Opinion
NO. 01-15-00867-CV
07-06-2017
PENN VIRGINIA OIL & GAS GP, LLC AND PENN VIRGINIA OIL & GAS LP, Appellants v. ALFREDO DE LA GARZA, INDIVIDUALLY AND AS NEXT FRIEND FOR I. D. L. G. AND K. D. L. G., MINORS, AND JOHN PAUL ADAME, INDIVIDUALLY AND AS NEXT FRIEND FOR C. A. A., J. P. A., JR., AND J. N. A., MINORS, Appellees
On Appeal from the 215th District Court Harris County, Texas
Trial Court Case No. 2014-42519
MEMORANDUM OPINION
In this accelerated interlocutory appeal, Penn Virginia Oil & Gas GP, LLC ("Penn GP") and Penn Virginia Oil & Gas LP ("Penn LP") (collectively, "Penn Virginia") appeal from the trial court's order denying their motion to compel arbitration of personal injury claims asserted by Alfredo De La Garza.
The other named appellee, John Paul Adame, has settled his claims and is not a party in this appeal.
De La Garza was injured while working for his employer, Nabors Completion & Production Services Company ("Nabors Completion") on a wellsite operated by Penn Virginia. De La Garza sued Penn Virginia in state district court, and Penn Virginia moved to arbitrate under the Nabors Dispute Resolution Program, an arbitration agreement that requires arbitration of disputes between Nabors employees and "Electing Entities."
Penn Virginia argued that De La Garza's claims were arbitrable because Penn Virginia had become an Electing Entity by entering into drilling contracts with Nabors Drilling USA, LP ("Nabors Drilling") in 2008 and 2010. De La Garza responded that Penn Virginia had only become an Electing Entity for disputes related to work performed under those specific contracts and that he was injured while working at a wellsite governed by a different contract, one that superseded the prior contracts and did not contain an Electing Entity provision. The trial court agreed with De La Garza and denied the motion. We affirm.
Background
The Nabors Dispute Resolution Program
Nabors Industries, Inc. ("Nabors") is a drilling contractor. Nabors has a Dispute Resolution Program that requires arbitration of "all Disputes" between the "Company" and the Company's "present and former" employees. Under the program, a "Dispute" is defined to include "all legal and equitable claims," including claims for "any personal injury allegedly incurred in or about a Company workplace or in the course and scope of an Employee's employment." The "Company" is defined to include Nabors, Nabors's subsidiaries, and any "Electing Entity." An "Electing Entity," in turn, is defined as "any legal entity that has agreed to be bound by the Program . . . ."
The 2008 and 2010 contracts between Penn Virginia and Nabors Drilling
Penn Virginia Corporation is an oil and gas company. Over the years, Penn Virginia Corporation and its subsidiaries have contracted with various Nabors subsidiaries to drill and service onshore wells throughout the United States. Penn Virginia Corporation and its subsidiaries have become Electing Entities under at least two contracts with Nabors.
The first contract was executed in 2008 between Penn LP and Nabors Drilling. It governs drilling operations for a wellsite in Jefferson County, Texas. The 2008 contract was filled out on a form contract. It contains a duration clause, which provides that the contract will "remain in full force and effect until drilling operations are completed on the well . . . ." And it contains a merger clause, which provides that the contract "constitutes the full understanding of the parties" and will "exclusively control and govern all work performed" thereunder.
Penn GP was not a party to the 2008 contract.
The form contract was promulgated by the International Association of Drilling Contractors and was titled "Drilling Bid Proposal and Daywork Drilling Contract—U.S."
The record does not contain any evidence of whether drilling operations have been completed on the well.
The 2008 contract also includes several exhibits, one of which lists 17 "special provisions" that are expressly "made a part" of the contract. Included among the "special provisions" is an Electing Entity provision. The Electing Entity provision states, in relevant part:
Operator [Penn LP], its parent, subsidiary and affiliated corporations, as well as the employees, officers and directors of each (collectively, "Operator") is cognizant of the Nabors Dispute Resolution Program and wishes to become an Electing Entity, as defined in that Program. Accordingly, Operator and Nabors Industries, Inc. ("Nabors") hereby agree that Operator is an Electing Entity as to all disputes between Operator and the present and former Employees and Applicants of Nabors pursuant to the Nabors Dispute Resolution Program as it currently exists and as may be amended from time to time. . . . Operator may withdraw this election to participate in the Program at any time by giving notice of such withdrawal to Nabors, such revocation to be effective with respect to any claims not yet instituted as of the date of revocation. Operator understands that it is bound by the terms of the Program with respect to all Disputes with Nabors
employees, regardless of whether such Dispute is initiated by the employee or by Operator.The 2008 contract is signed by representatives of Penn LP and Nabors Drilling; the exhibit listing the 17 "special provisions" is not.
The second contract was executed in 2010 by Nabors Drilling and a different Penn entity, Penn Virginia MC Energy, LLC ("Penn MC"). It governs drilling operations for a wellsite in Logan County, Oklahoma. The 2010 contract was filled out on the same form as the 2008 contract. It has the same title, the same duration and merger clauses, and the same Electing Entity provision. Like the 2008 contract, the 2010 contract's Electing Entity provision is listed on an attached exhibit that is expressly "made a part" of the contract. And like the 2008 contract, the 2010 contract is signed by representatives of both contracting parties, while the exhibit listing the "special provisions" is not.
Penn GP was not a party to the 2010 contract either.
Like with the Jefferson County well, the record does not contain any evidence of whether drilling operations have been completed on the Logan County well.
The 2013 contract between Penn Virginia and Nabors Completion
No Penn Virginia entity is an Electing Entity under the most recent contract with Nabors, a contract executed in March 2013 with Nabors Completion. The 2013 contract is not limited to a specific wellsite. Instead, it governs all operations conducted by Penn LP in Texas. The 2013 contract states that it "shall become effective" the day of its execution and that it "shall supersede all prior service contracts between the parties . . . with respect to new work or services commenced during the term of this Contract to be performed in connection with this Contract."
The 2013 contract also governs operations conducted in various other states by two other Penn entities, Penn Virginia Oil & Gas Corporation (which is distinct from Penn Virginia Corporation) and Penn MC.
The 2013 contract also contains a separate merger clause, which states:
This Contract represents a final, complete and exclusive statement of the agreement between the parties, supersedes any prior oral or written representation, agreement or understanding between the parties, and may not be modified, supplemented, explained or waived, except in writing signed by an authorized representative of both parties.
Unlike the 2008 and 2010 contracts, the 2013 contract does not contain any provision or attachment making Penn LP or any other Penn entity an Electing Entity under the Nabors Dispute Resolution Program.
De La Garza's injury and subsequent lawsuit
In July 2013, De La Garza was hired by Nabors Completion. As part of the application and hiring process, De La Garza signed several acknowledgment forms agreeing to adhere to the Nabors Dispute Resolution Program.
De La Garza concedes that if he were suing Nabors Completion he would be required to arbitrate the dispute under the Dispute Resolution Program.
Later, in April 2014, De La Garza was injured while working on the Wellhausen well in Lavaca County, Texas. The Wellhausen well was operated by Penn LP and governed by the 2013 contract.
De La Garza asserted personal injury claims against Penn Virginia in state district court. Penn Virginia moved to compel arbitration under the Nabors Dispute Resolution Program. Penn Virginia argued that De La Garza's claims were arbitrable because De La Garza was a Nabors employee and Penn Virginia had become an Electing Entity under the 2008 and 2010 contracts.
De La Garza asserted claims individually and on behalf of his minor children.
The trial court denied Penn Virginia's motion to compel arbitration. Penn Virginia appeals.
Denial of Motion to Compel Arbitration
In its sole issue, Penn Virginia contends that the trial court abused its discretion by denying its motion to arbitrate.
A. Standard of review and applicable law
We have jurisdiction over an appeal from an interlocutory order denying a motion to compel arbitration. TEX. CIV. PRAC. & REM. CODE §§ 51.016, 171.098(a)(1). We review the trial court's denial of such a motion for an abuse of discretion. In re Houston Progressive Radiology Assocs., 474 S.W.3d 435, 442-43 (Tex. App.—Houston [1st Dist.] 2015, no pet.).
Under this standard, we defer to the trial court's factual determinations if those determinations are supported by the evidence, but we review the trial court's legal determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding); Parker v. Schlumberger Tech. Corp., 475 S.W.3d 914, 922 (Tex. App.—Houston [1st Dist.] 2015, no pet.).
It is undisputed that the arbitration agreement at issue here is governed by the Federal Arbitration Act. See 9 U.S.C.A. §§ 1-16; In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011). Under the FAA, a party seeking to compel arbitration must establish that (1) a valid, enforceable arbitration agreement exists and (2) his claims fall within the agreement's scope. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding); In re Provine, 312 S.W.3d 824, 828 (Tex. App.—Houston [1st Dist.] 2009, orig. proceeding).
"Once an agreement is established, a court should not deny arbitration unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue." Houston Progressive, 474 S.W.3d at 443. In interpreting an arbitration agreement, we apply "ordinary contract principles." Kellogg Brown & Root, 166 S.W.3d at 738. "We examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless." Valerus Compression Servs., LP v. Austin, 417 S.W.3d 202, 208 (Tex. App.— Houston [1st Dist.] 2013, no pet.). "No single provision taken alone will be given controlling effect." Id.
Although the Texas Supreme Court has "repeatedly expressed a strong presumption favoring arbitration, the presumption arises only after the party seeking to compel arbitration proves that a valid arbitration agreement exists." J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Once a valid arbitration agreement is established, "doubts regarding an agreement's scope are resolved in favor of arbitration . . . ." Kellogg Brown & Root, 166 S.W.3d at 737.
If the movant establishes that an arbitration agreement governs the dispute, the burden shifts to the party opposing arbitration to establish a defense to the arbitration agreement. Provine, 312 S.W.3d at 829. Once the arbitration movant establishes a valid arbitration agreement that encompasses the claims at issue, a trial court has no discretion to deny the motion to compel arbitration unless the opposing party establishes a defense to arbitration. Id.
B. No valid, enforceable agreement exists
We begin by determining whether a valid, enforceable arbitration agreement exists. Kellogg Brown & Root, 166 S.W.3d at 737; Parker, 475 S.W.3d at 922; Austin, 417 S.W.3d at 207.
Penn Virginia contends that De La Garza's claims are arbitrable under the Nabors Dispute Resolution Program. The Dispute Resolution Program is an arbitration agreement that requires arbitration of "all Disputes" between "present and former" Nabors employees and any "Electing Entity."
De La Garza was a Nabors employee who expressly agreed to adhere to the Dispute Resolution Program. And Penn Virginia was an Electing Entity under the 2008 and 2010 contracts.
However, the 2008 and 2010 contracts were superseded by the 2013 contract. The 2013 contract expressly provides that it "shall supersede all prior service contracts between the parties[,]" and it contains a separate merger clause, which states that the contract "represents a final, complete and exclusive statement of the agreement between the parties" and "supersedes any prior oral or written representation, agreement or understanding between the parties . . . ."
De La Garza was hired by Nabors after the 2013 contract was executed, and he was injured while working on a well (the Wellhausen) that the 2013 contract governed. Unlike the 2008 and 2010 contracts, the 2013 contract contains no Electing Entity provision. Thus, the 2013 contract does not make Penn Virginia an Electing Entity for that well.
Penn Virginia nevertheless contends that it is an Electing Entity for wells governed by the 2013 contract. Despite the 2013 contract's express language, Penn Virginia contends that the 2013 contract does not actually supersede the Electing Entity provisions in the 2008 and 2010 contracts. According to Penn Virginia, because the Electing Entity provisions are not in the 2008 and 2010 contracts themselves, but rather are in attachments to those contracts, the Electing Entity provisions constitute separate "stand-alone" agreements and make Penn Virginia an Electing Entity for disputes relating to work performed under all future contracts. We disagree.
Penn Virginia further argues that the 2013 contract only supersedes "prior service contracts" and that the Electing Entity provisions are not "service contracts." This argument ignores the 2013 contract's merger clause, which broadly states that the contract "supersedes any prior oral or written representation, agreement or understanding between the parties . . . ."
The Electing Entity provisions are not separate, stand-alone agreements. Rather, they are provisions of the 2008 and 2010 contracts. The Electing Entity provisions are listed on exhibits to the 2008 and 2010 contracts. Each exhibit is titled "Exhibit C: Contractor's Special Provisions" and lists 17 provisions. Neither exhibit is signed. The 2008 and 2010 contracts expressly state that the exhibits are "made a part" of the contracts. And the exhibits themselves contain no language indicating that they should be considered as separate from the contracts to which they are attached. To the contrary, a review of the "special provisions" listed on the exhibits makes clear that the purpose of the provisions is to further specify the parties' duties under the 2008 and 2010 contracts.
The provisions specify who is responsible for furnishing labor, equipment, and materials; testing the blowout preventer; providing and maintaining an onsite septic tank; and so on.
If the Electing Entity provision in the 2008 contract made Penn Virginia an Electing Entity for all future contracts, then Penn Virginia would not have had to execute an Electing Entity provision for the 2010 contract or any future contract. Yet it did. That Penn Virginia included an Electing Entity provision in each of these two contracts indicates that the provisions were intended to make Penn Virginia an Electing Entity only for disputes relating to those particular contracts.
Because De La Garza was injured on a well governed by the 2013 contract, and because Penn Virginia was not an Electing Entity under that contract, we hold that there is no agreement between Penn Virginia and De La Garza to arbitrate De La Garza's claims under the Dispute Resolution Program. Therefore, we overrule Penn Virginia's sole issue.
Conclusion
We affirm the trial court's order.
Harvey Brown
Justice Panel consists of Chief Justice Radack and Justices Brown and Lloyd.