PITTSBURGH – An arbitration award over a long-running gas lease dispute between a Bradford County couple and an energy company will stand, a federal judge ruled last month.
In his seven-page memorandum issued Nov. 18, Senior U.S. District Court Judge David Stewart Cercone, on the bench in Pennsylvania's Western District, denied a complaint to vacate the arbitration award filed by plaintiffs Edward and Kathleen Ostroski against Chesapeake Appalachia and others.
"Clearly, there was no manifest disregard of either the lease, or the law, in the arbitrator's award," Cercone wrote in his memorandum. "Moreover, the court can find no support in the record for plaintiffs' contention that the arbitrator 'clearly strayed from interpretation and application of the oil and gas lease at issue and effectively dispensed her own brand of industrial justice.'"
The dispute between the Ostroskis and Chesapeake Appalachia stems from a September 2007 "paid-up oil and gas lease" between the parties for oil and gas rights to the couple's property in Bradford County, according to the background portion of Cercone's memorandum.
In December 2015, the couple filed a motion in U.S. District Court for Pennsylvania's Middle District for class certification over allegations that the natural gas company and its affiliates had inappropriately reduced royalty payments.
At the time, the Ostroskis claimed more than 2,000 property owners in the putative class had been cheated out of more than $5 million in royalty payments.
The following September, U.S. Middle District Court Judge John E. Jones III denied class certification in the couple's claim, directing the parties instead to submit their dispute to the American Arbitration Association for arbitration.
"Plaintiffs contend that they are entitled to royalties based upon the gas produced and sold to third-party buyers without deduction costs," Cercone said in his memorandum. "The arbitrator disagreed and entered a final award in favor of the Chesapeake defendants."
The Ostroskis' complaint to vacate the arbitration award soon followed over arguments the arbitrator had "clearly strayed from interpretation and application of the oil and gas lease at issue and effectively dispensed her own brand of industrial justice," the ruling states.
In his memorandum, Cercone said that his role, based on federal precedent, "is extremely narrow," limited to reviewing the merits of the arbitrator's decision and to correct factual and legal errors.
"After a comprehensive review of the lease, the award and the record in this case, this court finds more than adequate support in the lease for the rulings of the arbitrator," the memorandum said.