Texas Supreme Court Takes Up Arbitration Vacatur Case
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Forest Oil Corp. v. El Rucio Land and Cattle Co., Inc., 446 S.W.3d 58 (Tex. App.—Houston [1st Dist.] 2014, pet. granted). A three member arbitration panel awarded $24.5 million in damages to James Argyle McAllen (“McAllen”), El Rucio Land and Cattle Company, Inc. (“El Rucio”), San Jacinto Land Partnership, Ltd., and McAllen Trust Partnership in a dispute with Forest Oil Corporation (“Forest Oil”) (collectively, “the McAllens”). El Rucio moved to confirm the award, and Forest Oil moved to vacate. The trial court confirmed the award, except the bond requirement. Houston Court of Appeals (1st Dist.) confirmed the trial court’s judgment. Forest Oil appealed to the Texas Supreme Court, which granted petition for review. Oral argument is scheduled for February 8, 2017.
Disputes between Forest Oil and El Rucio Land and Cattle Company date to the mid-1990s when McAllen filed suit against Forest Oil and alleged royalty underpayment and lease underproduction. In 1999, the parties signed a Settlement Agreement releasing all claims against Forest Oil except “environmental liability, surface damages, personal injury, or wrongful death occurring at any time and relating to the McAllen Ranch Leases,” which the parties agreed to arbitrate under the Texas General Arbitration Act.
OBSERVATIONS
- The separate written dissent by one of the arbitrators provided a roadmap for vacatur.
- The party-appointed arbitrators, one of whom was the dissenting arbitrator, were neutrals in the arbitration, and therefore subject to the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes.
- The Settlement Agreement was the product of experienced oil and gas parties.
- The arbitration clause in the Settlement Agreement requiring an initial filing in the district court and that the district court immediately compel arbitration sounds like an advisory opinion.
- This case continues to engender discussion about the common law grounds for vacatur of awards that is confusing in light of Hoskins v. Hoskins.
- “Exceeding powers” is the most often cited and used vacatur ground offered in 9 U.S.C. §10(a).
- There are numerous Texas cases that limit what constitutes exceeding the arbitrator’s powers.
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