Free Motion to Stay - District Court of Colorado - Colorado

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 1 of 11

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Senior Judge Zita L. Weinshienk Civil Action No. 96-cv-2451-ZLW-MJW CO2 CLAIMS COALITION, et al., Plaintiff, v. SHELL OIL COMPANY, et al., Defendants. Civil Action No. 00-cv-1856-ZLW-MJW MARGARET ANN AINSWORTH, et al., Plaintiffs, v. SHELL OIL COMPANY, et al., Defendants. Civil Action No. 00-cv-1854-ZLW-MJW RUTTER & WILBANKS CORP., et al., Plaintiffs, v. SHELL OIL COMPANY, et al., Defendants. Civil Action No. 00-cv-1855-ZLW-MJW THOMAS E. WATSON, et al., Plaintiffs, v. SHELL OIL COMPANY, et al., Defendants.

DEFENDANTS' JOINT MOTION TO DENY, TRANSFER, OR STAY CO2 COMMITTEE, INC.'S MOTION TO VACATE ARBITRATION AWARD

Defendants file this Joint Motion and respectfully move the Court to deny the Motion to Vacate Arbitration Award ("Motion") submitted by CO2 Committee, Inc. (the "Committee") or, alternatively, to transfer the Committee's Motion to the New Mexico federal district court or stay consideration of the Committee's Motion pursuant to the Settlement Agreement and the "first-tofile" rule applied in the Tenth Circuit.

DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 2 of 11

FACTUAL BACKGROUND In October 1996, CO2 Claims Coalition, LLC filed an action in this Court asserting claims related to the alleged underpayment of royalty and revenue payments on carbon dioxide ("CO2") produced from the McElmo Dome Unit and transported on the Cortez pipeline through New Mexico to oil fields in west Texas. In September 2000, three separate putative class action cases were filed in this Court, each of which made substantially the same claims. These four actions are the above-styled cases. On September 24, 2001, the parties in these cases entered into a written Settlement Agreement. Exhibit 2. This Court approved the Settlement Agreement and entered final

judgments in each of the cases on May 6, 2002. Exhibit 1, Final Judgments. According to the Court's docket sheet, each of the cases was administratively closed on that date. In the Settlement Agreement, the parties agreed that certain disputes arising out of the Settlement Agreement, including those concerning the future relief provisions, would be submitted to binding arbitration. See Exhibit 2, Settlement Agreement § 14.2. The parties expressly agreed that "judgment upon the [arbitration] award may be entered in any Court having jurisdiction." Id. at § 14.3. In November 2005, the Committee submitted a demand for arbitration and arbitration complaint asserting that Defendants had not complied with the future relief provisions of the Settlement Agreement concerning the calculation of the Cortez pipeline transportation tariff and post-settlement royalty and revenue payments. Defendants timely responded. Pursuant to the Settlement Agreement (§ 14.3), each side selected its party-appointed arbitrator. The two partyappointed arbitrators then jointly appointed Kenneth L. Harrigan of Albuquerque, New Mexico to serve as the chairperson of the Panel. All parties ­ including the Committee ­ agreed to conduct the arbitration proceedings in New Mexico. The Panel held preliminary hearings, issued a scheduling order, received the

-2DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 3 of 11

parties' briefs and other submissions, and made certain pre-hearing findings. In June 2006, the Panel conducted a week-long arbitration hearing in Albuquerque and received live testimony from fact and expert witnesses along with numerous exhibits. On August 7, 2006, the Panel unanimously concluded that Defendants had not breached the Settlement Agreement and denied the Committee's request for relief. See Award (attached to Committee's Motion) at 34. Because the arbitration proceedings occurred exclusively in New Mexico and the Panel's award was issued in New Mexico, and pursuant to the Settlement Agreement and the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., certain Defendants filed an application to confirm the arbitration decision in the United States District Court for the District of New Mexico on October 25, 2006. Exhibit 3, Application for Order Confirming Arbitration Award without exhibits ("Application to Confirm"). On November 6, 2006, almost two weeks after Defendants filed the Application to Confirm in New Mexico, the Committee (which has never been a party in any of the abovestyled cases) filed its Motion in this Court.1 The issue raised in the Committee's Motion is not part of the above-styled cases or the creation of the Settlement Agreement; rather, the issue is whether the New Mexico arbitration decision should be confirmed or is so defective that it should be vacated. The Committee seeks to have this Court throw out the Panel's unanimous decision and "order that a new arbitration panel be selected by the parties as set forth in the Settlement Agreement. . . ." Committee's Motion at 23. Despite having been served with the Application to Confirm prior to filing its Motion, the Committee failed to mention the first-filed New Mexico action in its Motion. Not surprisingly, Defendants' Application to Confirm in New Mexico addresses the same key issue as the
The Committee was created as part of the settlement to receive the annual reports produced by Defendants and to monitor Defendants' performance of the future relief provisions. See Settlement Agreement § 13.24; Committee's Motion at 2 n.1. Although the Committee was formed as a result of the settlement, it is not, and has never been, a party in any of the above-styled cases. While the caption on the Committee's Motion identifies the Committee as the named plaintiff in each of the above-styled cases, the Committee has never been formally substituted in as a named plaintiff or otherwise added as a party. These issues are further addressed in subsection C below.
1

-3DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 4 of 11

Committee's Motion in this Court, namely, whether the Panel's award should be confirmed or vacated. The issue of whether the New Mexico court or this Court should decide whether to confirm or vacate the arbitration award has already been briefed in the New Mexico court. As discussed below, under the "first-to-file" rule followed by the Tenth Circuit, the New Mexico federal district court is the proper court to determine which court should decide this matter. This Court should deny the Committee's Motion or, alternatively, stay consideration of the Motion or transfer it to the New Mexico court for consideration in connection with the first-filed action. ARGUMENT A. The Settlement Agreement and the final judgments in the above-styled cases provide that any court of competent jurisdiction can enter judgment on the arbitration award.

Although the parties could have agreed that any arbitration award must be reviewed or entered as a judgment by this Court, they did not do so. Instead, the Settlement Agreement provides that any court of competent jurisdiction can enter judgment upon the arbitration award: ...The decision of any two of the three arbitrators shall be binding on the parties. In all other respects, arbitration shall be conducted in accordance with and pursuant to the Commercial Rules of the American Arbitration Association and judgment upon the award may be entered in any court having jurisdiction thereof. Exhibit 2, Settlement Agreement at § 14.3 (emphasis added). The Commercial Rules of the American Arbitration Association, incorporated in the arbitration provision as shown above, further provide that an arbitration award may be entered in any federal or state court of competent jurisdiction. AAA Rules of Commercial Arbitration, R-48; see also P&P Indus., Inc. v. Sutter Corp., 179 F.3d 861, 867 (10th Cir. 1999).2 Moreover, Section 9 of the FAA provides that where, as here, "no court is specified in the agreement of the parties" for confirming an arbitration award, then "such application may be made to the United States court in and for the

The New Mexico court is a court of proper jurisdiction. Diversity of citizenship exists between Defendants, which are Delaware and Texas entities with principal places of business in Texas, and the Committee, a Colorado corporation with its principal place of business in Oklahoma. Thus, both the amount in controversy and diversity of citizenship requirements are satisfied. See 28 U.S.C. § 1332.

2

-4DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 5 of 11

district within which such award was made." 9 U.S.C. § 9 (emphasis added); see also id. at § 10 (utilizing the same statutory language to describe a proper court for challenging an arbitration award). Based on the clear language of the Settlement Agreement that allows any court of proper jurisdiction to enter judgment upon the arbitration award, and because the arbitration proceedings took place exclusively in New Mexico and the award was issued in New Mexico, Defendants properly filed their Application to Confirm in the New Mexico court.3 Despite recognizing that venue is proper under the FAA in the district where an arbitration award is made (Committee's Motion at 10), the Committee argues that this Court, by way of its reservation of authority to "implement" and "enforce" the Settlement Agreement, has continuing jurisdiction to review the Panel's arbitration decision. See Committee's Motion at 4 & 10.4 Contrary to the Committee's position, however, the scope of this Court's continuing

jurisdiction relating to the Settlement Agreement was specifically limited, and expressly excluded disputes such as the present one which were subject to binding arbitration: Without affecting the finality of this judgment in any way and subject to the arbitration provisions of the Settlement Agreement, this Court hereby retains continuing jurisdiction over (a) implementation of this Settlement and any award or distribution of the Settlement Fund, including interest earned thereon, (b) allocation and disposition of amounts of and from the Settlement Fund, and (c) all Settling Parties for the purpose of enforcing and administering the Settlement Agreement and this final judgment.
The Committee has raised a technical, procedural issue in the New Mexico federal district court as to whether it has been properly served with the Defendants' Application to Confirm. Defendants have responded to this point in the New Mexico court and have demonstrated that service in New Mexico was proper. However, even assuming that the Committee has not yet been properly served, the Tenth Circuit has held that a delay in service of process is irrelevant under the "first-to-file" rule. See Product Eng. & Mfg., Inc. v. Barnes, 424 F.2d 42, 44 (10th Cir. 1970) ("The action which is first filed takes precedence over a later filed action, even though service of process was effected first in the later action."); S&B Engineers & Constructors, Ltd. v. Alstrom Power, Inc., 2004 WL 2360034 (N.D. Tex. 2004) (same). The Committee implies that venue for its Motion is "more proper" in this Court given the Court's long history with these cases. However, that is not what the parties agreed to in the Settlement Agreement. Additionally, the issue raised in the Committee's Motion is not whether Defendants complied with the future relief provisions of the Settlement Agreement (which issues are reserved for an arbitration panel); but rather, the issue is whether the arbitration award should be confirmed or is so defective that it should be vacated. See Eastman Medical Prods., Inc. v. E.R. squibb & Sons, 199 F. Supp. 2d 590, 59697 (N.D. Tex. 2002). Thus, contrary to the Committee's assertions, virtually all of the events giving rise to the relevant claims occurred in New Mexico where all of the arbitration proceedings took place and from which the award was issued.
4 3

-5DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 6 of 11

Exhibit 1, Final Judgments at 2 (emphasis added). The arbitration provision set forth in Section 14 of the Settlement Agreement provides that any court having jurisdiction can enter judgment on an arbitration award. Therefore, this Court does not have exclusive jurisdiction to review the Panel's arbitration decision, nor does it have continuing jurisdiction to do so under the Final Judgments.5 B. As the first court to obtain jurisdiction of the parties and issues relating to the arbitration award, the New Mexico court must determine which court should decide whether the arbitration decision should be confirmed or vacated and whether the Committee's later-filed Motion should be denied, transferred and consolidated, or stayed.

Like most circuits, the Tenth Circuit follows the "first-to-file" rule, which is based on principles of comity, self-restraint, and the efficient use of judicial resources. See O'Hare Int'l Bank v. Lambert, 459 F.2d 328, 331-32 (10th Cir. 1972) (finding that a federal district court in Oklahoma abused its discretion by not granting a motion to stay the proceedings until the first suit had been determined by a federal district court in Illinois); Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817-820 (1976). "It is well established in this Circuit that where the jurisdiction of a federal district court has first attached, that right cannot be arrested or taken away by proceedings in another federal district court. . . . `The rule is that the first federal district court which obtains jurisdiction of the parties and issues should have priority and the second court should decline consideration of the action until the proceedings before the first court are terminated.'" O'Hare Int'l Bank, 459 F.2d at 331 (citations omitted; emphasis added). In fact, whether the second case should proceed is an issue for the first court's consideration. Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161, 1163-64 (10th Cir. 1982) ("the court which first obtains jurisdiction should be allowed to first decide issues of venue";

As further discussed in subsection C below, this Court's continuing jurisdiction related primarily to actions concerning the administration of the settlement and the distribution of the settlement fund, all of which were finally completed on or before September 8, 2006 ­ almost two months before the Committee's Motion was filed in the above-styled cases. See Exhibit 4, Notice of Completion at 4.

5

-6DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 7 of 11

district court in New Mexico erred by considering venue and issuing a preliminary injunction when a related action was filed three days earlier in Texas); Sutter Corp. v. P&P Indus., Inc., 125 F.3d 914, 920 (5th Cir. 1997) ("the first to file rule not only determines which court may decide the merits of substantially similar cases, but also establishes which court may decide whether the second suit filed must be dismissed, stayed or transferred and consolidated"). The "first-to-file" rule applies to competing actions to confirm or vacate arbitration awards. See, e.g., Cortez Byrd Chips, Inc. v. Harbert Constr. Co., 529 U.S. 193, 198 (2000) (if petitioner's "motion to vacate or modify [the arbitration award] was properly filed in Mississippi, . . . under principles of deference to the court of first filing the Alabama court should have considered staying its hand"); P&P Indus., 179 F.3d at 870 n.6 (often "the `first to file rule' will play a role in deciding which court, of the many that have power to confirm the [arbitration] award, should in fact do so"; citing with approval Sutter Corp., 125 F.3d at 920). The court's holding in Sutter is instructive. In Sutter, P&P filed a motion to vacate an arbitration award in federal district court in Oklahoma. Sometime later, Sutter filed a motion seeking to confirm the same arbitration award in federal district court in Texas. 125 F.3d at 916.6 The district court in Texas denied P&P's motion to dismiss the action, transfer it to the district court in Oklahoma, or stay the confirmation proceedings. Id. at 917. The court of appeals found that "[t]here is no doubt that substantial overlap exists between the Texas and Oklahoma actions" as they both pertain to the same arbitration award. Id. at 920. The court held that "the first to file rule not only determines which court may decide the merits of substantially similar cases, but also establishes which court may decide whether the second suit filed must be dismissed, stayed or transferred and consolidated." Id. (emphasis added). Accordingly, the court of appeals determined that the
The Sutter opinion mistakenly states that Sutter filed its motion to confirm the award in the Texas court on August 11, 1996. It is clear from the court's recitation of the facts that Sutter's motion was filed between April 4, 1996, when P&P filed its motion to vacate the arbitration award in the Oklahoma court, and May 6, 1996, when P&P filed a motion to dismiss, transfer, or stay Sutter's Texas action. See Sutter, 125 F.3d at 916.
6

-7DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 8 of 11

Texas court had abused its discretion and should have transferred the matter to Oklahoma. Id.; see also S&B Engineers, 2004 WL 2360034 at *5 (after the federal district court in Virginia stayed a later filed motion to confirm an arbitration award, the federal court in Texas where an action to vacate the arbitration award had been first filed held that the Virginia action would be transferred to Texas and consolidated with the Texas action). The facts of this case are similar to those in Sutter and require a similar outcome. Here, it is undisputed that Defendants filed their Application to Confirm in the New Mexico court on October 25, 2006, twelve days before the Committee filed its Motion in this Court. Thus, the New Mexico court was the first one to obtain "jurisdiction of the parties and issues" relating to the arbitration award. O'Hare Int'l Bank, 459 F.2d at 331. Just as the motion to confirm and the motion to vacate in Sutter presented identical issues, there can be no doubt that the Application to Confirm filed in New Mexico and the Committee's Motion here raise the same issues. Like the district court in Oklahoma, where P&P's post-arbitration motion was first filed, the district court in New Mexico should determine (a) which court should decide the merits of this case, and (b) whether the Committee's Motion should be denied, transferred and consolidated, or stayed. P&P Indus., 179 F.3d at 870 n.6; Sutter, 125 F.3d at 920; Hospah Coal Co., 673 F.2d at 1164. Accordingly, the Committee's Motion should be denied or, alternatively, transferred to the New Mexico court or stayed. C. The Committee's Motion was not properly filed and should be denied.

The Committee's filing of its Motion in the above-styled cases is procedurally incorrect and should be denied. First, on May 6, 2002, the Court dismissed the above-styled actions with prejudice, entered final judgments, and administratively closed the cases. See Exhibit 1, Final Judgments at 2, 8. Largely because of the need for administration and disbursement of the settlement fund, this Court retained continuing, but limited, jurisdiction over those matters. Significantly, on September 8, 2006 ­ a month after the arbitration award was issued, but almost two months before the Committee's Motion was filed ­ counsel for plaintiffs and the -8DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 9 of 11

Committee in the underlying arbitration, along with the third-party settlement administrator, informed this Court that all matters that were the subject of the Court's continuing jurisdiction had been completed: The undersigned hereby give notice to the Court that the Settlement in these cases has been fully administered, that all Orders of the Court have been complied with, that all funds have been distributed as required by Orders of the Court, that all other actions necessary to be taken to complete administration of the Settlement have occurred, . . . that there are no other duties or actions, to the knowledge of the undersigned, which require performance, and that no claims have been asserted by any person against any of the undersigned in connection with the administration of the Settlement. Exhibit 4, Notice of Completion at 4. Thus, because the above-styled cases have been closed and the Court did not retain continuing jurisdiction in those cases to review subsequent arbitration awards, the Committee was required to file a separate action in this Court in order to seek review of the Panel's arbitration decision. Moreover, as a non-party, the Committee lacks standing to file its Motion in the abovestyled cases. A person who is not a party to the action may not file a motion in the proceedings, even on behalf of one of the parties. Yazdchi v. American Honda Fin. Corp., No. 3:05-CV-0737L, slip. op. at 3, 2006 WL 2453495 (N.D. Tex. Aug. 23, 2006). Throughout its Motion, the Committee refers to itself as the "plaintiff" in the above-styled cases. The Committee even creatively altered the captions of these cases on its Motion by deleting the actual plaintiffs and inserting itself. Compare Motion to Vacate at 1 with Exhibit 4, Notice of Completion at 1.

However, although the creation of the Committee was approved by this Court, the Committee itself has never sought to join the above-styled cases and has never been added as a party. CONCLUSION The Court should deny the Committee's Motion because it was filed by a non-party without standing in these already closed cases. However, even if the Committee had properly brought its Motion as a separate action in this Court, the first-to-file rule requires that the Committee's Motion be transferred to the first-filed action in New Mexico or that consideration of

-9DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 10 of 11

it be stayed in this Court. For all of the foregoing reasons, Defendants respectfully move the Court to deny the Committee's Motion or, in the alternative, transfer or stay the Committee's Motion in favor of the first-filed New Mexico action.7 Dated: November 29, 2006. Respectfully submitted, s/ Matthew J. Salzman Kent Sullivan Matthew J. Salzman Nicole M. Graham Stinson Morrison Hecker LLP 1201 Walnut Kansas City, MO 64106-2150 Telephone: (816) 842-8600 Facsimile: (816) 691-3495 Attorneys for Cortez Pipeline Company

s/ Mark Rodriguez Andrew W. McCollam III Mark Rodriguez Vinson & Elkins LLP 2300 First City Tower 1001 Fannin Street Houston, TX 77002-6760 Telephone: (713) 758-1004 Facsimile: (713) 758-2346 John F. Shepherd Holland & Hart L.L.P. 555-17th Street, Suite 3200 Denver, CO 80202 Telephone: (303) 295-8309 Facsimile: (303) 713-6296 Attorneys for the Shell and Kinder Morgan Defendants

Defendants respectfully submit that this motion must be decided prior to the Committee's Motion and, to the extent necessary, hereby move for and request additional time to file a substantive response to the Committee's Motion explaining their position as to why the award should not be vacated, but rather should be confirmed and entered as a judgment (i.e., the same issues pending in the New Mexico action).

7

-10DB02/767232 0008/7353169.2

Case 1:00-cv-01856-ZLW-MJW

Document 277

Filed 11/29/2006

Page 11 of 11

s/ Brian G. Eberle Shannon H. Ratliff Ratliff Law Firm, PLLC 600 Congress Avenue, Suite 3100 Austin, TX 78701 Telephone: (512) 493-9600 Facsimile: (512) 493-9625 Brian G. Eberle Sherman & Howard, LLC 633 17th Street, Suite 3000 Denver, CO 80202 Telephone: (303) 297-2900 Facsimile: (303) 298-0940 Attorneys for Mobil Producing Texas & New Mexico, Inc.

CERTIFICATE OF SERVICE I hereby certify that on this 29th day of November, 2006, the foregoing document, and all attachments and exhibits thereto, were served via the electronic filing system and by U.S. First Class Mail on the following: Michael J. Heaphy, Esq. Michael J. Heaphy, P.C. P.O. Box 1490 Vail, CO 81658 Attorney for CO2 Committee, Inc.

/s Donna Baros Donna Baros

-11DB02/767232 0008/7353169.2