Victory on Appeal in $200 Million Arbitration Fight

  • September 18, 2020

In a decision issued September 14, 2020, the U.S. Court of Appeals for the Fifth Circuit agreed with Beck Redden in a hotly-contested oil and gas dispute.

Beck Redden represented the operator, Chesapeake Exploration, which had been sued for significant money damages by OOGC, an arm of CNOOC, for breach of contract.

The parties' joint venture agreements required disputes be resolved through AAA arbitration before a panel of three arbitrators with several years of experience in oil and gas disputes, so the parties pursued arbitration before such a panel. After the arbitrators decided certain issues in favor of Chesapeake, OOGC persuaded a federal district court to stop the arbitration from proceeding any further and to vacate the arbitration awards already handed down. OOGC complained about connections between one of the arbitrators and a third-party fracking vendor. The federal district court sustained OOGC's complaint in a decision entitled "Opinion on Arbitration Corruption," at which point Chesapeake engaged Beck Redden to appeal the ruling. Beck Redden appellate partner David M. Gunn presented oral argument to the appellate court in New Orleans in November 2019.

The Fifth Circuit firmly disagreed with the district court's ruling. A panel consisting of Judges Jennifer Elrod, Don Willett, and Andrew Oldham unanimously held that OOGC had not met its burden to justify vacatur under the Federal Arbitration Act. Judge Elrod summarized the decision: "Chesapeake argues that the district court erred by vacating the arbitration awards for 'evident partiality' under 9 U.S.C. § 10(a)(2). We agree." The Fifth Circuit then ordered the lower court to restore Chesapeake's victory promptly: "We VACATE the district court's arbitration ruling and REMAND the action with instructions to confirm the arbitrations awards within thirty days of the issuance of the mandate."

Beck Redden attorneys David M. Gunn and B.D. Daniel worked on the appeal with Jones Walker attorneys Josh Norris and Nicole Duarte, who represented Chesapeake in the lower court and the arbitration.