The United States Law Week

Arbitrator’s Undisclosed Relationships Sink Oil and Gas Awards

Dec. 6, 2018, 8:29 PM

An arbitrator’s failure to disclose his longstanding business relationships with one of the parties requires setting aside the arbitration awards, the U.S. District Court for the Southern District of Texas said Dec. 5.

Patrick Long, part of a three-member arbitration team, heard a contractual dispute over joint oil and gas operations between OOGC America LLC and Chesapeake Exploration LLC. But when Long “claimed that he did not have professional or social connections with the parties or witnesses, he lied,” the court said.

In reality, Long was a long-time business partner of Yong Siang Goh, the board chairman of FTS International Inc., an affiliate of Chesapeake Exploration. In addition, Long failed to disclose that he had represented FTS as a lawyer, that FTS’s deputy general counsel was a former partner at his law firm, and that his law firm had employed Goh’s daughter.

“Long knew he had to disclose his business connections. Instead, for eleven months, he lied and hid his complex history of investments and relationships with companies and people associated with Chesapeake,” the court said.

Moreover, he deliberately evaded inquiries from the American Arbitration Association, the court found.

Chesapeake knew of Long’s deceit and failed to disclose it. “Chesapeake is just as culpable as Long,” the court said.

Because Long “probably affected the outcome of the arbitration, the awards will be vacated,” the court concluded.

The case is OOGC Am. LLC v. Chesapeake Exploration, S.D. Tex., Civil Action H-17-248, 12/5/18.

To contact the reporter on this story: Brian Flood in Washington at bflood@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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