Opinion ID: 2672444
Heading Depth: 2
Heading Rank: 1

Heading: Chesapeake’s Appeal

Text: In its appeal of the district court’s decision on the merits, BP Am. Prod. Co. v. Chesapeake Exploration, LLC, CIV-10-519-M, 2013 WL 1397727 (W.D. Okla. Apr. 5, 2013), Chesapeake argues that the district court lacked jurisdiction to adjudicate the dispute beyond confirming the arbitration award, that Chesapeake did not waive its right to arbitrate BP’s counterclaim, that BP’s counterclaim is barred by res judicata, and that BP’s counterclaim is impermissible in the context of a confirmation proceeding. We address each below.
Chesapeake argues that the district court’s jurisdiction ended when it confirmed the arbitration award, citing Hall St. Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), and the terms of the PSA. First, Hall Street bears no parallel to this case. In Hall Street, the Supreme Court held the scope of judicial review of an arbitration award is limited by the Federal Arbitration Act and cannot be enlarged by agreement of the parties. Hall Street, 522 U.S. at 584, 586; see 9 U.S.C. §§ 9-11. The district court in this case confirmed the arbitration award as provided by FAA § 9 and PSA § 2.2.14, Aplt. App. 579. The court’s adjudication of BP’s counterclaim—which the district court found to be outside the scope of arbitration, id. at 248, the panel found both outside the scope of what -9- was submitted to it, id. at 874, and subject to defenses outside its purview, id. at 938, and which Chesapeake consistently argued “arises solely from matters outside the scope of PSA § 2.2.14 arbitration,” id. at 200—was not judicial review of an arbitration award, and so was not subject to the limitations of the FAA. See Hall Street, 522 U.S. at 592. Chesapeake now argues that BP’s counterclaim is relegated to binding arbitration by the PSA. Aplt. Br. 27. In short, Chesapeake’s argument is contrary to the position it asserted throughout the whole of this dispute. See Aplt. App. 816. The district court found Chesapeake waived its right to arbitrate the counterclaim; we review that issue de novo, Hill v. Ricoh Americas Corp., 603 F.3d 766, 771 (10th Cir. 2010), and come to the same conclusion. In assessing waiver, we consider, among other things, whether a party’s actions are inconsistent with the right to arbitrate and the extent to which the party invoked and took advantage of litigation. Id. at 772-73. The record before us is replete with Chesapeake’s attempts to avoid arbitrating this claim. Chesapeake protested the authority of the panel to adjudicate it, initiated this litigation to prevent the panel from doing so, and expressly agreed to have the issue decided on joint motions for summary judgment. Chesapeake thus waived its right to arbitrate. Its attempt to invoke arbitration at this stage is simply disingenuous. Compare Aplt. Br. 39 (Chesapeake’s appellate brief: “Chesapeake has always maintained that BP’s $22 million claim was subject to Title - 10 - Arbitration required by PSA § 2.2.14.”) with Aplt. App. 200 (Chesapeake’s motion to confirm: “BP’s claim for $22,265,302, arises solely from matters outside the scope of PSA § 2.2.14 arbitration.”).
Next, Chesapeake argues that BP’s counterclaim is barred by the companion doctrines of res judicata and arbitration and award. Aplt. Br. 28-35. The application of claim preclusion is a question of law we review de novo. MACTEC, Inc. v. Gorelick, 427 F.3d 821, 831 (10th Cir. 2005). Chesapeake asserts the counterclaim is precluded because it was not timely submitted to the arbitration panel, and because the panel declined to award BP the $22 million it sought. As an initial matter, BP’s counterclaim was not submitted to the panel at the beginning of arbitration because, at the time, it was not in dispute. Aplt. App. 481. When Chesapeake refused to pay the amount it previously withheld, BP immediately submitted the claim to the panel, under protest from Chesapeake. Id. at 484. As the panel and the district court both found, BP’s counterclaim is preserved. Moreover, BP’s counterclaim is not precluded by res judicata. There was no final judgment on BP’s claim that would have preclusive effect. See - 11 - MACTEC, 427 F.3d at 831. 4 The panel’s December 30, 2009 award specifically stated it decided only the title issues before it and not the effect of those rulings on the amounts ultimately exchanged by the parties. The panel’s later ruling found that BP was likely entitled to the $22 million but reserved judgment because Chesapeake raised defenses outside the panel’s purview. And the district court found that BP’s counterclaim remained a live controversy after the award was confirmed. The claim is not precluded.
Finally, Chesapeake argues that BP’s counterclaim is not cognizable under the FAA, citing authority from other circuits. Aplt. Br. 35-37 (citing Booth v. Hume Pub., Inc., 902 F.2d 925, 931 (11th Cir. 1990); Ottley v. Schwartzberg, 819 F.2d 373, 377 (2d Cir. 1987)). In Booth, the Eleventh Circuit concluded it would be inconsistent with the goals of the FAA to allow counterclaims in confirmation proceedings other than those enumerated by FAA §§ 10-11. Booth, 902 F.2d at 931. The court expressed concern that allowing counterclaims would change the “summary” nature of confirmation proceedings. Id. at 931-33. There is no rule in this circuit prohibiting counterclaims in confirmation 4 Chesapeake addresses the law of claim preclusion of this circuit, Aplt. Br. 34, while BP argues the district court correctly applied the claim preclusion rules of Oklahoma, Aplee. Br. 47. Both Tenth Circuit and Oklahoma law require a final judgment before a claim may be precluded, See MACTEC, 427 F.3d at 831; Doyle v. Smith, 202 P.3d 856, 864 (Okla. Civ. App. 2009), and the result is the same under either. - 12 - proceedings, and we do not need to consider adopting one now. When Chesapeake initiated this litigation, it sought more than summary confirmation; it asked the court to examine the jurisdiction of the panel and to enjoin it from hearing the parties’ dispute. Aplt. App. 56. Allowing BP’s counterclaim in that context would not change the nature of the proceeding. See Booth, 902 F.2d at 931-33. As we find Chesapeake’s arguments in appeal No. 13-6108 unpersuasive, the ruling of the district court, BP Am. Prod. Co., 2013 WL 1397727, will be affirmed.