EQT Corporation v. Toney

Filing 23

MEMORANDUM OPINION AND ORDER denying EQT Corporation's 1 Petition for Order Compelling Arbitration Pursuant to 9 U.S.C. § 4; and granting Respondent's 13 MOTION to Dismiss. Signed by Judge Joseph R. Goodwin on 4/26/2013. (cc: attys; any unrepresented party) (taq)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION

EQT CORPORATION,
Petitioner,
v.

CIVIL ACTION NO. 2:13-cv-02552

GREGORY TONEY,
Respondent.

MEMORANDUM OPINION AND ORDER
Pending before the court is EQT Corporation’s Petition for Order Compelling Arbitration
Pursuant to 9 U.S.C. § 4 [Docket 1] and the Respondent’s Motion to Dismiss [Docket 13]. The
motion to dismiss has been fully briefed and is ripe for review. For the reasons discussed below,
EQT’s Petition for Order Compelling Arbitration Pursuant to 9 U.S.C. § 4 [Docket 1] is
DENIED and Respondent’s Motion to Dismiss [Docket 13] is GRANTED.
I.

Background and Procedural History
This case arises from alleged unlawful discrimination by the petitioner EQT Corporation

(“EQT”) against the respondent Gregory Toney (“Toney”). Toney began working for Ashland
Oil—which eventually became EQT—as a well operator in 1981. In 2005, Toney was promoted
to the position of Assistant Superintendent. In 2007, EQT and Toney entered into a written
Alternative Dispute Resolution Program Agreement (the “ADR Agreement”). In 2008, D. Ryan
Crowe (“Crowe”) became Toney’s direct supervisor.

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Toney alleges that Crowe “began a course of discriminatory conduct towards” Toney.
(Resp.’s Mot. to Dismiss [Docket 13], at 1).1 According to Toney, he reported this conduct to
EQT, but no action was taken and the discriminatory conduct escalated. On December 19, 2011,
Toney was suspended without pay from his employment pending an investigation into
accusations of work-related misconduct. On January 26, 2012, Toney received a letter from
Crowe which terminated Toney from his employment.
On May 9, 2012, Toney filed his Complaint against EQT and Crowe in the Circuit Court
of Kanawha County. On June 13, 2012, EQT filed a motion to dismiss and to compel arbitration,
or in the alternative to stay pending arbitration, in the Circuit Court. The Circuit Court denied
EQT’s motion and held that “[t]he Defendants may revisit this issue at the Summary Judgment
phase of this matter, should they deem it appropriate.” (Order Denying Defs.’ Mot. to Dismiss
this Proceeding & Compel Arbitration or, in the Alternative, to Stay this Proceeding Pending
Arbitration [Docket 13-5], at 5) [hereinafter Circuit Court Order]. Rather than limiting discovery
to matters related to the formation and validity of the ADR Agreement, the Circuit Court ordered
the parties to conduct discovery on the merits. (See id.). On February 1, 2013, EQT filed the
instant petition in this court.
II.

Discussion
The parties present three issues for the court: (1) whether the petition should be dismissed

based upon res judicata; (2) whether the court should abstain from hearing this action due to the
parallel state court proceedings, and; (3) whether the ADR Agreement violates West Virginia

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For purposes of this Memorandum Opinion and Order, the particular acts of alleged
discriminatory conduct set forth in Toney’s motion is irrelevant.

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contract law.2 Because I FIND that the court should abstain from hearing this action, I do not
reach the issue of whether the ADR Agreement is valid and enforceable under West Virginia
law.
A.

Res Judicata

A lawsuit is barred by res judicata if three elements are satisfied: “(1) a judgment on the
merits in a prior suit resolving (2) claims by the same parties or their privies, and (3) a
subsequent suit based on the same cause of action.” Ohio Valley Envtl. Coal. v. Aracoma Coal
Co., 556 F.3d 177, 210 (4th Cir. 2009) (quoting Aliff v. Joy Mfg. Co., 914 F.2d 39, 42 (4th Cir.
1990)); see also Slider v. State Farm Mut. Auto Ins. Co., 210 W. Va. 476, 480 (2001). Toney
argues that all three elements are met:
First, the state court litigation resulted in a final judgment on the merits regarding
the unenforceability of the instant ADR provision. . . . Second, the matter put
before this Court, the enforceability of an arbitration provision, is the exact same
issue decided by the state court. Third, the parties before this Court and the parties
[before the state court] are identical, with the sole exclusion of Defendant D.
Ryan Crowe from the state court action . . .
(Respondent’s Mot. to Dismiss [Docket 13], at 5-6).3 EQT does not take issue with the second or
third elements, but contends that there has been no final determination on the merits in state
court regarding the enforceability of the arbitration agreement. A review of the Circuit Court
Order reveals that no final judgment on the merits has been issued. The Circuit Court denied
EQT’s motion to dismiss and compel arbitration. While a dismissal of claims under Rule
12(b)(6) is presumed to be on the merits, a denial of a motion to dismiss does “not amount to a
final adjudication on the merits.” S. States Coop. Inc. v. I.S.P. Co., Inc., 198 F. Supp 2d. 807
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Toney does not contend that his claims against EQT are not arbitrable under the ADR Agreement.
In his reply, Toney also argues that collateral estoppel applies. Collateral estoppel also requires a
showing of a “final adjudication on the merits of the prior action.” State ex rel. McGraw v. Johnson &
Johnson, 226 W. Va. 677, 688 (2010) (quoting State v. Miller, 194 W. Va. 3 (1995)).

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(N.D. W. Va. 2002). Additionally, it is abundantly clear that the Circuit Court did not rule on the
merits of whether the ADR Agreement is enforceable. Rather, the Circuit Court ordered the
parties to “further develop the facts regarding the ADR agreement at issue in this matter . . .
through the course of discovery” because the Circuit Court found that the enforceability of the
ADR Agreement could not be resolved at that stage. (Circuit Court Order [Docket 13-5], at 5).
Since the Circuit Court did not reach a final adjudication on the merits of whether the ADR
Agreement was enforceable, the Supreme Court of Appeals of West Virginia’s denial of EQT’s
writ petition also fails to constitute a final adjudication on the merits of that question.
B.

Abstention

Toney argues that the court should abstain from hearing the instant petition based upon
Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983). “Abstention from the
exercise of federal jurisdiction is the exception, not the rule.” Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 813 (1976). If parallel federal and state suits
exist, which they do here, “a district court must carefully balance several factors, ‘with the
balance heavily weighted in favor of the exercise of jurisdiction.’” Chase Brexton Health Servs.,
Inc. v. Maryland, 411 F.3d 457, 463 (quoting Moses H. Cone, 460 U.S. at 16)). The Fourth
Circuit has identified six factors, based on Moses H. Cone, to guide this analysis:
(1) whether the subject matter of the litigation involves property where the first
court may assume in rem jurisdiction to the exclusion of others; (2) whether the
federal forum is an inconvenient one; (3) the desirability of avoiding piecemeal
litigation; (4) the relevant order in which the courts obtained jurisdiction and the
progress achieved in each action; (5) whether state law or federal law provides the
rule of decision on the merits; and (6) the adequacy of the state proceeding to
protect the parties’ rights.

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Id. at 463-64. The Fourth Circuit has re-emphasized that “[i]n the end, however, abstention
should be the exception, not the rule, and it may be considered only when ‘the parallel state-court
litigation will be an adequate vehicle for the complete and prompt resolution of the issues
between the parties.’” Id. at 464 (quoting Moses H. Cone, 460 U.S. at 28).
Here, the first two factors weigh against abstention. First, where the proceedings are in
personam and neither the state nor federal proceeding “has jurisdiction over the property,” the
factor weighs against abstention. Gannett Co. v. Clark Constr. Grp., Inc., 286 F.3d 737, 747 (4th
Cir. 2002). Second, Toney has not argued that the federal forum is inconvenient, nor would such
an argument likely hold any weight, considering the close proximity of the Circuit Court of
Kanawha County to this district court.
Under the third factor, it is true that a court order compelling Toney to arbitrate his
claims against EQT will result in piecemeal litigation because his claims against Crowe will
remain pending in state court. However, this court has previously analyzed a similar situation
and concluded “that the relevant question for abstention purposes is not simply whether granting
the plaintiff’s relief will result in piecemeal litigation, but whether it is the federal court’s
involvement in the case that will lead to piecemeal litigation.” United Serv. Prot. Corp. v. Lowe,
354 F. Supp. 2d 651, 656 (S.D. W. Va. 2005) (emphasis in original); see also E. Associated Coal
Corp. v. Skaggs, 272 F. Supp. 2d 595, 600 (S.D. W. Va. 2003). I note that in this case, although
Crowe was sued in his individual capacity, both EQT and Crowe moved to compel arbitration in
state court. (See Defs.’ Mot. to Dismiss this Proceeding & Compel Arbitration or, in the
Alternative, to Stay this Proceeding Pending Arbitration [Docket 1-5]). Given that Crowe was
not a signatory to the ADR Agreement, it was very possible that piecemeal litigation would have

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resulted, compelling Toney to arbitrate his claims against EQT while his claims against Crowe
proceeded in state court. In sum, threat of piecemeal litigation “arises from the existence of the
arbitration clause . . . which may require [Toney] to arbitrate [his] claims against [EQT] but
which will not require arbitration of [his] claims [against Crowe].” Lowe, 354 F. Supp. 2d at 656.
Under the fourth factor, as a matter of comity, the more the state has invested its time and
resources into the proceedings, the less appropriate it is for a federal court to intervene and
disrupt those proceedings. See Gannett Co., 286 F.3d at 748. Here, the state court action was
filed in May 2012, the Circuit Court ruled on EQT’s motion to dismiss in October 2012, and it
was not until February 2013 that EQT filed the instant petition. Toney notes that Toney and
Crowe were deposed earlier this month and that the Circuit Court has set trial to begin on June
17, 2013. In Lowe, I found that this factor did not weigh in favor of abstention because (1) “the
state-court action was filed approximately two months before the federal action” and (2) “no
substantial proceedings have taken place in the state court, and there has not been a significant
expenditure of time and resources.” Lowe, 354 F. Supp. 2d at 657. In contrast, in Skaggs, I found
that this factor weighed in favor of abstention because the underlying case had been pending in
state court for three years prior to the federal action to compel arbitration was filed. Skaggs, 272
F. Supp. 2d at 601.
EQT argues that the state suit has not progressed “toward resolving the relevant question,
namely, the arbitration question,” and that the issue “can be resolved efficiently, as the [Federal
Arbitration Act] demands—only if this Court retains jurisdiction and decides it.” (Resp. in Opp’n
to Mot. to Dismiss [Docket 17], at 11-12). EQT further argues that its compliance with the state
court’s order to conduct discovery does not weigh in favor of abstention, because (1) it is not the

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type of progress that would warrant abstention; (2) discovery obtained would be equally
available to the parties in state or federal court; and (3) EQT’s actions “show EQT has not
purposefully availed itself of the state’s jurisdiction.” (Id. at 12). I find EQT’s arguments
unconvincing. Although the record before the court does not contain the Circuit Court’s
scheduling order, the fact that—according to Toney—a trial date has been set for June 17, 2013
means that summary judgment motions would necessarily be due in the near future. The Circuit
Court has explicitly stated that EQT may visit the arbitration issue at summary judgment. After
considering the record before the court and the parties’ arguments, I FIND that the fourth factor
weighs in favor of abstention.
The fifth factor weighs in favor of abstention. Certainly, the Federal Arbitration Act
(“FAA”) “establishes that, as a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone, 460 U.S. at 24-25.
However, the issue of whether the instant matter should be arbitrated is not presented as a
question of the arbitrability of the claims, but rather as whether the ADR Agreement is
enforceable. For example, Toney’s response in the Circuit Court argued one primary point: that
“[t]he ADR in question is unenforceable and invalid under West Virginia contract law for several
reasons.” (Pl.’s Resp. in Opp’n to Defs.’ Mot. to Dismiss this Proceeding & Compel Arbitration
or, in the Alternative, to Stay this Proceeding Pending Arbitration [Docket 1-6], at 4). Toney’s
motion to dismiss argues only three points: (1) res judicata, (2) abstention, and (3)
unenforceability and invalidity of the ADR Agreement. In sum, the question is not whether the
claims are arbitrable, but rather, whether the arbitration provisions in the contract are

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enforceable. West Virginia state law governs the validity and enforceability of a contract,
including arbitration provisions.
The sixth and final factor inquires into the ability of the state court to adequately protect
the parties’ rights. Here, I have no reason to doubt the adequacy of the state forum. Not only do
state courts have concurrent jurisdiction over claims under the FAA, but given the primary
question in this matter is whether a contract is valid and enforceable, the state court certainly has
the ability to adequately rule upon matters of state contract law.
In weighing the Moses H. Cone factors, I do not consider EQT’s motivations for filing
the instant petition. Neither the Supreme Court nor the Fourth Circuit has adopted the motivation
of a party in pursuing parallel litigation as a relevant factor. See MidAtlantic Int’l, Inc. v. AGC
Flat Glass N. Am., Inc., 497 F. App’x 279, 284 n.* (4th Cir. 2012). I do note, however, that there
is little evidence to support Toney’s argument that EQT had any improper motive in this case.
EQT could certainly have reasonably believed that the Circuit Court or the Supreme Court of
Appeals of West Virginia would have ruled in its favor, and the instant petition would not have
been necessary. Additionally, because the state courts did not make a final determination on the
merits, EQT certainly did not have any improper motive for filing the petition in order to avoid
the expenses of proceeding through discovery on the merits of the state law claims.
After consideration of the factors together in light of the particular circumstances of this
case, I FIND that this case presents the sort of “exceptional circumstances” warranting
abstention. I have no reason to doubt EQT’s ability to pursue its rights in the state court system,
and particularly given the stage of litigation and scheduling order in the state court, I cannot find

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that the arbitration issue can only be resolved efficiently in this court. Accordingly, I abstain
from exercising my jurisdiction over EQT’s petition.
III.

Conclusion
For the reasons discussed above, I abstain from exercising my jurisdiction over EQT’s

petition. Accordingly, EQT’s Petition for Order Compelling Arbitration Pursuant to 9 U.S.C. § 4
[Docket 1] is DENIED and Respondent’s Motion to Dismiss [Docket 13] is GRANTED.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:

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April 26, 2013