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J&JB Timberlands, LLC v. Woolsey Energy II, LLC

United States District Court, S.D. Illinois

January 30, 2017

J&JB TIMBERLANDS, LLC, Plaintiff,
v.
WOOLSEY ENERGY II, LLC and WOOLSEY OPERATING COMPANY, LLC, Defendants.

          MEMORANDUM AND ORDER

          STACI M. YANDLE United States District Judge

         This matter comes before the Court on Defendants' Motion to Stay Litigation Pending Arbitration (Doc. 3). The motion has been fully briefed and the Court held a hearing on the motion on May 15, 2015. The Court also made its tentative rulings on the record on November 30, 2016 (See Doc. 55). Consistent with the Court's tentative rulings, for the reasons that follow and as detailed on the record, Defendants' motion is GRANTED in part and DENIED in part.

         Background

         Plaintiff originally filed its Complaint in the Second Judicial Circuit Court, Franklin County, Illinois. Defendants removed the action to this Court based on diversity jurisdiction (Doc. 2). Plaintiff, the owner of certain surface property located in Franklin County, seeks compensatory and punitive damages as a result of actions taken by Global Geophysical Services ("Global"), under the direction of Defendants during a seismic survey conducted on Plaintiffs property (Doc. 2-1, p. 5-6).

         Plaintiff asserts that the property was purchased as a relatively undisturbed, pristine floodplain forest for its unique characteristics and for the purposes of wildlife conservation and outdoor recreation and investment. Id., p. 4. Global's work included entering the surface of the property, drilling and setting explosive charges under the surface of the property. Id., p. 5.

         Plaintiff alleges that despite promises by Defendants to instruct field representatives to limit traffic and cause as little surface damage as possible, the work caused "extensive, measurable, long-term habitat loss and tree and plant damage...Rutting and other damage to the forest floor which will require years to restore." Id., p. 5, Exhibit B. Plaintiff further alleges that "trails once available for recreational access are severely damaged" and that, due to the negligence of Defendants' agents and employees, the land's scenic, aesthetic, recreational and market values are diminished. Id.

         The reservation of mineral rights in a prior deed of conveyance provides that the Grantor shall pay for damages caused by mineral extraction activity, and that if no agreement on the amount of damages is reached within ninety (90) days, "the amount of damage shall be determined by arbitration" (Doc. 4, Exhibit B, p. 9-11). Defendants filed the instant Motion to Stay Litigation Pending Arbitration pursuant to the Federal Arbitration Act ("FAA") arguing that the FAA authorizes this Court to enforce the arbitration provisions of Plaintiff s deed.

         Plaintiff argues that the FAA does not apply and that the Illinois Uniform Arbitration Act should not be applied as an alternative to the FAA because the arbitration provision of the deed requires a 90-day period for voluntary settlement as a condition precedent and Defendants have refused to negotiate. Plaintiff further argues that, because the FAA does not apply, this case should be remanded because an Illinois state court would be better suited to determine if the reservation imposing arbitration in Plaintiffs deed- a reservation expressed in a prior deed of conveyance but not expressly referenced in Plaintiffs deed-is enforceable.

         Discussion

         Plaintiff holds a Trustee's Warranty Deed dated June 28, 2010 by which William E. Puckett II, as Trustee of Rainbow Land Trust, conveyed and warranted to Plaintiff certain parcels of real estate (Doc. 3, Exhibit 1). Following a description of conveyed easements and a retained easement in favor of Grantor for ingress and egress, the deed provides:

EXCEPTING AND RESERVING the coal, oil, gas, methane gas, casing head gas, or other minerals underlying the same and all rights and easements in favor of the owner of the mineral estate or of any party claiming by, through or under said estate, situated in Franklin County, Illinois.

         The deed contains a section entitled "ALSO SUBJECT TO" which lists various other rights of way and easements, the last of which reads at number seven: "Reservations contained in a Warranty Deed recorded October 24, 1990 as Document No. 90-5829 to William E. Puckett, II as Trustee ... [of] the Rainbow Land Trust." These provisions are the only references to reservations contained in the prior deed of conveyance. That prior deed of conveyance (Doc. 3-2), by which Finite Resources and two other entities granted the surface only to William E. Puckett, II, contains a lengthy clause reserving the mineral estate. The portion of the clause upon which Defendants rely states:

         Grantors their heirs, successors and assigns shall conduct any and all mineral exploration, development, mining, transportation, and related activities in a workmanlike manner and shall pay for all actual damages caused by such mining activities to any improvement on the surface of the lands and/or to any improvements or crops; such actual damages shall be determined by agreement of those parties Grantee who are owners of the surface estate on the date of this deed, their successors and assigns; provided that if no agreement is reached within ninety (90) days, the amount of damage shall be determined by arbitration. Surface owner, Grantees, and Grantors shall each select a competent and disinterested arbitrator having expertise in damage evaluation, and the two arbitrators so selected shall select a third arbitrator (emphasis added).

         As an initial matter, Plaintiffs suggestion that an Illinois state court would be better suited to determine whether or not the arbitration clause at issue is enforceable is without merit. This case is before the Court based on diversity jurisdiction and the issues of diversity of citizenship and amount in controversy are undisputed. Thus, the Court is required to apply Illinois substantive law - including ...


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