On April 28, U.S. District Judge Matthew Brann of the Middle District of Pennsylvania issued the latest opinion in a series of high-profile decisions regarding class arbitrability of oil and gas leases. In Chesapeake Appalachia v. Scout Petroleum, 4:14-CV-0620, (M.D. Pa. April 28), Brann granted Chesapeake’s motion for partial summary judgment, and entered a declaratory judgment that the leases at issue do not permit class arbitration, and instead require individual (or bilateral) arbitration. Brann’s opinion rejected Scout’s novel argument that as a matter of Pennsylvania contract law, class arbitration was impliedly authorized under the leases.
Background
In 2008, Chesapeake entered into oil and gas leases with landowners in several northeastern Pennsylvania counties to explore for, and produce natural gas. The leases at issue are standard natural gas leases, consisting of a basic form contract, often including an individually negotiated addendum. In 2013, Scout purchased the right to certain leases from landowners and has received royalties from Chesapeake on the gas produced from their properties. On March 17, 2014, Scout sought to bring class arbitration against Chesapeake. Scout attempted to initiate class arbitration on behalf of itself, together with a putative class of thousands of landowners, claiming that Chesapeake had improperly calculated royalties.
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