BP America Production Company v. Chesapeake Exploration, LLC, et al

Defendants-Appellants Chesapeake Exploration, L.L.C., and Chesapeake Investments appealed a district court judgment awarding Plaintiff-Appellee BP America Production Company $22,265,302 plus interest, and a district court order compelling Chesapeake to pay $1,403,669.38 in attorneys' fees and disbursements. BP cross-appealed the district court order confirming an arbitration award. This dispute arose out of a purchase and sale agreement ("PSA") entered into by Chesapeake as seller and BP as purchaser of oil and gas properties for $1.75 billion. The PSA contained three arbitration provisions. After closing, the parties agreed on title defects. Less the aggregate threshold, the parties agreed BP was owed $81,234,556. At the same time, disputed title defects and benefits were submitted to title arbitration. BP sought approximately $46 million for disputed title defects, and Chesapeake sought approximately $22 million for disputed title benefits and "credits." While the title arbitration was pending, BP submitted a proposed final accounting statement reflecting the agreed title defects of approximately $80 million. Chesapeake responded with an exception report changing the $80 million to $58 million. When BP asked why, Chesapeake responded that it had applied a $22 million offset based on its pending claims in the title arbitration; Chesapeake did not dispute the $80 million in agreed title defects, but temporarily withheld the $22 million because it might recover that amount in title arbitration. Though the accounting arbitration ended, the title arbitration continued. The arbitration panel issued an award finding $11,526,434 in title defects (favoring BP), and $3,727,031 in title benefits (favoring Chesapeake). The arbitration panel noted that it made no determination of whether these amounts exceeded the aggregate threshold, or whether its ruling would actually cause any money to exchange hands. If the parties could not agree on the effect of the panel's ruling on the ultimate purchase price adjustment, they could submit their positions on that issue to further arbitration. Shortly thereafter, BP requested payment from Chesapeake. Because a $3 million in title benefits awarded to Chesapeake did not exceed the aggregate threshold, Chesapeake received no price adjustment to offset the $22 million it previously withheld. The parties filed competing motions to confirm in the district court. The court ultimately entered judgment in favor of BP for $22,265,302 plus interest. Chesapeake appealed that judgment. The district court later granted in part BP's motion for attorneys' fees and costs and awarded $1,403,669.38 against Chesapeake for fees and disbursements. Chesapeake appealed that judgment too. Upon review of the matter, the Tenth Circuit affirmed both awards in Chesapeake's direct appeals and dismissed BP's cross-appeal. View "BP America Production Company v. Chesapeake Exploration, LLC, et al" on Justia Law