                            STATE OF WEST VIRGINIA

                          SUPREME COURT OF APPEALS



CABOT OIL & GAS CORPORATION and                                       FILED

CRANBERRY PIPELINE CORPORATION,                                   November 9, 2017

Defendants Below, Petitioners,                                         released at 3:00 p.m.
                                                                   EDYTHE NASH GAISER, CLERK

                                                                   SUPREME COURT OF APPEALS

vs. No. 16-0904 (Raleigh County No. 18-C-210-H)                         OF WEST VIRGINIA




BEAVER COAL COMPANY, LIMITED,
Plaintiff Below, Respondent,

and

BEAVER COAL COMPANY, LIMITED,
Plaintiff Below, Petitioner,

vs. No. 16-0905 (Raleigh County No. 18-C-210-H)

CABOT OIL & GAS CORPORATION and
CRANBERRY PIPELINE CORPORATION,
Defendants Below, Respondents.


                             MEMORANDUM DECISION

       Through these consolidated appeals, Cabot Oil & Gas Corporation and Cranberry
Pipeline Corporation, as well as Beaver Coal Corporation, seek a reversal, either in whole
or in part, of the circuit court’s August 25, 2016, order through which it adopted an
intervening law exception to the doctrine of res judicata, applied that exception to a prior
final and binding arbitration ruling, and referred the parties to arbitration on all claims
alleged in Beaver’s complaint with instructions to the arbitrators on the law to be applied
and the circuit court’s rulings to be followed. The parties are represented by counsel:
Timothy M. Miller and Callie E. Waers for Cabot Oil & Gas Corporation and Cranberry
Pipeline Corporation, and J. Thomas Lane, J. Mark Adkins, and Andrew C. Robey for
Beaver Coal Corporation.


                                             1

        Upon review of the parties’ arguments, the appendix record, the parties’ briefs and
the applicable law, we affirm, in part, and reverse, in part, the referral to arbitration; reverse
the application of an intervening law exception to res judicata; and reverse the directions to
the arbitrators concerning the law they are to apply and the rulings they are to follow. For
the reasons set forth herein, we find this case satisfies the requirements of Rule 21(c) and
(d) of the West Virginia Rules of Appellate Procedure and is properly disposed of through
this memorandum decision.

                          I. Factual and Procedural Background

        In 1929, Beaver Coal Corporation (“Beaver”) and Godfrey L. Cabot, Inc. (“Godfrey
Cabot”) entered into a lease agreement (“1929 Lease”) giving Godfrey Cabot the right to
mine, explore, extract, and remove oil and gas from approximately twelve thousand acres of
Beaver’s land located in Raleigh County, West Virginia. In a 1956 amendment to the 1929
Lease,1 Beaver granted Godfrey Cabot the right to use an additional 2,516 acres of Beaver’s
land for the operation of a gas storage field (“storage field”). Godfrey Cabot assigned its
rights under the 1929 Lease to Cabot Corporation in 1960. In a separate agreement entered
into in 1977, Beaver granted to Cabot Corporation a license to install, operate, and maintain
a gas pipeline across a certain portion of Beaver’s property (“1977 Agreement”).

        Cabot Corporation underwent an internal reorganization in 1982 and 1983, through
which it assigned rights to various wholly-owned subsidiaries: Cabot Oil & Gas
Corporation (“Cabot”) was assigned the rights under the 1929 Lease and Cranberry Pipeline
Corporation (“Cranberry”) assumed all pipeline operations on Beaver’s property, including
the leased pipeline and related facilities under the 1929 Lease, and the licensed pipeline
under the 1977 Agreement.2 In 1991, Beaver and Cabot executed a Ratification of the 1929
Lease. Cabot states that it has continuously operated and produced gas under the lease since
that time.




       1
         Through various amendments, agreements, and supplements to the 1929 Lease, the
total leased land now exceeds seventeen thousand acres.
       2
       Beaver states that subsequent to the arbitration that is discussed infra, it discovered
Cabot’s assignments to Cranberry that occurred in 1983, which it alleges were done without
Beaver’s express consent and agreement.

                                                2

      Critical to the instant dispute is a provision in the 1929 Lease that reflects the parties’
agreement to resolve all disputes arising under the lease through binding arbitration, as
follows:

       Should any question arise between the parties hereto as to the performance by
       the Lessee of any of the Articles of this lease, or of any covenant contained in
       any of said Articles, every such question shall be determined by arbitration in
       the manner provided for in this Article; and the Lessee hereby covenants with
       the Lessor to comply with and carry out promptly the decision or award of any
       and every arbitration so appointed. . . . . The decisions and awards of such
       arbitrators, or any two of them, shall be final and conclusive and binding upon
       the parties hereto, with no right of appeal[.]3

(Footnote added). There is a limited arbitration provision in the 1977 Agreement that solely
applies to differences of opinion concerning the current market stumpage price of trees cut
by Cabot; however, no other arbitration is provided for, nor does that agreement incorporate
by reference the 1929 Lease.

        Beaver states that it determined in the late 1990’s that Cabot was (1) deducting
post-production costs from royalties and (2) not paying royalties on the native gas produced
from wells in the storage field. The parties were unable to resolve these issues, which
prompted Beaver to institute an arbitration in 2001. In the arbitration, Beaver sought to
resolve whether Cabot had paid proper royalties; whether Cabot could deduct post­
production costs from the royalties; and whether Cabot owed royalties on the wells located
in the storage field.

       On July 27, 2004, the arbitration panel issued its award in which it considered then-
existing law, including Wellman v. Energy Resources, Inc., 210 W.Va. 200, 557 S.E.2d 254


       3
        The 1929 Lease involves the production and sale of natural gas in interstate
commerce and is between parties who are citizens of different states. Accordingly, the
Federal Arbitration Act (“FAA”), 9 United States Code §§ 1-16, applies. See CDS Family
Trust, LLC v. ICG, Inc., No. 13-0375, 2014 WL 184441, *3 n.8 (W.Va. Jan. 13, 2014)
(memorandum decision) (“The FAA is applicable to this case because: (1) there was an
agreement in writing providing for arbitration; and (2) the contract evidences a transaction
involving interstate commerce considering the parties’ different states of residence. Am.
Home Assur. Co. v. Vecco Concrete Const. Co., Inc., 629 F.2d 961, 963 (4th Cir.1980).”).

                                               3

(2001). The panel determined that there was no “controlling West Virginia decision” and
reached its decision on the deduction of post-production expenses from royalties by applying
“the language of the lease[] as written.” Although the panel concluded that it was the parties’
intent to allow for reasonable deductions from royalty for post-production costs, it further
found that the amount Cabot had deducted was not reasonable and ordered Cabot to pay as
additional royalty to Beaver “an amount equal to the difference between the gathering charge
Cabot actually used and the amount the arbitrators have concluded is a reasonable gathering
charge[.]” Since the 2004 arbitration award, Cabot states that it has issued royalty checks to
Beaver that were computed and paid in accordance with the arbitration panel’s award, and
that Beaver has accepted and cashed those royalty checks.

        Subsequent to the 2004 arbitration award, this Court issued Estate of Tawney v.
Columbia Natural Resources, Inc., 219 W.Va. 266, 633 S.E.2d 22 (2006).4 In Tawney, this
Court held that lease language providing that the royalty is to be calculated “‘at the well,’ ‘at
the wellhead,’ or similar language, or that the royalty is ‘an amount equal to 1/8 of the price,
net all costs beyond the wellhead,’” is ineffective to allow for any post-production costs to
be deducted from the royalty. Id. at 268, 633 S.E.2d at 24, syl. pt. 11, in part.

        On March 7, 2008, Beaver filed a complaint and petition for injunctive relief in the
circuit court against Cabot and Cranberry (collectively the “Cabot defendants,” except where
it is necessary to refer to these parties individually) seeking: (Count I) enforcement of the
2004 arbitration award for Cabot’s alleged failure to satisfy its obligations thereunder;5
(Count II) damages for Cabot’s alleged breaches of the 1929 Lease due to the underpayment
of royalties, the wrongful deduction of post-production costs under Tawney, and Cabot’s
assignment of its rights under the 1929 Lease to Cranberry without seeking or obtaining
Beaver’s consent; (Count III) damages for Cabot’s alleged breach of the 1977 Agreement by
assigning its pipeline rights under that agreement to Cranberry without seeking and obtaining

       4
        During the pendency of the parties’ prior arbitration, a class action was filed against
Cabot in the Circuit Court of Kanawha County seeking, inter alia, damages for deductions
of post-production costs from royalties that Cabot paid to oil and gas lessors in West
Virginia. Beaver states that it could not join the putative class because of its arbitration
agreement with Cabot. Beaver adds that while the class action was pending, Tawney was
issued, which led to a settlement in the pending class action with damages being paid to all
class members.
       5
         Beaver alleges that Cabot has failed to pay fully the refund ordered in the 2004
arbitration award.

                                               4

Beaver’s consent; (Count IV) declaratory judgment for forfeiture of the 1929 Lease; (Count
V) damages resulting from Cranberry’s allegedly intentional intrusion and continuous
trespass upon Beaver’s land; (Count VI) ejectment of Cranberry from Beaver’s land; and
(Count VII) declaratory judgment for forfeiture of the 1977 Agreement. The Cabot
defendants removed the action to federal court where they filed a motion to dismiss.

        In their motion to dismiss, the Cabot defendants asserted that Beaver’s claims under
the 1929 Lease were barred by the doctrine of res judicata given the prior arbitration award;
that those claims were also barred by the statute of limitations pertaining to seeking a
vacancy of an arbitration award; and that the trespass claims against Cranberry were barred
by the applicable two-year statute of limitations. Beaver filed a response in opposition to the
motion, after which the Cabot defendants filed a reply brief. In May 2008, Beaver filed a
motion seeking a remand of the action to state court. By order entered February 18, 2009,
the federal court remanded the action to the circuit court without ruling on the Cabot
defendants’ motion to dismiss.

       On November 16, 2009, the circuit court held a hearing on the motion to dismiss.
During this hearing, the Cabot defendants argued that all issues pertaining to the 1929 Lease
were subject to arbitration; that Beaver’s current claims either were or should have been
raised in the prior arbitration; that the time for an appeal of the arbitration panel’s 2004
award had passed; and that all issues subject to arbitration should be dismissed. Thereafter,
the parties submitted proposed findings of fact and conclusions of law to the circuit court.

        Through its order entered on July 13, 2010, the circuit court denied the motion to
dismiss. The court found that Tawney constituted an intervening change in the law, which
created an exception to the finality of the arbitration award and the doctrine of res judicata.
The circuit court concluded that given the “intervening change of law in the Tawney decision
. . . when viewing the facts in a light most favorable to Beaver, Beaver at this time states a
claim upon which relief may be granted against Cabot for underpayment of royalties.”

       On August 12, 2010, the Cabot defendants filed a motion for clarification or,
alternatively, for relief from the circuit court’s order denying their motion to dismiss. In this
motion, they stated that if the circuit court did not relieve them from the “operation and
effect” of the order denying their motion to dismiss, and “compel arbitration of [Beaver’s]
claims,” they intended to “seek relief from the Order by filing a petition for writ of




                                               5

prohibition with the Supreme Court of Appeals of West Virginia.”6 Although a hearing was
held on the motion on November 12, 2010, the circuit court never ruled on the motion.

       The Cabot defendants filed an answer to the complaint on December 2, 2010, in which
they asserted arbitration as an affirmative defense, stating that “[a]ll disputes between parties
which form the subject matter of the Complaint must be submitted to arbitration pursuant to
the Federal Arbitration Act, 9 U.S.C. §1, et seq., and the dispute resolution agreement
bargained for and agreed upon by the parties.” An agreed order was entered by the circuit
court on December 11, 2013, setting forth a briefing schedule for the parties to address
“certain outstanding legal issues . . . necessary . . . for this case to proceed in a timely
fashion.”7 The parties addressed these five issues—the Cabot defendants through a motion

       6
        The Cabot defendants further asserted in this motion that the circuit court had failed
to address the arbitrability of Beaver’s claims or the court’s jurisdiction over those claims.
       7
           These legal issues were set forth in the December 11, 2013, order, as follows:

       A. Whether Cabot’s 1983 assignment to its wholly-owned subsidiary,
       Cranberry Pipeline Corporation, constitutes a violation of the 1929 Lease or
       the 1977 License Agreement.

       B. Whether the 1929 Lease and/or the 1977 License Agreement have been
       forfeited or terminated due to the assignment, or, alternatively, whether
       Beaver’s remedies are limited to those compensable damages, if any, which
       may be allowed by law and proven at trial.

       C. Whether Beaver’s claims regarding the assignment are barred by any
       affirmative defenses asserted by Cabot, including ratification of the lease,
       statute of limitations, laches, estoppels, waiver.

       D. Whether the award of the arbitrators [in 2004] regarding royalty payments
       between the parties, operates as a res judicata or bar to the re-litigation of the
       issues decided by the Arbitration Panel, and whether the Court’s ruling in this
       regard is suitable for certification [] [to] the West Virginia Supreme Court of
       Appeals.

       E. If not barred by res judicata, whether monetary or volumetric deductions
       made by Cabot from Beaver’s royalties were improper under the terms of the

                                               6

for partial summary judgment and Beaver through a memorandum of law. An evidentiary
hearing was held before the circuit court on February 21, 2014, during which testimony was
given and oral arguments were presented in support of the parties’ respective positions.

        On March 27, 2014, the circuit court entered an agreed order directing the parties to
submit proposed orders on the Cabot defendants’ motion for partial summary judgment.
Although the parties submitted their respective proposed orders, a ruling was not
forthcoming.8 Instead, on August 25, 2016, the circuit court entered a final order through
which it removed the action from its docket and directed the parties to arbitration on all
claims, finding the referral was required by the arbitration provision in the 1929 Lease. In
this final order, the circuit court recognized an intervening law exception to the doctrine of
res judicata, which it found was applicable to Count II of Beaver’s complaint. As the circuit
court explained:

       The real question is whether the issues before this Court, and subject to
       arbitration, are precluded by res judicata. This Court is required to make that
       decision because, as previously found, the contract does not delegate that
       decision to the arbitrators. This Court has previously found that the issues
       raised by the plaintiff herein are not precluded by the doctrine of res judicata
       because of the limited exception to that doctrine and identified as a
       “subsequent change in law.” This case is not an appeal but is, in part, a direct
       demand for resolution of issues not previously addressed by the arbitrators.

The circuit court then addressed the 2004 arbitration award and found the arbitrators had
“used the Wellman case to support their conclusion that the defendant could in fact impose
certain costs incurred in transporting and marketing the gas produced from the plaintiff’s
property.” Having determined that Tawney represented “a significant shift in West Virginia


       1929 Lease and West Virginia law, and if so, the time period for which
       Beaver is entitled to damages.

(Footnote omitted).
       8
         In the absence of a ruling on the motion for partial summary judgment, the parties
sought a status conference with the circuit court, which was held on April 4, 2016. During
this status conference, the circuit court asked the parties, who had previously engaged in an
unsuccessful mediation, whether another mediation would be productive. The parties
informed the court that another mediation would be unproductive.

                                              7

Law [and] that the case must be brought before the arbitrators again[,]” the circuit court
ordered that all issues in Beaver’s complaint, as well as the five legal issues identified in the
court’s December 10, 2013, order, be referred to arbitration, and it instructed the arbitrators,
as follows:

       [T]he arbitrators will be required to recognize the existence of the change in
       law identified in the Tawny [sic] case and to the extent the arbitrators are
       required to determine the relative positions of the parties in this case, if Tawny
       [sic] is relevant to the issues to be resolved by the arbitrators then Tawny [sic]
       will trump Wellman. The issues raised in Counts I, III, IV, V, VI and VII are
       new issues and are subject to arbitration without the necessity of an analysis
       of the res judicata claims.

The circuit court concluded that “the arbitration herein ordered shall be conducted pursuant
to the requirements of [] [the 1929 Lease] and the rulings in this order.” These consolidated
appeals followed.
                                  II. Standard of Review

        The circuit court’s August 25, 2016, order removed this action from the court’s
docket and compelled the parties to arbitration. As this Court has previously held, we “will
preclude enforcement of a circuit court’s order compelling arbitration only after a de novo
review of the circuit court’s legal determinations leads to the inescapable conclusion that the
circuit court clearly erred, as a matter of law, in directing that a matter be arbitrated[.]” Syl.
Pt. 4, in part, McGraw v. Amer. Tobacco Co., 224 W.Va. 211, 681 S.E.2d 96 (2009). With
this standard in mind, we proceed to consider the parties’ arguments.9


       9
         The Cabot defendants contend that the circuit court’s order was a ruling on their
motion for partial summary judgment; therefore, this Court should apply the de novo
standard of review applicable to summary judgment rulings. Although the circuit court’s
order contains findings of fact and conclusions of law, there is no indication that the court
was ruling on the motion for partial summary judgment, nor does the order address all of the
issues upon which the Cabot defendants sought partial summary judgment. Moreover, the
circuit court’s order contains language indicating at least a partial reconsideration of its order
denying the Cabot defendants’ motion to dismiss:

       The essence of defendants’ “Motion to Dismiss” was that this Court had no
       jurisdiction because of the existence of an arbitration agreement. This Court

                                                8

                                         III. Discussion

        In the Cabot defendants’ appeal (No. 16-0904), they assign error in the circuit court’s
application of an exception to res judicata that has never before been recognized by this
Court and to the circuit court’s direction to the arbitrators on the issues to be decided, the
rulings to be followed, and the law to be applied. In Beaver’s appeal (No. 16-0905), it
assigns error in the circuit court’s referral of its claims to arbitration, arguing that arbitration
had been waived.10 The Cabot defendants and Beaver assert that the circuit court erred in
referring to arbitration those claims that arise under the 1977 Agreement, as that agreement
does not contain an arbitration provision. We address these issues below.

                            A. Whether arbitration was waived

        The parties agree that there is a valid, enforceable arbitration agreement in the 1929
Lease; however, Beaver argues that the Cabot defendants waived the right to arbitration.
Noting that this case has been pending in the circuit court for more than eight years without
the Cabot defendants forcing the arbitration issue, Beaver asserts that the Cabot defendants
acted inconsistently with the intent to seek arbitration and made only passing references to
arbitration during the proceedings below, all to Beaver’s prejudice. In response, the Cabot
defendants argue that the circuit court never ruled on the allegation of waiver and, therefore,
the issue is not properly before this Court. They add, however, that if this Court considers


       will ultimately agree in part and disagree in part. . . . To the extent the issues
       raised in “Plaintiff’s Complaint and Petition for Injunctive Relief” are subject
       to the arbitration agreement, this Court agrees with the defendants at least to
       the extent that this case must be stayed and the issues referred to arbitration.

Beaver urges application of the standard of review set forth in syllabus point two of Walker
v. West Virginia Ethics Commission, 201 W.Va. 108, 492 S.E.2d 167 (1997), which
provides that the final order and ultimate disposition are reviewed under an abuse of
discretion standard, factual findings under a clearly erroneous standard, and questions of law
are reviewed de novo.
       10
        Beaver also requests in its appellate brief that “this matter be referred to the
Business Court Division for further development.” Under West Virginia Trial Court Rule
29.06, a party may seek to refer a matter to the business court by filing a motion in this
Court. Such motions are ruled upon by the Chief Justice. W.Va. T.C.R. 29.06(c)(3). No
such motion has been filed with this Court.

                                                 9

Beaver’s waiver argument, they did not waive the right to arbitration, citing the numerous
times the issue of arbitration was raised below.

       A review of the record demonstrates that the issue of waiver was raised multiple times
below, including during hearings before the circuit court.11 Consequently, we are impelled
to view the circuit court’s referral of the parties to arbitration as necessarily being an implicit
determination by the circuit court that arbitration had not been waived. See Syl. Pt. 4,
Williams v. Tucker, 239 W.Va. 395, 801 S.E.2d 273 (2017) (“In the absence of an agreement
to the contrary, waiver of a contractual right to arbitration is a threshold question of
enforceability to be determined by a court, not an arbitrator.”).

       We recently addressed the issue of a waiver of the right to arbitration, holding that

              [t]he right to arbitration, like any other contract right, can be waived.
       To establish waiver of a contractual right to arbitrate, the party asserting
       waiver must show that the waiving party knew of the right to arbitrate and
       either expressly waived the right, or, based on the totality of the
       circumstances, acted inconsistently with the right to arbitrate through acts or
       language. There is no requirement that the party asserting waiver show
       prejudice or detrimental reliance.

Syl. Pt. 6, Parsons v. Halliburton Energy Serv. Inc., 237 W.Va. 138, 785 S.E.2d 844 (2016).
There is no indication either in the record or in the parties’ arguments that the Cabot
defendants expressly waived the right to arbitration; therefore, we look to the totality of the
circumstances. Id.

        The record reflects the Cabot defendants sought to enforce the arbitration clause of
the 1929 Lease, including through their arguments made in relation to their motion to
dismiss in which they asserted rights under the arbitration agreement and sought a “dismissal
of all claims that were previously brought or should have been brought in the final and
binding arbitration.” The Cabot defendants again raised arbitration in their motion for
clarification or relief from the denial of their motion to dismiss in which they sought, inter
alia, to compel arbitration. Arbitration was again raised during the hearing held on the


       11
         The circuit court stated in the order being appealed that Cabot had, “at appropriate
times and as part of motions, answers, and responses, argued that the existence of an
arbitration agreement between the parties is binding and arbitration is mandatory.”

                                                10

Cabot defendants’ motion for clarification or relief,12 and it was raised as an affirmative
defense in their answer to the complaint.

        Although Beaver has cited several cases regarding waiver in support of its position
that arbitration has been waived, we agree with the Cabot defendants that these cases are
readily distinguishable. Certainly, none involve a similar situation where “the party who
initially sought arbitration seeks to relitigate the issues it arbitrated[,]” as the Cabot
defendants argue. Instead, the Cabot defendants were compelled to seek enforcement of the
arbitration agreement in the 1929 Lease, which rendered the 2004 arbitration award final and
binding. Likewise, we are persuaded by the Cabot defendants’ argument that the facts of
this case “present a chilling scenario where . . . a defending party, who accepted the
bargained-for finality [of the prior arbitration], could be deemed to have waived all rights
under the agreement . . . by virtue of its actions in defending the claims in circuit court to
enforce the final arbitration[.]” While we do not discount Beaver’s concerns regarding the
passage of time in this matter and have considered the law they have cited in that regard, this
Court has previously held that before we will find there has been a waiver, “all of the
attendant facts, taken together, must amount to an intentional relinquishment of a known
right.” Id. at 142, 785 S.E.2d at 848, syl. pt. 2, in part. Our consideration of the totality of
the rather unique circumstances of this case, as well as the strong federal and state public
policy favoring arbitration,13 informs our decision that the Cabot defendants did not waive
arbitration.

                              B. The doctrine of res judicata

       The Cabot defendants argue that the 2004 arbitration award, which determined the
issue of how royalties are to be calculated under the 1929 Lease, was final and binding; that


       12
          As indicated above, the Cabot defendants stated in their motion for clarification or
relief that if the circuit court did not relieve them of the effect of the denial of their motion
to dismiss and compel arbitration, they would seek a writ of prohibition from this Court.
Because the circuit court never ruled on this motion, the Cabot defendants state that they
continued to comply with the circuit court’s scheduling order while awaiting a decision on
their motion.
       13
          See Amer. Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 95
(4th Cir. 1996) (“Because of the strong federal policy favoring arbitration, . . . we will not
lightly infer the circumstances constituting waiver.”)

                                               11

the doctrine of res judicata14 precluded Beaver’s current claim; and that the time for
challenging the arbitration award had long passed. While Beaver agrees that the doctrine
of res judicata applies to arbitration awards,15 it argues that the panel’s award was not
prospective; that the arbitration panel relied upon Wellman, 210 W.Va. 200, 557 S.E.2d 254,
in rendering its award;16 that the more recent decision of Tawney, 219 W.Va. 266, 633 S.E.2d
22, should be applied to the royalty claim asserted in Count II of its complaint; and that an


       14
         See Syl. Pt. 4, Blake v. Charleston Area Med. Ctr., Inc., 201 W.Va. 469, 498 S.E.2d
41 (1997) (“Before the prosecution of a lawsuit may be barred on the basis of res judicata,
three elements must be satisfied. First, there must have been a final adjudication on the
merits in the prior action by a court having jurisdiction of the proceedings. Second, the two
actions must involve either the same parties or persons in privity with those same parties.
Third, the cause of action identified for resolution in the subsequent proceeding either must
be identical to the cause of action determined in the prior action or must be such that it could
have been resolved, had it been presented, in the prior action.”).
       15
          See Boomer Coal & Coke Co. v. Osenton, 101 W.Va. 683, 693, 133 S.E. 381, 385
(1926) (internal citation omitted) (“The courts of this country have adhered with great
steadiness to the general rule that awards will not be set aside for errors of law or fact on the
part of the arbitrators. Their decision on matters of fact and law is conclusive, and all matters
in the award are thenceforth res judicata, on the theory that the matter has been adjudged by
a tribunal which the parties have agreed to make final, a tribunal of last resort for that
controversy.”).
       16
         Beaver argues that the arbitration panel applied Wellman and that Tawney represents
a change in the law that should overcome the res judicata effect of the 2004 arbitration
award. Critically, a review of the 2004 arbitration award reveals that it was not based upon
Wellman. While the panel discussed Wellman, as well as other cases, it clearly stated that
Wellman was “expressly limited to ‘proceeds’ leases, excluded ‘value’ leases from the
discussion and, even as to ‘proceeds’ leases, failed to resolve the issue of the deductibility
of ‘post-production’ expenses, at least with respect to ‘mouth of the well’ leases.” Because
the 1929 Lease is not a proceeds lease, the panel ultimately found there was no “controlling
West Virginia decision” and that it was reaching its decision on the deduction of post­
production expenses from royalties by applying “the language of the lease[] as written.”
Further, Wellman has never been reversed and continues to be the basis for the law in this
state on the deduction of post-production costs. See Leggett v. EQT Prod. Co., 239 W.Va.
264, __, 800 S.E.2d 850, 858 (2017) (“[I]t is Wellman which forms the foundation of the
current state of West Virginia’s law on deduction of post-production costs.”).

                                               12

intervening change in the law is an exception to the doctrine of res judicata. The circuit
court agreed with Beaver and applied an intervening law exception to res judicata to find
that the 2004 arbitration award regarding the calculation of royalty under the 1929 Lease
was not binding upon Beaver’s current royalty claims.

        Although Beaver has very recently represented to this Court, both in a written motion
and during oral argument, that it was withdrawing its royalty claim and now agrees that the
2004 arbitration award is binding upon it,17 we take this opportunity to emphasize that this
Court has never adopted an intervening law exception to res judicata. Indeed, we have long
recognized the importance of the finality of decisions. As we explained in Marguerite Coal
Co. v. Meadow River Lumber Co., 98 W.Va. 698, 127 S.E. 644 (1925), the doctrine of res
judicata “is founded upon two maxims of the law, one of which is that ‘a man should not be
twice vexed for the same cause,’ the other that ‘it is for the public good that there be an end
of litigation.’” Id. at 702, 127 S.E. at 646 (citation omitted). Espousing a similar view, the
United States Supreme Court explained that it

      has long recognized that “[p]ublic policy dictates that there be an end of
      litigation; that those who have contested an issue shall be bound by the result
      of the contest, and that matters once tried shall be considered forever settled
      as between the parties.” Baldwin v. Traveling Men’s Assn., 283 U.S. 522, 525
      (1931). We have stressed that “[the] doctrine of res judicata is not a mere
      matter of practice or procedure inherited from a more technical time than ours.
      It is a rule of fundamental and substantial justice, ‘of public policy and of
      private peace,’ which should be cordially regarded and enforced by the courts.
      . . .” Hart Steel Co. v. Railroad Supply Co., 244 U.S. 294, 299 (1917).
Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 401 (1981).

       Bearing in mind the policies underpinning res judicata, we also observe that the 1929
Lease is a twenty-page, bargained-for agreement between two commercially sophisticated
parties that contains an arbitration provision, which provides that the arbitrators’ decision
“shall be final and conclusive and binding upon the parties hereto, with no right of appeal.”


       17
         Because Beaver is withdrawing its underpayment of royalty claim, we need not
address the Cabot defendants’ argument that Beaver’s claim would require vacating the
2004 arbitration award, which is precluded by 9 United States Code § 10 (setting forth the
grounds for seeking to vacate arbitration award), and Beaver’s countervailing argument that
it did not seek to vacate or modify the 2004 arbitration award.

                                              13

(Emphasis added). Because the parties clearly and expressly agreed to the finality and
conclusiveness of the 2004 arbitration award, and because West Virginia has not recognized
an intervening law exception to res judicata, we reverse the circuit court’s order to the extent
it applied an intervening law exception to res judicata in this matter.

               C. The circuit court’s referral of all claims to arbitration

        In its August 25, 2016, order, the circuit court referred all of Beaver’s claims to
arbitration. It is clear, however, that all claims cannot be referred to arbitration. We agree
with the parties that the claims arising under the 1977 Agreement are not subject to
arbitration because there is no applicable arbitration provision in that agreement, nor does
it incorporate the 1929 Lease by reference. While it may seem counterintuitive to split
claims for resolution, as we previously explained, “[t]he Federal Arbitration Act, 9 U.S.C.
§ 2, requires that if a lawsuit presents multiple claims, some subject to an arbitration
agreement and some not, the former claims must be sent to arbitration—even if this will lead
to piecemeal litigation.” Syl. Pt. 9, in part, State ex rel. Johnson Controls, Inc. v. Tucker,
229 W.Va. 486, 729 S.E.2d 808 (2012).

        Bearing this legal premise in mind, we reverse the circuit court’s referral to arbitration
of those claims set forth in Beaver’s complaint that solely arise under the 1977 Agreement.
Those claims are Count III (breach of contract claim under the 1977 Agreement) and Count
VII (declaratory judgment for forfeiture of 1977 Agreement), as well as Counts V (trespass
against Cranberry) and VI (ejectment against Cranberry) to the extent those counts pertain
to Cranberry’s alleged wrongful operation of the licensed pipeline through Cabot’s allegedly
illegal assignment of the 1977 Agreement to Cranberry. Because Counts V and VI also
involve Cranberry’s alleged wrongful operation of the storage field and lease pipelines
through Cabot’s allegedly illegal assignment to Cranberry of certain rights under the 1929
Lease, those claims must be arbitrated in accordance with the arbitration provision in the
1929 Lease,18 and we affirm the circuit court’s referral to arbitration in that specific regard.19


       18
        The 1929 Lease provides that “[a]ll terms, provisions, conditions, limitations,
covenants, stipulations and agreements of this lease shall inure to the benefit of and be
binding upon the successors, assigns and lessees of the parties hereto, respectively.”
       19
         We recognize that this could lead to inconsistent results on Beaver’s ejectment and
trespass claims, but the absence of an applicable arbitration provision in the 1977 Agreement
compels this outcome.

                                               14

       Beaver’s complaint also contains claims that pertain solely to the 1929 Lease
Agreement, i.e., Count I (enforcement of the 2004 arbitration award), Count II (breach of
contract for underpayment of royalty),20 and Count IV (declaratory judgment for forfeiture
of the 1929 Lease for various lease violations). We affirm the circuit court’s referral of
those particular claims to arbitration.

                  D. The circuit court’s directions to the arbitration panel

       In its order referring the parties to arbitration, the circuit court stated that the
“arbitrators will be required to recognize the existence of the change in law identified in the
Tawny [sic] case and to the extent the arbitrators are required to determine the relative
positions of the parties in this case, if Tawny [sic] is relevant to the issues to be resolved by
the arbitrators then Tawny [sic] will trump Wellman.”21 The circuit court further stated that
“Counts I, III, IV, V, VI and VII are new issues and are subject to arbitration without the
necessity of an analysis of the res judicata claims” and that the “arbitration herein ordered
shall be conducted pursuant to the requirements of [] [the 1929 Lease] and the rulings in this
order.” The Cabot defendants argue that the circuit court exceeded the scope of its authority.
We agree.

        Through its pronouncements, the circuit court did precisely what we found to have
been error in State ex rel. TD Ameritrade, Inc. v. Kaufman, 225 W.Va. 250, 692 S.E.2d 293
(2010). In TD Ameritrade, the circuit court referred the parties to arbitration but also
reached conclusions of law, ordering the arbitrator to “‘follow the directives of this Court.’”
Id. at 253, 692 S.E.2d at 296. We explained that “the severability doctrine . . . permits trial
courts to address challenges to an arbitration clause but reserves to arbitrators challenges to
the contract as a whole.” Id. at 254, 692 S.E.2d at 297. After observing that the plaintiff
had “skirt[ed]” the issue of whether the “trial court [had] overstepped clearly-demarcated
boundaries by ruling on the merits of the controversy and directing the arbitrator to observe
those rulings,”22 we held that




       20
       As indicated above, Beaver has represented both in writing and during oral
argument that it will no longer pursue its royalty claim against Cabot.
       21
            See supra note 16.
       22
            T.D. Ameritrade, 225 W.Va. at 254, 692 S.E.2d at 297.

                                               15

               [w]hen a trial court is required to rule upon a motion to compel
       arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-307 (2006),
       the authority of the trial court is limited to determining the threshold issues of
       (1) whether a valid arbitration agreement exists between the parties; and (2)
       whether the claims averred by the plaintiff fall within the substantive scope
       of that arbitration agreement.

225 W.Va. at 251, 692 S.E.2d at 294, syl. pt. 2. We emphasized that “[t]he law is well-
settled ‘that, in deciding whether the parties have agreed to submit a particular grievance to
arbitration, a court is not to rule on the potential merits of the underlying claims.’” Id. at
253, 692 S.E.2d at 296 (quoting AT&T Techs., Inc. v. Commc’ns Workers, 475 U.S. 643,
649 (1986)). As in TD Ameritrade, we find that the circuit court’s “foray into matters
reserved for arbitral resolution was clearly improper.” 225 W.Va. at 255, 692 S.E.2d at 298.
Accordingly, we reverse that portion of the circuit court’s order that directs the arbitrators
on the law to be applied and the circuit court’s rulings to be followed.

                                       IV. Conclusion

        For the reasons set forth above, the circuit court’s August 25, 2016, order is affirmed,
in part, reversed, in part, and this case is remanded for further proceedings consistent with
this opinion. To the extent this Court has affirmed, in part, the circuit court’s referral to
arbitration, those particular claims are referred to arbitration.

                               Affirmed, in part, Reversed, in part, and Remanded, in part.

ISSUED: November 9, 2017

CONCURRED IN BY:

Chief Justice Allen H. Loughry II
Justice Robin Jean Davis
Justice Margaret L. Workman
Justice Menis E. Ketchum
Justice Elizabeth D. Walker




                                              16

