HIGH SIERRA ENERGY, L.P. v. HULL

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HIGH SIERRA ENERGY, L.P. v. HULL
2010 OK CIV APP 96
Case Number: 107141
Decided: 05/14/2010
Mandate Issued: 10/08/2010
DIVISION III
THE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION III

HIGH SIERRA ENERGY, L.P., a Delaware Limited Partnership, Plaintiff/Appellee,
v.
DAVID R. HULL, an individual, and BILLY D. HARE, an individual, Defendants/Appellants.

APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA

HONORABLE NOMA D. GURICH, JUDGE

REVERSED AND REMANDED

D. Kent Meyers, Evan G.E. Vincent, CROWE & DUNLEVY, P.C., Oklahoma City, Oklahoma, and Kent P. Sullivan, LEACH, SULLIVAN, SULLIVAN & WATKINS, L.L.P., Duncan, Oklahoma, and Trae Gray, THE LAW OFFICES OF TRAE GRAY, P.L.L.C., Coalgate, Oklahoma, for Defendants/Appellants,
James C. McMillin, Vickie J. Buchanan, Jeremiah L. Buettner, McAFEE & TAFT, Oklahoma City, Oklahoma, for Plaintiff/Appellee.

BAY MITCHELL, JUDGE:

¶1 In a dispute arising out of a multi-million dollar purchase/sale of multiple companies, Defendants/Appellants David R. Hull ("Hull") and Billy D. Hare ("Hare") appeal the trial court's interlocutory order denying their motion to compel arbitration and for stay of the action pursuant to 12 O.S. Supp. 2006 §1879(A). Hull and Hare ("Appellants") contend the arbitration provision contained in the Purchase and Sale Agreement ("PSA") entered into between Appellants and Plaintiff/Appellee High Sierra Energy, L.P. ("High Sierra") is applicable to all causes of action arising under or related to the PSA, including disputes relating to the Employment Agreements for Hull and Hare respectively.

¶2 Appellants and High Sierra executed the PSA on September 10, 2007, for the purchase and sale of the assets of Hull's Oilfield Service, Inc., Briggett, Inc., and Briggett Transportation, and the purchase of all outstanding "membership interests" of National Coal County, LLC.1 In accordance with the PSA, High Sierra paid Hull and Hare a purchase price of forty-two million dollars.2 Pursuant to the PSA, High Sierra made an additional investment of eighteen million dollars in the purchased companies.

¶3 On September 10, 2007, Hull and Hare each entered into Employment Agreements with High Sierra to serve as executive level managers for National Coal County, LLC, which included managing the daily business operations, maintaining client relationships and sustaining the good standing of the business. The Employment Agreements were executed with and attached as an exhibit to the PSA. Section 12.6 of the PSA specifically incorporated all attached exhibits into the Agreement.3 Section 10 of the Employment Agreements specifically incorporated the PSA as a part of the terms of employment.4 Section 12.14(a) of the PSA contains an arbitration provision which states: "Arbitration. Except as expressly provided otherwise in this Agreement, all disputes between the Parties arising under or related to this Agreement shall be solely and exclusively resolved by final and binding arbitration."

¶4 On March 5, 2009, High Sierra commenced a lawsuit in the trial court against Hull and Hare alleging: breach of the Employment Agreements, misappropriation of trade secrets and confidential information and unfair competition, unjust enrichment, misappropriation of assets and property, constructive trust, breach of fiduciary duty, fraud and deceit, tortious interference with contractual or business relations, tortious interference with prospective economic advantage, and negligence. High Sierra alleged that it discovered evidence in December 2008 that Appellants "[W]illfully breached their Employment Agreements, including the Non-Solicitation Provision, the Non-Disclosure Provision and the Non-Compete Provision." High Sierra's Petition also sought preliminary and permanent injunctive relief prohibiting Hull and/or Hare from conducting any further activities alleged in the Petition.

¶5 On April 27, 2009, prior to filing an Answer, Appellants filed their motion to compel arbitration and stay the district court proceedings. They contended Section 12.14 of the PSA required High Sierra's claims be submitted to arbitration. High Sierra filed its objection to Appellants' motion to compel arbitration claiming, "(1) [N]one of the causes of action asserted by High Sierra against the Appellants arise under or invoke the terms of the Purchase Agreement but rather solely arise under the terms of the Employment Agreements and (2) such claims are excluded from arbitration as provided in the Purchase Agreement." A hearing was held on May 14, 2009, after which the trial court overruled Appellants' motion to compel arbitration. The order memorializing that decision was filed on May 27, 2009. Appellants filed this appeal two days later.

¶6 The parties agree that Section 12.14 of the PSA contains a valid agreement to arbitrate disputes arising under the PSA. High Sierra contends, however, that the allegations contained in its Petition arise solely under the Employment Agreements and in no way implicate the PSA. High Sierra maintains that Section 9 of the Employment Agreements unquestionably shows the parties intended to except disputes or claims arising under the Employment Agreements from arbitration.5 Additionally, High Sierra contends that Section 6 of the Employment Agreements, which describes the remedies available to the parties, expresses the intent that disputes arising under the Employment Agreement be litigated, not arbitrated.6 Finally, High Sierra claims that Section 12.7 of the PSA contains an additional exception to the arbitration provision, which states:

Governing Law

High Sierra does not elaborate on how Section 12.7 of the PSA constitutes an additional exception to the arbitration provision.

¶7 Hull and Hare claim the PSA and the Employment Agreements are to be construed as one document, because each incorporates and references the other. Appellants also argue that some of the allegations contained in High Sierra's Petition directly reference and relate to the PSA. Appellants contend the PSA identifies only two exceptions to arbitration found in Sections 3.5(c) and 12.14(m) of the Agreement, which are inapplicable to the facts of this case.7

¶8 Appellants point out that Section 12.7 of the PSA and Sections 6 and 9 of the Employment Agreements do not mention arbitration or "expressly address the scope of the parties' agreement to arbitrate." Appellants suggest that, at best, Sections 6 and 9 of the Employment Agreements contain an implied exclusion from arbitration. Appellants argue that Section 12.7 dictates the proper jurisdiction for litigating disputes under the PSA in the event that Hull and Hare chose to waive their rights to arbitration.

¶9 An order denying a motion to compel arbitration is an interlocutory order appealable by right, which we review de novo. See

¶10 In seeking to compel arbitration, a party "must present a statement of the law and facts showing an enforceable agreement to arbitrate the issues presented by the petition." Rogers v. Dell Computer Corp.,

¶11 The contract must be construed to carry out the intent of the parties at the time the contract was made. Oxley v. General Atlantic Resources, Inc.,

¶12 Oklahoma law reflects this State's "strong presumption in favor of arbitration." Towe, Hester & Erwin, Inc. v. Kansas City Fire & Marine Ins. Co.,

¶13 "[C]ourts generally look with favor upon arbitration provisions as a shortcut to substantial justice with a minimum of court interference." Long v. DeGeer,

¶14 In the present case, this Court finds the PSA and the Employment Agreements clearly and unambiguously incorporate and reference each other; therefore, the Agreements must be viewed together to determine the intent of the parties.

¶15 Section 12.14 of the PSA contains a broad arbitration provision, which specifically allows for exceptions to arbitration as "expressly provided otherwise" in the Agreement. As mentioned above, the exceptions to Section 12.14 expressly set forth in the PSA are inapplicable to the issues in this case. Both Section 12.7 of the PSA and Section 9 of the Employment Agreements discuss the law governing the Agreements, set forth the proper jurisdiction for claims asserted under the Agreements, and contain no reference to arbitration. Section 6 of the Employment Agreements discusses the remedies available to a non-breaching party which are enforceable by the trial court and also makes no mention of arbitration.

¶16 In viewing Sections 12.7 and 12.14 of the PSA together with Sections 6 and 9 of the Employment Agreements, we find an ambiguity exists regarding the applicability of the arbitration provision. The Employment Agreements contain no reference to arbitration. The PSA itself contains conflicting provisions regarding whether "all disputes" arising under the PSA are subject to arbitration.

¶17 This Court agrees that if Section 12.7 of the PSA is read as an exception to the arbitration provision in Section 12.14, the arbitration clause would be rendered meaningless. Appellants and High Sierra clearly and unambiguously agreed to resolve certain disputes through arbitration. Oklahoma law commands that "where arbitration has been contracted for it constitutes a substantive and mandatory right." Voss, ¶5, 618 P.2d at 928.

¶18 Oklahoma law mandates that ambiguities are to be resolved in favor of arbitration, unless the court can say with "positive assurance" that the matter is not subject to arbitration. City of Muskogee, ¶8, 796 P.2d at 340. We cannot say with positive assurance that a dispute arising under the Employment Agreements is not subject to arbitration in accordance with Section 12.14 of the PSA. Therefore, we reverse the order of the trial court overruling Appellant's motion to compel arbitration and for stay of the action.

¶19 REVERSED AND REMANDED.

JOPLIN, P.J., and BELL, V.C.J., concur.

FOOTNOTES

1 The effective date for the purchase and sale of Hull's Oilfield Service, Inc., Briggett, Inc., and Briggett Transportation, Inc. was August 1, 2007, and the effective date for the transfer of the membership interests in National Coal County, LLC was September 1, 2007.

2 The purchase price was paid as follows: a cash payment in the amount of $40 million and common "units" of High Sierra in the amount of $2 million, both paid one-half to Hull and one-half to Hare.

3 Section 12.6 of the PSA specifically states: "This Agreement (including the Exhibits and Schedules hereto, and the documents and instruments executed and delivered in connection herewith) constitutes the entire agreement among the parties with respect to the subject matter hereof.... All Schedules and Exhibits attached to this Agreement are expressly made a part of, and incorporated by reference into, this Agreement."