SCOTX Asked to Weigh in on Oil & Gas Arbitration Dispute

An oil company and several related entities have asked the Supreme Court of Texas to consider whether non-signatory assignees may be compelled to arbitrate their claims following an indemnity dispute.  In Wagner Oil Co. v. Apache Corp., No. 19-0243, Texas-based Wagner Oil Company (“WOC”) purchased certain Louisiana oil and gas assets from Apache Corporation by executing a purchase and sale agreement (“PSA”).  The PSA was signed by Bryan Wagner on behalf of WOC.  The PSA included an arbitration provision that incorporated the American Arbitration Association’s (“AAA”) Commercial Rules.

Soon after, an officer for WOC, Patterson, assigned the oil and gas assets that were purchased from Apache to Bryan Wagner, Trade Exploration Corporation, and Wagner & Cochran, Inc.  The new assignment included the same effective date as the original one and specifically stated it was subject to the terms of the earlier assignment.

Later, Apache and WOC were sued by third parties several times in Louisiana.  After defending the lawsuits, Apache filed an arbitration demand against WOC, Bryan Wagner, Trade Exploration, and Wagner & Cochran (the “Entities”).  According to Apache, the company was entitled to recover approximately $15 million from the various Entities as their share of the costs related to defending and settling the lawsuits.

In response, the Entities filed an action for a declaratory judgment in Tarrant County, Texas.  Among other things, the Entities claimed Bryan Wagner, Trade Exploration, and Wagner & Cochran could not be compelled to arbitrate because they did not sign the PSA.  In addition, the Entities argued none of them had a duty to indemnify Apache.  Apache countered by claiming the question of arbitrability was for an arbitrator to decide under the AAA’s Rules.

After much back and forth, the trial court denied Apache’s motion to compel arbitration and the company filed an interlocutory appeal with the Second District Court of Appeals in Fort Worth.  The appellate court held the “trial court erred in its construction of the parties’ arbitration agreement” and vacated the lower court’s order.  The Entities then filed an unsuccessful motion for en banc reconsideration.

On Monday, the various Entities filed a petition for review with the Supreme Court of Texas.  According to their petition for review, the issues presented in the case are:

1. Did the court of appeals ignore the parties’ agreement by vacating the trial court’s order granting Petitioners’ Motion to Stay Arbitration and remanding the case to the trial court to compel arbitration when:

a.  Indemnity disputes over third-party claims arising from the purchased Apache Assets were expressly excluded from arbitration by the PSA;

b.  The court ignored this Court’s interpretation of the term “[n]otwithstanding the above” in El Paso Field Services;

c.  The court expanded the presumption in favor of arbitration to apply to matters the parties agreed not to arbitrate; and

d.  The Non-Signatory Assignees were not parties to the PSA, never agreed to arbitrate, and limited their assumed obligations only to their proportionate share of Wagner’s obligations under the Apache Assignment?

Please check back soon for future updates on this case!

Photo by: Zbynek Burival on Unsplash