Geological Assessment & Leasing v. O'Hara

• Citation: 780 S.E.2d 647
• Decision Date: 18 November 2015
• Docket Number: Nos. 14–1210,14–1286.,14–1211,s. 14–1210
• Court: Supreme Court of West Virginia
• Parties: GEOLOGICAL ASSESSMENT & LEASING, and William Capouillez, Defendants below, Petitioners v. Michael C. O'HARA and Dierdre J. O'Hara, Plaintiffs below, Respondents. and Geological Assessment & Leasing, and William Capouillez, Defendants below, Petitioners v. Charles R. Corbin, Jr. and Margaret L. Corbin, husband and wife; Margaret E. Corbin, widow; and James E. Corbin, by and through his guardian and conservator, Charles R. Corbin, Jr., Plaintiffs below, Respondents. and Geological Assessment & Leasing, and William Capouillez, Defendants below, Petitioners v. Beth Nelson Fish f/k/a Beth A. Martin Nelson, Michael Wayne Martin, and William Martin, Sr., Plaintiffs below, Respondents.

780 S.E.2d 647

GEOLOGICAL ASSESSMENT & LEASING, and William Capouillez, Defendants below, Petitioners

v.Michael C. O'HARA and Dierdre J. O'Hara, Plaintiffs below, Respondents.andGeological Assessment & Leasing, and William Capouillez, Defendants below, Petitioners

v.Charles R. Corbin, Jr. and Margaret L. Corbin, husband and wife; Margaret E. Corbin, widow; and James E. Corbin, by and through his guardian and conservator, Charles R. Corbin, Jr., Plaintiffs below, Respondents.andGeological Assessment & Leasing, and William Capouillez, Defendants below, Petitioners

v.Beth Nelson Fish f/k/a Beth A. Martin Nelson, Michael Wayne Martin, and William Martin, Sr., Plaintiffs below, Respondents.

Nos. 14–1210

14–1211

14–1286.

Supreme Court of Appeals of West Virginia.

Submitted Oct. 7, 2015.

Decided Nov. 18, 2015.

Robert C. James, Esq., Flaherty Sensabaugh Bonasso PLLC, Wheeling, WV, for Petitioners.

Jonathan E. Turak, Esq., Gold, Khourey & Turak, Eric Gordon, Esq., Berry, Kessler, Crutchfield, Taylor and Gordon, Moundsville, WV, Daniel J. Guida, Esq., Guida Law Offices, Weirton, WV, for Respondents.

Justice KETCHUM :

In these three consolidated appeals, we examine a circuit court's ruling that a plaintiff's claim that a defendant engaged in the unauthorized practice of law can never, as a matter of law, be referred to arbitration. This Court has previously held that any state-based rule that prohibits outright the arbitration of a particular type of claim is preempted by the Federal Arbitration Act. Accordingly, we reverse the circuit court's ruling.

I.FACTUAL AND PROCEDURAL BACKGROUND

Defendant William Capouillez is a geologist who runs a small company, defendant Geological Assessment & Leasing.¹ Mr. Capouillez is not a lawyer, and no one in his company is licensed as a lawyer. Beginning in 2001, Mr. Capouillez represented landowners in their lease negotiations with companies who sought to lease the owner's land to drill for oil and gas. Sometimes Mr. Capouillez would sign a representation contract with the landowner, sometimes not. The representation contract was for a period of six months; after that, Mr. Capouillez said he destroyed the contract. The record is clear that there was no arbitration provision in the representation contracts involving the landowners in this appeal.

It appears that Mr. Capouillez would seek out and gather a group of landowners in a locality together under his representation. He would then seek lease offers for that group from different oil and gas companies. It was Mr. Capouillez's experience that groups of landowners working together negotiated more favorable oil and gas leases than landowners working alone. Mr. Capouillez would then invite those landowners to a meeting with an oil and gas company representative to sign the lease.

No landowner paid Mr. Capouillez directly for his assistance in negotiating the lease. Instead, the lease negotiated by Mr. Capouillez would contain provisions splitting any bonuses, rentals and royalties paid by the oil and gas company between the landowner and Mr. Capouillez. The lease would require the oil and gas company to pay Mr. Capouillez directly.

Furthermore, the lease would specifically identify Mr. Capouillez (or his company) as a "consultant" for the landowner. The lease would also contain language specifically preventing the landowner and the oil and gas company from modifying the lease to Mr. Capouillez's detriment.² At the end of the lease, between signature lines designated for the lessor and for the lessee, Mr. Capouillez would sign on a line designated "Consultant."

This appeal involves three different leases negotiated by Mr. Capouillez between the plaintiff-landowners and an oil and gas company, Great Lakes Energy Partners, LLC (now known as Range Resources–Appalachia, LLC, and hereinafter called "Range Resources"). The first lease (in case 14–1210) was signed on June 6, 2006 by plaintiffs Michael C. O'Hara and Dierdre J. O'Hara, for a 44.94 acre parcel in Ohio County. The second lease (in case 14–1211) was signed on March 7, 2006, by Charles R. Corbin, Jr., Margaret L. Corbin, James E. Corbin, and Margaret E. Corbin, for a 201.78 acre parcel in Brooke County. The third lease (in case 14–1286) was signed on March 14, 2006, by Beth A. Martin Nelson (now known as Beth Nelson Fish), Michael W. Martin, and William D. Martin, and involved a 33.803 acre parcel in Ohio County. Mr. Capouillez signed each of the three leases as a "consultant" for the landowners.

Each of the three leases with Range Resources contains an arbitration clause. The clause provides that "[a]ny controversy or claim arising out of or relating to this Lease ... shall be ascertained and settled" by arbitration.³

Each of the three leases engendered a different lawsuit against Mr. Capouillez. Two lawsuits were filed in Ohio County, the third in Brooke County, but all three suits were overseen by the same circuit judge. In all of the cases, the plaintiffs alleged that the character of the services provided by Mr. Capouillez constituted the unauthorized practice of law. The plaintiffs generally alleged that Mr. Capouillez instructed and advised the plaintiffs regarding their rights and obligations under their lease; offered advice to the plaintiffs about their legal ownership interests and the meaning of contract language; prepared, drafted and developed documents for the plaintiffs that required legal knowledge beyond the skill of an ordinary layman; and suggested and gave advice on various lease provisions, many of which were not contained in the form lease used by Range Resources.

In their lawsuits, the plaintiffs sought a declaration that Mr. Capouillez's actions constituted the unauthorized practice of law in West Virginia.⁴ The plaintiffs asked the circuit court to hold Mr. Capouillez's representation contract for "consulting services" to be unenforceable. More importantly, the plaintiffs sought a declaration that all of the fees charged by Mr. Capouillez be found unfair, unreasonable, and against public policy. The plaintiffs demanded that the provisions in the leases allowing Mr. Capouillez to receive a portion of any bonuses, rentals or royalty payments to the plaintiffs be found void, and that any fees paid by Range Resources to Mr. Capouillez as a result of his unauthorized practice of law be disgorged and returned to the plaintiffs to deter similar future conduct.

Mr. Capouillez subsequently filed motions to dismiss the plaintiffs' lawsuits, and seeking to compel the plaintiffs to participate in arbitration pursuant to the arbitration clause in each lease. In their response to the motions, the plaintiffs directly challenged the arbitration clause as void upon existing state law grounds for the revocation of any contract, namely that the arbitration clause was contrary to public policy because it was procured through the unauthorized practice of law.⁵

The circuit court entered an identical order in all three suits. The circuit court determined that Mr. Capouillez was a signatory to each lease, and that it was the understanding and mutual objective of the parties that Mr. Capouillez would benefit from the lease. Accordingly, the circuit court concluded that Mr. Capouillez "can enforce the arbitration clause of the lease as a signatory to the lease."

The circuit court next determined that the plaintiffs' lawsuits sought to void bonus, rental and royalty payments to Mr. Capouillez that were guaranteed by the terms of each lease. Because the plaintiffs' claims implicated the terms of each lease, the court court found the plaintiffs' allegations fell within the substantive scope of the arbitration clause.

The circuit court noted it was "aware of its obligation to enforce a valid arbitration clause," but did not pass judgment on the validity of the arbitration provisions in the three leases. Instead, the circuit court determined that a claim alleging the unauthorized practice of law simply could not be submitted to arbitration. Because the judicial department of the government has the constitutional and inherent power to define, supervise, regulate and control the practice of law, the circuit court determined that nothing in an arbitration clause or the Federal Arbitration Act ("the FAA") could deprive a court of that power. See Syllabus Point 8, W.Va. State Bar v. Earley, 144 W.Va. 504, 109 S.E.2d 420 (1959) ("The judicial department of the government has the inherent power, independent of any statute, to inquire into the conduct of a natural person, a lay agency, or a corporation to determine whether he or it is usurping the function of an officer of a court and illegally engaging in the practice of law and to put an end to such unauthorized practice wherever it is found to exist.").

Mr. Capouillez now appeals the three orders of the circuit court.⁶ We consolidated the three appeals for joint argument and consideration.

II.STANDARD OF REVIEW

"An order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine." Syllabus Point 1, Credit Acceptance Corp. v. Front, 231 W.Va. 518, 745 S.E.2d 556 (2013). Because the circuit court's ruling denied Mr. Capouillez's motion to dismiss, we review the circuit court's order de novo. See Syllabus Point 4, Ewing v. Bd. of Educ. of Cnty. of Summers, 202 W.Va. 228, 503 S.E.2d 541 (1998) ("When a party, as part of an appeal from a final judgment, assigns as error a circuit court's denial of a motion to dismiss, the circuit court's disposition of the motion to dismiss will be reviewed de novo. ").

III.ANALYSIS

Mr. Capouillez appeals arguing that the circuit court erred when it refused to refer the plaintiffs' cases to arbitration. Because the parties do not dispute that their leases reflect transactions affecting interstate commerce, our discussion is controlled by the Federal Arbitration Act ("the FAA").

The primary substantive provision of the FAA is Section 2,⁷ which we have...