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IN THE UNITED STATES DISTRICT COURT 

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA 

CHESAPEAKE APPALACHIA, L.L.C., : 4:16-cv-50 

 : 

 Plaintiff, : Hon. John E. Jones III 

 : 

 v. : 

 : 

EDWARD M. OSTROSKI and : 

KATHLEEN OSTROSKI, : 

 : 

 Defendants. : 

 

MEMORANDUM 

August 8, 2016 

Presently pending before the Court is Plaintiff Chesapeake Appalachia, 

L.L.C.’s Motion for Summary Judgment on Count II (Doc. 23) filed on April 29, 

2016. For the reasons that follow, the Court shall grant the Plaintiff’s Motion for 

Summary Judgment and declare that the subject lease between Plaintiff and 

Defendants does not permit class arbitration. 

I. STANDARD OF REVIEW

 Summary judgment is appropriate if the moving party establishes “that there 

is no genuine dispute as to any material fact and the movant is entitled to judgment 

as a matter of law.” FED. R. CIV. P. 56(a). A dispute is “genuine” only if there is a 

sufficient evidentiary basis for a reasonable jury to find for the non-moving party, 

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and a fact is “material” only if it might affect the outcome of the action under the 

governing law. See Sovereign Bank v. BJ’s Wholesale Club, Inc., 533 F.3d 162, 

172 (3d Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 

(1986)). A court should view the facts in the light most favorable to the nonmoving party, drawing all reasonable inferences therefrom, and should not 

evaluate credibility or weigh the evidence. See Guidotti v. Legal Helpers Debt 

Resolution, L.L.C., 716 F.3d 764, 772 (3d Cir. 2013) (citing Reeves v. Sanderson 

Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)). 

 Initially, the moving party bears the burden of demonstrating the absence of 

a genuine dispute of material fact, and upon satisfaction of that burden, the nonmovant must go beyond the pleadings, pointing to particular facts that evidence a 

genuine dispute for trial. See id. at 773 (citing Celotex Corp. v. Catrett, 477 U.S. 

317, 324 (1986)). In advancing their positions, the parties must support their 

factual assertions by citing to specific parts of the record or by “showing that the 

materials cited do not establish the absence or presence of a genuine dispute, or 

that an adverse party cannot produce admissible evidence to support the fact.” 

FED. R. CIV. P. 56(c)(1). 

 A court should not grant summary judgment when there is a disagreement 

about the facts or the proper inferences that a factfinder could draw from them. 

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See Reedy v. Evanson, 615 F.3d 197, 210 (3d Cir. 2010) (citing Peterson v. Lehigh 

Valley Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982)). Still, “the mere existence of 

some alleged factual dispute between the parties will not defeat an otherwise 

properly supported motion for summary judgment.” Layshock ex rel. Layshock v. 

Hermitage Sch. Dist., 650 F.3d 205, 211 (3d Cir. 2011) (quoting Anderson, 477 

U.S. at 247-48) (internal quotation marks omitted). 

II. FACTUAL AND PROCEDURAL SUMMARY 

 The facts in this matter are not in dispute. Defendants Edward M. and 

Kathleen M. Ostroski (collectively “Defendants” or “the Ostroskis”), Pennsylvania 

landowners, entered into a lease agreement (the “Lease”) with Plaintiff Chesapeake 

Appalachia, L.L.C. (“Plaintiff” or “Chesapeake”), an Oklahoma company, which 

gave Chesapeake the right to explore for and produce gas from Defendants’ 

property. (Doc. 25, ¶ 1). Upon entering into the Lease, the Ostroskis received a 

signing bonus by check that was mailed across state lines from Oklahoma to 

Pennsylvania. (Doc. 25, ¶ 6). Defendants have also received royalties from 

Chesapeake on gas produced. These royalties were paid by check and mailed 

across state lines from Oklahoma to Pennsylvania. (Doc. 25, ¶ 7). 

 The Lease contains a provision known as the “Payments to Lessors” clause, 

which provides, in relevant part, as follows: 

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2. GAS: To pay Lessor an amount equal to one-eighth (1/8) of the 

revenue realized by Lessee for all gas and the constituents thereof 

produced and marketed from the Leasehold, less the cost to transport, 

treat and process the gas and any losses in volumes to the point of 

measurement that determines the revenue realized by Lessee. 

(Doc. 24-1, pp. 1-2). 

 The Lease also contains an arbitration provision that provides as follows: 

ARBITRATION: In the event of a disagreement between Lessor and 

Lessee concerning this Lease, performance thereunder, or damages 

caused by Lessee’s operations, the resolution of all such disputes shall 

be determined in accordance with the rules of the American Arbitration 

Association. All fees and costs associated with the arbitration shall be 

borne equally by Lessor and Lessee. 

(Doc. 24-1, p. 2). 

 On December 4, 2015, Defendants filed an arbitration demand against 

Chesapeake, asserting claims related to the Lease and the calculation of royalties 

thereunder. (Doc. 25, ¶ 8). In the arbitration, the Ostroskis seek to represent a 

statewide putative class of: 

Every person except governmental entities who is, or has been, a 

royalty owner under an oil and gas lease in which Chesapeake 

Appalachia, L.L.C., is the present lessee, either because it is named as 

the lessee or because the lease has been assigned to it, and (i) the lease 

conveys rights to natural gas in Pennsylvania, (ii) natural gas has been 

produced under the lease, and the lease includes a provision requiring 

the arbitration of disputes. 

(Doc. 25, ¶ 9). 

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 Thereafter, on January 11, 2016, Chesapeake filed the instant action, seeking 

an injunction barring Defendants from continuing to pursue any class claims 

against Chesapeake in the already filed arbitration or in any other arbitration. 

(Doc. 1). On April 29, 2016, Chesapeake filed the instant Motion for Summary 

Judgment (Doc. 23), which was appropriately briefed by the parties. (Docs. 24, 25, 

26, 27, 30).1

 This matter is thus ripe for our review. 

III. DISCUSSION 

A. The Federal Arbitration Act 

 The parties first disagree over which law is to be applied to this motion. 

Defendants contend the FAA governs because the Lease concerns interstate 

commerce. The Ostroskis dispute that the Lease concerns interstate commerce, and 

contend the PAA applies.

 An arbitration clause is subject to the Federal Arbitration Act if the 

arbitration clause is part of a valid written contract “evidencing a transaction 

involving commerce.” See 9 U.S.C. §§ 1, 2. The FAA's application here turns on 

 

1

 Following full briefing on the summary judgment motion, on June 20, 2016, the 

Ostroskis filed a Motion pursuant to Fed. R. Civ. P. 56(d), for leave to take discovery in aid of 

the resolution of the pending summary judgment motion. (Doc. 31). The Ostrokis seek to take 

discovery to establish that all of the gas produced by Chesapeake in Pennsylvania is sold at the 

well. The Ostroskis contend that record evidence of this fact will render the Federal Arbitration 

Act (“FAA”) inapplicable to this matter, and require the Court to apply the Pennsylvania 

Uniform Arbitration Act (“PAA”) to this matter. However, for the reasons that follow, it is of no 

moment to our determination that the FAA applies to this matter whether the gas produced at the 

Ostroskis’ Pennsylvania well is sold at the wellhead. Thus, we shall deny the Rule 56(d) motion.

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whether the Lease involves interstate commerce. The Supreme Court has held that 

the term "involving commerce" signifies the "broadest permissible exercise of 

Congress' Commerce Clause power.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 

56 (2003) ("[T]he FAA encompasses a wider range of transactions than those 

actually 'in commerce'-that is, 'within the flow of interstate commerce.'"). The 

Supreme Court explained that "Congress' Commerce Clause power 'may be 

exercised in individual cases without showing any specific effect upon interstate 

commerce' if in the aggregate the economic activity in question would represent 'a 

general practice . . . subject to federal control.'" Id. at 56-57 (quoting Mandeville 

Island Farms, Inc. v. Am. Crystal Sugar Co., 334 U.S. 219, 236, 68 S. Ct. 996, 

1006, 92 L. Ed. 1328 (1948)). Thus, "[o]nly that general practice need bear on 

interstate commerce in a substantial way." Id. at 57. Our sister district courts have 

explained that “[t]his is not a rigorous inquiry; in fact, the contract need only the 

slightest nexus with interstate commerce,” for the FAA to apply. Nova CTI 

Caribbean v. Edwards, 2004 U.S. Dist. LEXIS 41, *9 n.3 (quoting Crawford v. W. 

Jersey Health Sys., 847 F. Supp. 1232, 1240 (D.N.J. 1994)). 

 Applying those guidelines, we find that the Lease here clearly involves 

interstate commerce. It is undisputed that Chesapeake is a limited liability 

company organized and existing under the laws of the State of Oklahoma (Doc. 1, 

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¶ 12) and that the Ostroskis are residents of Pennsylvania. (Doc. 1, ¶ 13). It is 

further undisputed that the payments arising under the terms and conditions of the 

Lease that were made by Chesapeake to the Ostroskis were issued in Oklahoma 

and received in Pennsylvania. (Doc. 25, ¶¶ 7-8). While the Lease at issue involves 

real property solely situated in Pennsylvania and the Ostroskis are Pennsylvania 

residents, the subject Lease was negotiated with Chesapeake, an Oklahoma 

company. Even if the gas produced by Chesapeake is sold at the wellhead in 

Pennsylvania, the Lease is clearly part of a chain of transactions involving 

interstate commerce for it is well-established that the end use of the natural gas and 

oil extraction in the Marcellus Shale is not simply contained within Pennsylvania’s 

borders. Accordingly, the Lease satisfies the FAA's "involving commerce" test and 

the FAA will be applied.2

 

 

2 Accord Chesapeake Appalachia, LLC v. Scout Petrol., LLC, 809 F.3d 746, 753 (3d Cir. 

2016)(applying the FAA to an oil and gas lease materially identical to the Ostroskis’); Alexander 

v. Chesapeake Appalachia, LLC, 839 F. Supp. 2d 544, 550 (N.D.N.Y. 2012)(applying FAA 

because the oil and gas leases “clearly evidence transactions involving commerce,” including 

“development of gas resources which will ultimately be placed in an interstate pipeline subject to 

federal regulation”); Bird v. Turner, 2015 WL 5168575, at *2 (N.D. W. Va. Sept. 1, 

2015)(applying FAA because “[b]ased 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’ lease ‘evidenc[es] a transaction 

involving commerce.’”(citation omitted)); Mesa Operating Ltd. Partnership v. Louisiana 

Interstate Gas Corp., 797 F.2d 238, 243 (5th Cir. 1986)(“[c]itizens of different states engaged in 

performance of contractual obligations in one of those states are engaged in a contract involving 

commerce under the FAA . . . [because] . . . [s]uch a contract necessitates interstate travel of both 

personnel and payments.”). 

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B. Availability of Class Arbitration Under the Lease 

 We now turn to an analysis as to whether class arbitration is available under 

the parties’ Lease. To review, the pertinent section of the Lease provides: 

ARBITRATION: In the event of a disagreement between Lessor and 

Lessee concerning this Lease, performance thereunder, or damages 

caused by Lessee’s operations, the resolution of all such disputes shall 

be determined in accordance with the rules of the American Arbitration 

Association. All fees and costs associated with the arbitration shall be 

borne equally by Lessor and Lessee. 

(Doc. 24-1, p. 2). It is undisputed that the arbitration clause of the Lease does not 

mention class arbitration. 

 The United States Supreme Court has stated that “a party may not be 

compelled under the FAA to submit to class arbitration unless there is a contractual 

basis for concluding that the party agreed to do so.” Stolt-Nielsen S.A. v. 

AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010)(emphasis in original). In StoltNielsen, the Supreme Court reasoned that class arbitration cannot be implicitly 

agreed to, “because class-arbitration changes the nature of arbitration to such a 

degree that it cannot be presumed that the parties consented to it by simply 

agreeing to submit their disputes to an arbitrator.” Id. at 685. Thus, the 

jurisprudence on this point is clear, “[c]lass arbitration is a matter of consent,” and 

[a]n arbitrator may employ class procedures only if the parties have authorized 

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them.” Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2066 (2013)(citing 

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

 Our analysis on this point is necessarily abbreviated because the 

jurisprudence is abundantly clear. Because the plain language of the arbitration 

clause in the Lease is silent as to class arbitration, we find that the Lease does not 

allow Defendants to compel it. 

IV. CONCLUSION 

 For all the reasons stated herein, we shall grant Chesapeake’s Motion for 

Summary Judgment. 

 An appropriate Order shall issue. 

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