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Allen v. W&T Offshore, Inc.

United States District Court, S.D. Texas, Galveston Division

July 1, 2019

CHANNING ALLEN Plaintiff.
v.
W&T OFFSHORE, INC.; W&T ENERGY VI, LLC; and STABIL DRILL SPECIALTIES, LLC Defendants.

          MEMORANDUM AND RECOMMENDATION [1]

          ANDREW M. EDISON UNITED STATES MAGISTRATE JUDGE

         Pending before the Court is Defendants W&T Offshore, Inc.'s and W&T Energy VI, LLC's Motion to Compel Arbitration and to Dismiss or Abate (“Motion to Compel Arbitration”). See Dkt. 24. This motion was referred to this Court by United States District Judge George C. Hanks, Jr. See Dkt. 30. After careful consideration of the Motion to Compel Arbitration, the response, the reply, and applicable law, the Court RECOMMENDS that the Motion to Compel Arbitration be GRANTED.

         BACKGROUND

         Plaintiff Channing Allen (“Allen”) worked for Nabors Offshore Corporation, a subsidiary of Nabors Industries, Inc. (collectively “Nabors”). On June 26, 2018, while working on a drilling platform owned and/or operated by W&T Offshore, Inc. and W&T Energy VI, LLC (collectively “W&T”), Allen alleges that he suffered severe and debilitating injuries. Allen filed this personal injury lawsuit against W&T and Stabil Drill Specialties, LLC. In response, W&T has sought to compel arbitration of the claims brought against it arising out of this workplace accident.

         Nabors has an arbitration agreement with its employees known as the Nabors Dispute Resolution Program (“DRP”). On August 8, 2017, Allen signed the DRP and agreed to submit all claims in relation to or arising out of his employment with Nabors to binding arbitration. See Dkt. 24-3. This includes “any personal injury allegedly incurred in or about a Company workplace or in the course and scope of an Employee's employment.” Dkt. 24-1 at 2.

         The DRP provides the exclusive mechanism for resolving disputes between the “Company and Company's present and former Employees.” Id. at 1. The DRP defines “Company” to include Nabors as well as any Electing Entity “to the extent provided in the Electing Entity's agreement to be bound by the [DRP].” Id. at 1. Electing Entity is broadly defined as “any legal entity that has agreed to be bound by the [DRP] as provided herein.” Id. at 2. In the Offshore Drilling Contract between Nabors and W&T, W&T agreed to abide by the DRP and become “an Electing Entity as to all Disputes between [W&T] and the present and former Employees and Applicants of Nabors pursuant to the Nabors Dispute Resolution Program as it currently exists.” Dkt. 24-2 at 22.

         LEGAL STANDARD

         The Federal Arbitration Act (“FAA”) provides that “[a] written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA permits a party that has entered an arbitration agreement to request an order compelling the parties to proceed with arbitration. Id. at § 4. If the court is “satisfied” that an action is subject to an enforceable arbitration provision, the court must “stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” Id. at § 3.

         “[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Janvey v. Alguire, 847 F.3d 231, 240 (5th Cir. 2017) (quoting United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960)). The Fifth Circuit employs a two-step analysis to determine whether a party can be compelled to arbitrate. See Webb v. Investacorp, Inc., 89 F.3d 252, 257-58 (5th Cir. 1996). The court must ask: (1) whether the parties agreed to arbitrate the dispute; and (2) whether the dispute falls within the scope of that arbitration agreement. See id. (collecting cases). If the party attempting to compel arbitration establishes the existence of a valid arbitration agreement, “a strong presumption favoring arbitration arises, and the burden shifts to the party opposing arbitration to raise an affirmative defense to the agreement's enforcement.” Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011) (citation omitted).

         In deciding whether the parties agreed to arbitrate the dispute, courts “should apply ordinary state-law principles that govern the formation of contracts.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (collecting cases). In the present case, the parties agree that Texas state law governs matters that are not addressed by the FAA.

         ANALYSIS

         The question before the Court is whether W&T, a non-signatory to the DRP, may compel Allen to arbitration pursuant to the DRP. W&T argues that it has a right to compel arbitration on a third-party beneficiary theory because the DRP applies to all Electing Entities, and W&T is an Electing Entity.

         Under the FAA, state contract law governs issues of validity, revocability, and enforceability of an arbitration agreement. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (2009). W&T may only enforce the arbitration agreement as a third-party beneficiary if it qualifies as such under Texas law. The Texas Supreme Court has held that a third party may enforce a contract only if the parties clearly intended to secure a benefit to that third party and the contracting parties entered into the contract directly for the third party's benefit. See Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011); Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002). In determining whether the parties to a contract intended to benefit a third-party, courts look to the entire agreement, giving effect to all of its provisions. See City of Houston v. Williams, 353 S.W.3d 128, 145 (Tex. 2011) (citation omitted). “Although a third party must be more than an incidental beneficiary, a beneficiary is not required to show that the parties executed the contract solely for its benefit.” In re Citgo Petroleum Corp., 248 S.W.3d 769, 776 (Tex. App.-Beaumont 2008, pet. denied) (citation omitted). A third-party beneficiary may be identified by class or category of persons in the arbitration agreement, all of whom may not be known to the parties at the time of execution. See ConocoPhillips Co. v. Graham, No. 01-11-00503-CV, 2012 WL 1059084, at *6 (Tex. App.-Houston [1st Dist.] Mar. 29, 2012, no pet.).

         W&T argues that this case is extremely similar to ConocoPhillips and In re Citgo, two Texas appellate cases upholding the enforceability of arbitration clauses involving non-signatory ...


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