d 583 (W. Va. 2004).
a.
Procedural
improprieties,

Procedural Unconscionability
unconscionability
or

unfairness

formation of the contract.”

in

refers
the

to

any

bargaining

“inequities,
process

and

Brown II, 729 S.E.2d at 227; see also

Court fails to see the affect that ambiguity or a plaintifffriendly construction would have upon unconscionability.
8

Pingley v. Perfection Plus Turbo-Dry, L.L.C., 746 S.E.2d 544, 551
(W. Va. 2013).

It requires an examination of certain inadequacies

that, when viewed together, “result in a lack of a real and
voluntary meeting of the minds of the parties.”

Pingley, 746

S.E.2d at 551 (quoting Syl. Pt. 17, Brown v. Genesis Healthcare
Corp. (“Brown I”), 724 S.E.2d 250 (W. Va. 2011)).

Those certain

inadequacies include “the age, literacy, or lack of sophistication
of a party; hidden or unduly complex contract terms; the adhesive
nature of the contract; and the manner and setting in which the
contract was formed, including whether each party had a reasonable
opportunity to understand the terms of the contract.” Pingley, 746
S.E.2d at 551 (quoting Brown I, 724 S.E.2d at syl. pt. 17).
The plaintiffs argue that the lease was a contract of adhesion
because they lacked bargaining power and a meaningful opportunity
to understand and affect the terms of the agreement. Specifically,
the plaintiffs note that Chesapeake is a subsidiary of a large
multi-billion dollar corporation that has entered into numerous oil
and

gas

leases,

that

the

plaintiffs

lack

sophistication

to

effectively negotiation or understand the terms of the lease, that
the

plaintiffs

did

not

read

the

lease

or

understand

what

arbitration means, and that the lease was a contract of adhesion
because the plaintiffs felt compelled to enter into the lease or
risk losing their share of pooled royalties.

9

“A contract of adhesion is one drafted and imposed by a party
of superior strength that leaves the subscribing party little or no
opportunity

to

alter

the

substantive

terms,

and

opportunity to adhere to the contract or reject it.”
Brown I, 724 S.E.2d 250.

only

the

Syl. pt. 18,

While Chesapeake drafted the lease and

appears to have had superior legal and technical knowledge, the
circumstances surrounding the lease indicate that the plaintiffs
had a meaningful opportunity to understand and affect its terms.
The plaintiffs’ claims that they did not understand the terms of
the lease, lacked bargaining power, and believed the lease to be a
“take it or leave it agreement” are undermined by the fact that the
parties

signed

substantive
eliminated
harmless”

an

terms

addendum
in

the

Chesapeake’s
provision

to

the

form

plaintiffs’

storage

rights

indemnifying

the

lease

favor.
and

changing
The

included

plaintiffs,

its

addendum
a

“hold

provisions

protecting the plaintiffs’ property from operation-related damages,
and a requirement that Chesapeake cleanup and restore the property
after ceasing operations. Most notably, the addendum increased the
plaintiffs’ royalty share from 1/8 (in the form lease) to 15% of
pooled royalties.

The addendum makes it clear that the plaintiffs

had, and exercised, their opportunity to change the terms of the
agreement

in

their

favor.

Thus,

this

Court

finds

that

the

plaintiffs failed to meet their burden of showing procedural
unconscionability.

10

b.
Although

Substantive Unconscionability
this

Court

has

determined

that

the

arbitration

agreement is not procedurally unconscionable, for purposes of
thoroughness, this Court will examine whether the arbitration
agreement is substantively unconscionable.
Substantive unconscionability relates to “unfairness in the
contract itself and whether a contract term is one-sided and will
have an overly harsh effect on the disadvantaged party.”

Pingley,

746 S.E.2d at 551 (quoting Brown I, 724 S.E.2d at syl. pt. 19).
When assessing substantive unconscionability, the factors that a
Court must analyze “vary with the content of the agreement.”
Pingley,

746

S.E.2d

at

551

(internal

citations

omitted).

Therefore, courts should “assess whether a contract provision is
substantively unconscionable on a case-by-case basis.”
724 S.E.2d at 262.

Brown I,

Nonetheless, relevant factors to consider

include “the commercial reasonableness of the contract terms, the
purpose and effect of the terms, the allocation of the risks
between the parties, and public policy concerns.”

Pingley, 746

S.E.2d at 551; see also Dan Ryan Builders, Inc. v. Nelson, 737
S.E.2d 550 (W. Va. 2012); Johnson Controls, Inc., 729 S.E.2d at
808.
The

plaintiffs

argue

that

the

arbitration

agreement

is

substantively unconscionable because it requires the parties to
split

the

cost

of

arbitration

11

and

because

arbitrators

are

inherently biased in favor of large corporations like Chesapeake
and its parent corporation.
First, as to fee splitting, in Brown v. Genesis Healthcare
Corp., 729 S.E.2d 217 (W. Va. 2012), the Supreme Court of Appeals
of West Virginia noted that “when an agreement to arbitrate imposes
high costs that might deter a litigant from pursuing a claim, a
trial court may consider those costs in assessing whether the
agreement is substantively unconscionable.”
quotation marks omitted).

Id. at 229 (internal

Moreover, “[i]t is not only the costs

imposed on the claimant but the risk that the claimant may have to
bear substantial costs that deters the exercise of constitutional
right of due process.”

Id. (internal quotation marks omitted)

(quoting Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d
669, 687 (Cal. 2000)).

However, the party claiming prohibitive

cost “bears the burden of showing the likelihood of incurring such
costs.” Adkins, 303 F.3d at 502 (internal quotation marks omitted)
(quoting Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 92
(2000)).
Here, the plaintiffs provided an affidavit from Vincent S.
Gurrera, Esq. (“Gurrera”), co-counsel for the plaintiffs.

Gurrera

averred that he represented the plaintiffs in an arbitration before
the American Arbitration Association (“AAA”), which required an
initial

$8,200.00

filing

fee.

The

parties

settled

before

arbitration, but the plaintiffs paid approximately $13,000.00 in

12

arbitration fees after receiving a $7,000.00 refund from the
$20,000.00 paid prior to the settlement.

ECF No. 39 Ex. H.

Gurrera estimated that the total cost if the case were arbitrated
would have been about $25,000.00. Id. However, this affidavit has
no bearing on “the likelihood of incurring such costs” in this
case.

It does not indicate whether fees in that arbitration were

split,

what

the

plaintiffs’

expected

recovery

was,

or

the

difference between the fees and the settlement amount. Even if the
costs outlined in Gurrera’s affidavit were likely to be incurred,
the plaintiffs have not provided any indication of their expected
damages in this case such that this Court may consider whether the
estimated

costs

of

arbitration

are

plaintiffs from pursuing arbitration.

so

high

as

to

deter

the

There is simply no way for

this Court to evaluate the burden of splitting arbitration fees in
this case.
Second,
arbitrators

the
in

plaintiffs

this

case

arbitration defendants.
potential

speculate

would

be

that

biased

the

in

potential

favor

of

the

The plaintiffs offer no evidence of even

bias on the part of any potential

arbitral panel.

Moreover, the split-fee structure seems to negate any potential
bias arising out of the parties’ disparate financial means, as the
arbitrators’ fees will be paid equally by the parties.
“decline[s]

to

indulge

the

presumption

that

the

This Court

parties

and

arbitral body conducting a proceeding will be unable or unwilling

13

to retain competent, conscientious[,] and impartial arbitrators.”
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 30 (1991)
(internal quotation marks omitted).
Therefore, this Court finds that the plaintiffs failed to meet
their burden of showing substantive unconscionability. Because the
arbitration agreement is not unconscionable and the plaintiffs have
raised no other contract defenses, this Court finds that the
arbitration agreement is enforceable.
4.

Arbitrability

This Court must determine whether the parties’ dispute is
arbitrable, that is, whether the dispute is within the scope of the
arbitration agreement.

The plaintiffs argue that the arbitration

agreement is ambiguous as to its scope, and should be limited to
disagreements about the lease, payments, performance, or property
damage.

The arbitration defendants maintain that the arbitration

agreement
dispute.

is

unambiguous

The

and

arbitration

broad

enough

defendants

to

further

encompass
argue

that

this
the

arbitration agreement does not permit class arbitration.
a.

Scope of the Arbitration Agreement

Federal policy generally takes a liberal stance in favor of
enforcing arbitration agreements. See Adkins, 303 F.3d at 500. In
determining whether an issue is arbitrable, courts must “resolve
‘any doubts concerning the scope of arbitrable issues . . . in
favor of arbitration.’”

Hill v. PeopleSoft USA, Inc., 412 F.3d

14

540, 543 (4th Cir. 2005) (quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).
The

plaintiffs

argue

that

the

arbitration

agreement

is

ambiguous and must be interpreted against Chesapeake, its drafter.
Under West Virginia law, contract language is considered ambiguous
“when it is reasonably susceptible to more than one meaning in
light of the surrounding circumstances and after applying the
established rules of construction.”

Williams v. Precision Coil,

Inc., 458 S.E.2d 327, 342 n.23 (W. Va. 1995).

Courts “should read

[contract] provisions to avoid ambiguities and not torture the
language to create them.” Payne v. Weston, 466 S.E.2d 161, 166 (W.
Va. 1995).

As such, ambiguity does not result merely because the

parties do not agree to the construction of the contract.
Lee, 721 S.E.2d 53, 56 (W. Va. 2011).

Lee v.

Instead, the question as to

whether a contract is ambiguous is a question of law to be
determined by the courts.

Pilling v. Nationwide Mut. Fire Ins.

Co., 500 S.E.2d 870, 872 (W. Va. 1997).
Here, the arbitration agreement provides as follows:
ARBITRATION. In the event of a disagreement between
Lessor and Lessee concerning this Lease or the associated
Order of Payment, performance thereunder, or damages
caused by Lessee’s operations, the resolution of all such
disputes shall be determined by arbitration in accordance
with the rules of the American Arbitration Association.
Arbitration shall be the exclusive remedy and cover all
disputes, including but not limited to, the formation,
execution, validity and performance of the Lease and
Order of Payment.
All fees and costs shall be borne
equally by Lessor and Lessee.

15

ECF No. 1 Ex. D.
This Court finds the language of the arbitration agreement to
be unambiguous.

The plain language of the second sentence clearly

states that “[a]rbitration shall be the exclusive remedy and cover
all disputes.” Id.
sentences

The plaintiffs argue that the first and second

conflict

arbitrable.

regarding

which

types

of

disputes

are

However, the specific types of disputes listed in the

first sentence are logically contained in the “all disputes”
language of the second sentence. Read together, the first sentence
simply emphasizes that particular (and perhaps common) disputes are
subject to arbitration along with all other disputes.
The plaintiffs also argue that the arbitration agreement is
ambiguous when read along with the “no automatic forfeiture,”
“force

majeure,”

and

“severability”

provisions.

However

the

language in these provisions does not alter this Court’s finding
that the arbitration agreement is unambiguous.
The plaintiffs rely on State ex rel. Richmond Homes of W. Va.,
Inc. v. Sanders, 717 S.E.2d 909 (W. Va. 2011).

That case involved

a home purchasing agreement containing an arbitration agreement.
Id. at 913.

Various substantive provisions in the agreement

referenced “court action” and “civil action.”

Id. at 924.

The

court noted that the contract “plainly intimate[d] at least five
times that a plaintiff retain[ed] the right to bring a civil action
in a courtroom before a judge, and absolutely muddle[d] the

16

language that followe[d] stating that the plaintiff . . . must only
pursue a remedy before an arbitrator.”

Id.

The court concluded

that the arbitration agreement’s scope was therefore ambiguous and
should be construed against the drafting party.

Id.

This case is distinguishable from Richmond Homes in that the
“no automatic forfeiture,” “force majeure,” and “severability”
provisions do not “plainly intimate[] . . . that the plaintiff[s]
retain[] the right to bring a civil action.”

Id.

Rather, these

provisions do not provide any rights to either party concerning the
forum in which they may bring their disputes.

First, the “no

automatic forfeiture” provision expressly limits the plaintiffs’
right to bring a civil forfeiture action, and as a negative
statement of rights does not imply a right to seek a civil action
for forfeiture of the lease. Second, the “force majeure” provision
simply references “orders” without implying that such orders issue
from

a

court.

Third,

the

“severability”

provision

simply

contemplates a court’s invalidation of a single provision (for
example the arbitration agreement), without mentioning how the
court came to do so.3

In short, none of these provisions imply the

3

This Court notes that the most probable scenarios are those
in which a court finds the arbitration agreement to be invalid in
an action to compel arbitration, or where an arbitral award
declares a provision to be invalid and the award is reduced to a
judgment when the parties seek to enforce the award under § 9 of
the FAA.
Either way, the severability provision does not
necessarily contemplate a civil action that is in conflict with the
“all disputes” language in the arbitration agreement.
17

availability of a civil action in light of the “all disputes”
language in the arbitration agreement.
Thus, after reading all of the provisions together, this Court
finds that the arbitration agreement is not ambiguous based on
either the limitation of forfeiture provision, the severability
provision, or the force majeure provision.

See Legg v. Johnson,

Simmerman & Broughton, L.C., 576 S.E.2d 532, 537 (W. Va. 2002)
(“‘The meaning of a word is to be considered in the context in
which it is employed.

The meaning of a word thus is to be

ascertained from a reading of the entire contract, rather than from
a consideration of that one word alone . . . .”) (quoting 17A
C.J.S. Contracts § 318 (1999)).
b.

Class Arbitration

The arbitration defendants argue that the plaintiffs must
submit to bilateral arbitration, rather than class arbitration
because the parties did not expressly agree to class arbitration.
The plaintiffs argue that the question of the availability of class
arbitration is arbitrable, and that if it is not, the arbitration
agreement contemplates class arbitration.
(1)

Arbitrability of Consent to Class Arbitration

This Court must first determine whether the availability of
class arbitration is a question of arbitrability or of procedure,
as questions of arbitrability are determined by this Court while
questions of procedure are determined by the arbitrator.

18

Peabody

Holding Co. v. United Mine Workers of Am., 665 F.3d 96, 102 (4th
Cir. 2012) (citing AT&T Techs., Inc. v. Commc’ns Workers of Am.,
475 U.S. 643, 649 (1986); Dockser v. Schwartzberg, 433 F.3d 421,
426

(4th

questions

Cir.
about

2006)).

Arbitrability

particular dispute.

Id.

involve

the

whether

issues
agreed

to

parties

gateway

arbitrate

a

Parties may agree to submit questions of

arbitrability to an arbitrator by clearly and unambiguously stating
so in the arbitration agreement.

First Options of Chi., Inc. v.

Kaplan, 514 U.S. 938, 943 (1995).
The Supreme Court has not directly dealt with the question of
whether consent to class arbitration is arbitrable.

However, the

Court’s most recent decisions on class arbitration in Stolt-Neilsen
S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), and Oxford
Health Plans, LLC v. Sutter, 133 S. Ct. 2064 (2013), indicate that
consent to class arbitration cannot be “a procedural matter because
the class-action construct wreaks ‘fundamental changes’ on the
‘nature of arbitration.’”

Cent. W. Va. Energy, Inc. v. Bayer

Cropscience LP, 645 F.3d 267, 274-75 (4th Cir. 2011) (quoting
Stolt-Neilsen, 559 U.S. at 689).

The Fourth Circuit Court of

Appeals has not conclusively weighed in on the issue either.

See

id. at 274-75 (noting that the issue before the court did not
involve class arbitration, but rather parallel arbitration before
two arbitral panels).

However, in dicta, the court indicated that

19

the issue is one of arbitrability. See id. at 275-76 (stating that
consent to class arbitration is not “a procedural matter”).
The Sixth and Third Circuits have both definitively held that
“the

availability

of

class

arbitration

is

a

question

of

arbitrability.” Opalinski v. Robert Half Int’l Inc., 761 F.3d 326,
335 (3d Cir. 2014); see also Reed Elsevier, Inc. v. Crockett, 734
F.3d

594,

599

(6th

Cir.

2013)

(“[T]he

question

whether

an

arbitration agreement permits classwide arbitration is a gateway
matter, which is reserved for judicial determination unless the
parties clearly and unmistakably provide otherwise.”). Both courts
relied on the Supreme Court’s reasoning in Stolt-Neilson and Oxford
Health Plans that class arbitration fundamentally changes the
nature and expected benefits of arbitration.

See Opalinski, 761

F.3d at 334-35; Reed Elsevier, 734 F.3d at 598.

This Court

likewise concludes that class arbitration raises significant due
process

issues

efficiency,

regarding

heightened

confidentiality.

See

absent

parties,

commercial
Chesapeake

lack

stakes,
Appalachia,

of

and
LLC

procedural
issues
v.

1:14CV159, 2015 WL 966326, *8 (N.D. W. Va. Mar. 4, 2015).
this

Court

concludes

that

the

issue

of

whether

the

of

Suppa,
As such,
parties

consented to class arbitration is a question of arbitrability,
presumptively decided by this Court.

See id.

A party may rebut the presumption of judicial determination by
presenting evidence that the arbitration agreement clearly and

20

unmistakably contemplated the arbitrators determining arbitrability
issues.

See AT&T Techs., 475 U.S. at 649 (“Unless the parties

clearly and unmistakably provide otherwise, the question of whether
the parties agreed to arbitrate is to be decided by the court, not
the arbitrator.”).

The plaintiffs argue that the arbitration

agreement does evidence the parties’ intent to submit to class
arbitration for two reasons.
First, the plaintiffs argue that the broad “all disputes”
language

of

the

arbitration

agreement

includes

issues

of

arbitrability, as those are disputes arising out of the contract.
However,

the

arbitration

agreement

does

not

clearly

and

unmistakably assign to an arbitrator the question of whether the
parties consented to class arbitration.
F.3d

at

599-600

(concluding

that

a

See Reed Elsevier, 734
broad

“any

controversy”

arbitration agreement did not clearly and unmistakably submit the
issue

of

whether

arbitrator).
to

submit

class

arbitration

was

available

to

the

Nor does it even “suggest[] that the parties agreed
questions

of

arbitrability

Opalinski, 761 F.3d at 335.

to

the

arbitrator.”

The broad “all disputes” language

alone does not indicate the parties’ intent to submit issues of
arbitrability to the arbitrator.
Second, the plaintiffs argue that the arbitration agreement’s
reference to the AAA rules evidences their intent to submit
arbitrability issues to arbitration because the AAA rules vest the

21

arbitrator

with

the

authority

to

decide

such

issues.

The

plaintiffs rely on Chesapeake Appalachia, LLC v. Burkett, Civil
Action No. 3:13-3073, 2014 WL 5312829 (M.D. Pa. Oct. 17, 2014), in
which the court concluded that a reference to the AAA rules
“constitute[d] clear and unmistakable evidence that the parties
agreed to arbitrate issues of arbitrability,” including class
arbitration.

Id. at *6-7.

The Burkett court relied on a set of

Circuit Court cases that each determined that incorporation of the
AAA rules constituted clear and unmistakable evidence that the
parties agreed to arbitrate issues of arbitrability.

Id. at *6.

However, all of those cases involved bilateral arbitration and did
not deal with whether the availability of class arbitration was
arbitrable.

See Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d

1069, 1071-72, 1074 (9th Cir. 2013); Petrofac, Inc. v. DynMcDermott
Petroleum Operations Co., 687 F.3d 671, 673-74, 675 (5th Cir.
2012), Fallo v. High-Tech Inst., 559 F.3d 874, 876-77, 878 (8th
Cir. 2009); Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1368-69,
1373 (Fed. Cir. 2006); Terminix Int’l Co. v. Palmer Ranch LP, 432
F.3d 1327, 1329-30, 1332 (11th Cir. 2005); Contec Corp. v. Remote
Solution Co., 398 F.3d 205, 207, 208 (2d Cir. 2005).

“Using

bilateral arbitration dispute case law to make a decision in a
classwide

arbitration

dispute

case

completely

undergirding of . . . Opalinski” and Reed Elsevier.

ignores

the

Chesapeake

Appalachia, LLC v. Scout Petroleum, LLC, 73 F. Supp. 3d 488, 500

22

(M.D. Pa. 2014).

Because “the class-action construct wreaks

‘fundamental changes’ on the ‘nature of arbitration,’” Cent. W. Va.
Energy, 645 F.3d at 274-75 (quoting Stolt-Neilsen, 559 U.S. at
689), the agreement must include “express contractual language”
submitting the availability of class arbitration to the arbitrator.
Opalinski, 761 F.3d at 335.

Anything less “is not enough to wrest

that decision from the courts.”

Reed Elsevier, 734 F.3d at 599

(citing Stolt-Nielsen, 559 U.S. at 684-85).
Considering the arbitration agreement’s language and the
reference to the AAA rules, this Court is unconvinced that the
parties intended to submit to the arbitrator the question of
whether class arbitration is available.

The agreement does not

mention class arbitration or arbitrability.

Its reference to the

AAA rules is the only link to the submission of arbitrability
issues to the arbitrator.

“[A]t best, the agreement is silent or

ambiguous as to whether an arbitrator should determine the question
of classwide arbitrability; and that is not enough to wrest that
decision from the courts.”

Reed Elsevier, 734 F.3d at 599 (citing

Stolt-Nielsen, 559 U.S. at 684-85).

Therefore, this Court finds

that the parties did not intend to submit arbitrability issues to
the arbitrator.
(2)

Consent to Class Arbitration

“[A]rbitration is a matter of contract and a party cannot be
required to submit to arbitration any dispute which he has not

23

agreed so to submit.”

AT&T Techs., 475 U.S. at 648 (internal

quotation marks omitted).
the

FAA

to

submit

to

“[A] party may not be compelled under
class

arbitration

unless

there

is

a

contractual basis for concluding that the party agreed to do so.”
Stolt-Nielsen, 559 U.S. at 684 (emphasis in original).
The plaintiffs rely on Oxford Health Plans to argue that the
arbitration

agreement

need

not

expressly

reference

class

proceedings for the parties to have submitted to such proceedings.
In that case, the parties submitted to arbitration, and the
arbitrator determined that the arbitration agreement contemplated
class

arbitration

despite

not

Id. at 2067-68.

arbitration.

expressly

mentioning

class

The plaintiffs argue that because

the Supreme Court concluded that the arbitrator did not exceed his
powers in authorizing class arbitration, id. at 2069, the Court
established

a

rule

of

law

that

express

reference

to

class

arbitration is not necessary for the parties to consent to it.
However, the key to the Oxford Health Plans decision is its
procedural posture.
arbitral

award,

The Court was facing a motion to vacate the

and

the

parties

did

not

contest

availability of class arbitration was arbitrable.

that

the

Id. at 2068.

The Court considered the narrow question of whether § 10(a)(4) of
the FAA allows a court to vacate an arbitral award based on the
arbitrator’s determination that the parties consented to class
arbitration.

Id.

Section 10(a)(4) allows a court to vacate an

24

arbitral award “where the arbitrator[] exceeded [his] powers,” 9
U.S.C. § 10(a)(4), but not when the arbitrator commits even serious
error.

Oxford Health Plans, 133 S. Ct. at 2068.

The Court

concluded that the arbitrator did not abuse his power in “( . . .
arguably) interpreting the parties’ contract.”

Id. at 2068, 2071.

Thus, Oxford Health Plans reinforces the high burden a party has in
seeking to vacate an award, but says nothing about how a court
should interpret an arbitration clause.
arbitration

agreement

as

they

would

Courts must interpret the
any

contractual

term

to

determine whether the parties agreed to class arbitration.
Here, the arbitration agreement does not indicate that the
parties consented to class arbitration.

As discussed above, the

arbitration agreement does not mention class arbitration. In fact,
the arbitration agreement is put in terms of bilateral disputes
“between Lessor and Lessee concerning this Lease.”

ECF No. 1 Ex.

D. Therefore, this Court finds that the parties did not consent to
class arbitration but only to bilateral arbitration.
C.

Motion to Stay Pending Arbitration
Chesapeake Exploration, LLC, Deutsche Bank Trust Company

Americas, P. Nathan Bowles, Jr., Esq., Chris Turner, and Kenyon
Energy, LLC (collectively “the remaining defendants”) moved this
court to stay the proceedings against them pending arbitration.
Alternatively, the remaining defendants request that this Court

25

compel the claims against them to arbitration along with the
plaintiffs and the arbitration defendants.
When an action subject to arbitration is filed, § 3 of the FAA
provides that a court “shall on application of the parties stay the
trial

of

the

action

until

such

arbitration

accordance with the terms of the agreement.”

has

been

had

in

9 U.S.C. § 3.

Although this does not directly apply to parties to the action
that are not subject to the arbitration agreement, “it may be
advisable to stay litigation among the non-arbitrating parties
pending the outcome of the arbitration.

That decision is one left

to the district court . . . as a matter of its discretion to
control its docket.”

Moses H. Cone Memorial Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 20 n.23 (1983); see also Am. Home
Assurance Co. v. Vecco Concrete Constr. Co., Inc. of Va., 629 F.2d
961, 964 (4th Cir. 1980) (“While it is true that the arbitrator’s
findings will not be binding as to those not parties to the
arbitration, considerations of judicial economy and avoidance of
confusion and possible inconsistent results nonetheless militate in
favor of staying the entire action.”).
The

plaintiffs’

claims

against

the

remaining

defendants

revolve around the issues to be arbitrated between the plaintiffs
and the arbitration defendants.

Thus, this Court finds that

staying the action against the remaining defendants will serve the

26

interests

of

judicial

economy

and

of

avoiding

duplicative

proceedings.
V.
For

the

reasons

set

Conclusion
forth

above,

defendants

Chesapeake

Appalachia, LLC and CHK Utica, LLC’s motion for leave to file
excess pages and motion to compel bilateral arbitration is GRANTED;
the plaintiffs’ motion to strike the defendants’ motion for leave
to

file

excess

pages

is

DENIED;

and

defendants

Chesapeake

Exploration, LLC, Deutsche Bank Trust Company Americas, P. Nathan
Bowles, Jr., Chris Turner, and Kenyon Energy, LLC’s motion for stay
pending arbitration is GRANTED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

September 1, 2015

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

27