HOUSTON (SE Texas Record) — A Texas appeals court recently upheld a lower court decision not to compel arbitration in a purchasing dispute between Oklahoma-based and Colorado-based oil and gas companies.
In its 17-page memorandum opinion issued Nov. 5, a Texas First District Court of Appeals affirmed a lower court's decision to deny a motion by Rebellion Energy II to compel arbitration in its litigation with Liberty Resources Powder River Operating and Liberty Resources Management Company.
Liberty Resources is based in Denver.
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"The trial court correctly concluded that this dispute falls outside the narrow accounting arbitration clause," the opinion said. "We affirm the trial court’s order and lift our stay of the litigation."
Appeals court Justice Richard Hightower wrote the opinion in which Justice Peter Kelly and Justice Countiss concurred.
The dispute between Rebellion Energy and Liberty Resources stems from a June 2018 Purchase and Sale Agreement (PSA) in which Rebellion Energy acquired Liberty Resources oil and gas assets in Wyoming for $106 million, according to the background portion of the opinion. The dispute is wells belonging to a third company that Liberty Resources decided not to complete.
Rebellion Energy sued Liberty Resources in Harris County District Court and sought to compel arbitration or to assert claims for breach of contract and declaratory judgment, according to the background portion of the opinion. In its counterclaim, Liberty Resource asked for declaratory judgment, breach of contract and indemnity declarations.
Liberty Resources asked for summary judgment on its counterclaims after Rebellion Energy moved to compel arbitration. A Harris County District Court judge denied Rebellion Energy's motion.
"We review a trial court's order denying a motion to compel arbitration for abuse of discretion, but whether the claims in dispute fall within the scope of a valid arbitration agreement is a question of law that we review de novo," the opinion said.
The appeals court panel disagreed with Rebellion Energy's "apparent suggestion" that an accounting arbitrator could decide whether the dispute over the third company's invoices falls within a narrow accounting arbitration clause in the PSA, the opinion said.
"Furthermore, nothing in the PSA delegates any authority for an accounting arbitrator to decide gateway issues of arbitrability," the opinion said.