United Offshore Co. v. Southern Deepwater Pipeline Co.

• Citation: 899 F.2d 405
• Decision Date: 30 April 1990
• Docket Number: No. 89-4461,89-4461
• Parties: UNITED OFFSHORE COMPANY, Plaintiff-Appellee, v. SOUTHERN DEEPWATER PIPELINE COMPANY, Defendant-Appellant. Summary Calendar.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 405

899 F.2d 405

UNITED OFFSHORE COMPANY, Plaintiff-Appellee, v. SOUTHERN DEEPWATER PIPELINE COMPANY, Defendant-Appellant.

No. 89-4461

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

April 30, 1990.

John M. Wilson, Liskow & Lewis, George J. Domas, Robert L. Theriot, New Orleans, La., for defendant-appellant.

Ray A. Barlow, Scott C. Sinclair, Dana P. Karam, Hargrove, Ramey, Guyton & Barlow, Shreveport, La., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before GEE, WILLIAMS, and DUHE, Circuit Judges.

DUHE, Circuit Judge.

FACTS AND PROCEEDINGS BELOW

United Offshore Company sued Southern Deepwater Pipeline Company in state court to enjoin an arbitration proceeding commenced by Southern Deepwater. Southern Deepwater removed the suit claiming jurisdiction under the Outer Continental Shelf Lands Act, 43 U.S.C. Sec. 1349(b)(1), and 28 U.S.C. Sec. 1331. The district court denied Southern Deepwater's motion to compel arbitration and granted a preliminary injunction prohibiting Southern Deepwater from proceeding with arbitration. ¹ Southern Deepwater now seeks to dissolve the injunction and to compel arbitration via an interlocutory appeal taken pursuant to 9 U.S.C. Sec. 15.

United Offshore and Southern Deepwater are equal partners in Sea Robin Pipeline Company. Sea Robin operates a natural gas pipeline which transports gas from the outer continental shelf to the coast of Louisiana for delivery into interstate gas markets. The joint venture agreement provides for a management committee and an operator. The committee exercises general oversight whereas the operator is responsible for running the operation. The management committee consists of eight members: four are appointed by United Offshore and four by Southern Deepwater. The operator was appointed by United Offshore but Southern Deepwater reserved the right to have United Offshore tender its resignation to the management committee.

The dispute between the two partners arose when Southern Deepwater sought to exercise its right to remove Sea Robin's operator. The operator tendered its resignation but conditioned resignation upon acceptance by the management committee and the appointment of a new operator. The management committee became hopelessly deadlocked ² and Southern Deepwater sought to have the matter resolved by arbitration. United Offshore, on the other hand, wants to litigate.

The issue before this Court, therefore, is whether this dispute should be resolved in an arbitral or in a judicial forum. This issue is, of course, merely the initial skirmish in a larger dispute. Before the merits of this clash may be reached, we must first deal with two threshold issues: jurisdiction and the standard of review.

JURISDICTION

It is black letter law that we may exercise jurisdiction only if there is both (1) original subject matter jurisdiction and (2) appellate jurisdiction.

(1) Subject Matter Jurisdiction

The Federal Arbitration Act (FAA), 9 U.S.C. Sec. 1 et seq., "does not create any independent federal-subject matter jurisdiction." Southland Corp. v. Keating, 465 U.S. 1, 15 n. 9, 104 S.Ct. 852, 861 n. 9, 79 L.Ed.2d 1 (1984). See also Mesa Oper. Ltd. Part. v. Louisiana Intrastate Gas, 797 F.2d 238, 240 (5th Cir.1986). The FAA simply provides that courts must decide whether a particular dispute is subject to arbitration and that this issue is governed by federal law in contracts involving interstate commerce. See AT & T Technologies, Inc. v. Communication Workers, 475 U.S. 643, 648, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986) and Mesa Oper., 797 F.2d at 243-44. Thus, we must look elsewhere for a source of federal jurisdiction.

It is clear that the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. Sec. 1349(b)(1), provides jurisdiction over the present dispute. Section 1349(b)(1), provides jurisdiction over "cases and controversies

                arising out of, or in connection with any operation conducted on the outer continental shelf which involves exploration, development, or production of ... minerals."    OCSLA defines production to include the "transfer of minerals to shore."    43 U.S.C. Sec. 1331(m).  The present dispute is one step removed from the actual transfer of minerals to shore since it involves a contractual dispute over the control of an entity which operates a gas pipeline.  In Amoco Production Co. v. Sea Robin Pipeline Co., 844 F.2d 1202, 1210 (5th Cir.1988) we noted that the "efficient exploitation of the mineral of the outer continental shelf, owned exclusively by the United States ..., was at least a primary reason for OCSLA."    We reasoned that a take or pay contract fell within Sec. 1349's jurisdictional grant because the resolution of the dispute would affect the exploitation of minerals on the outer continental shelf.  Since the present dispute has a similar nexus with production, it too falls within OCSLA's grant of jurisdiction
                

(2) Appellate Jurisdiction

Although the FAA does not provide for original subject matter jurisdiction, it does govern interlocutory appeals over disputes involving arbitration. This area of the law was characterized by " 'Byzantine peculiarities' " but has been greatly simplified by the enactment of 9 U.S.C. Sec. 15 in November of 1988. Ballay v. Legg Mason Wood Walker, Inc., 878 F.2d 729, 731-32 (3d Cir.1989) (quoting New England Power Co. v. Asiatic Petroleum Corp., 456 F.2d 183, 189 (1st Cir.1972)). See also Jeske v. Brooks, 875 F.2d 71, 73 (4th Cir.1989). The rule now is that orders favoring litigation over arbitration are immediately appealable whereas those which favor arbitration at the expense of litigation are not. Ballay, 878 F.2d at 732. 9 U.S.C. Sec. 15(a)(2) authorizes an interlocutory appeal of an order enjoining arbitration and vests us, therefore, with jurisdiction over the present appeal.

STANDARD OF REVIEW

United Offshore argues that since the decision of a district court to grant a preliminary injunction is reviewed under an abuse of discretion standard, the judgment of the court below should be reviewed under this deferential standard. See, e.g., Enterprise Intern., Inc. v. Corporacion Estatal Petrolera Ecuatoriana, 762 F.2d 464, 472 (5th Cir.1985). Southern Deepwater counters that a decision that an arbitration provision governs a particular dispute is a matter of contract interpretation which presents an issue of law to be reviewed de novo. See, e.g., Explo, Inc. v. Southern Natural Gas Company, 788 F.2d 1096, 1098 (5th Cir.1986) and First Investors v. American Capital Financial Service, 823 F.2d 307, 309 (9th Cir.1987).

Preliminary injunctions are not always reviewed under an abuse of discretion standard. In Thornburgh v. American College of Obstetricians, 476 U.S. 747, 757, 106 S.Ct. 2169, 2177, 90 L.Ed.2d 779 (1986), for example, the Court reasoned "if a district court's ruling rests solely on a premise as to the applicable rule of law, and the facts are established on a premise as to the applicable rule of law, and the facts are established or of no controlling relevance, that ruling may be reviewed [de novo] even though the appeal is from the entry of a preliminary injunction." The facts in the instant case are not in dispute and the central issue is one of contract interpretation. The judgment of the court below, therefore, will be reviewed de novo.

Our decision to exercise de novo review is fully consonant with Congress's decision to promote arbitration by enacting the F.A.A. Arbitration provides a relatively quick and inexpensive resolution to disputes. De novo review after a trial on the merits comes too late to preserve that right.

THE INITIAL SKIRMISH

A preliminary injunction may be granted only if the moving party proves "(1) a substantial likelihood of success on the merits; (2) a substantial threat that the movant will suffer irreparable injury if the injunction is not issued; (3) that [the] threatened injury to the movant outweighs any damage the injunction may do to the opponent; and (4) that the injunction will not disserve the public interest." E.E.O.C. v. Cosmair, Inc., L'Oreal Hair Care Div., 821 F.2d 1085, 1088 (5th Cir.1987) (quoting Gearhart Indus., Inc. v. Smith Int'l, Inc., 741 F.2d 707, 710 (5th Cir.1984)). The preliminary injunction is an extraordinary remedy, however, and the movant must clearly carry the burden of persuasion on each factor. See Mississippi Power and Light Co. v. United Gas Pipeline Co., 760 F.2d 618, 621 (5th Cir.1985). The district court decided only the first prerequisite as that was the only factor seriously contested by the parties. It is, therefore, the only issue which we will consider on appeal.

For United Offshore to succeed on the merits, it must overcome a presumption that the dispute is arbitrable:

While we are interpreting the [arbitration] provision, we must remain mindful of the strong federal policy favoring arbitration.... Doubts as to the availability of arbitration must be resolved in favor of arbitration.... Unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue, then a stay pending arbitration should be granted.

Explo, 788 F.2d at 1098 (citations omitted). See also Associated Corp. v. Ratcliff Const. Co., 823 F.2d 904, 905 (5th Cir.1987) and Mar-Len of La., Inc. v. Parsons-Gilbane, 773 F.2d 633, 635-36 (5th Cir.1985). We must also be mindful, however, that " 'arbitration 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.' " AT & T, 475 U.S. at 648, 106 S.Ct. at 1418 (quoting United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960)).

Southern Deepwater rests its case on two provisions of the joint venture agreement. Paragraph 15 states "any controversy or claim between United Offshore...