27 January 2015
Practice Groups:
Commercial Disputes
Oil & Gas
The Sixth Circuit Holds That an Arbitration Clause in
an Expired Contract Still Applies
By Thomas R. Johnson and David I. Kelch
Introduction
Does the duty to arbitrate survive the expiration of a contract? The United States Court of
Appeals, Sixth Circuit recently held “yes.” The Sixth Circuit became the first federal appeals
court to examine whether a contract’s arbitration clause continues to apply after the
contract’s expiration, despite the arbitration clause not being listed in the survival clause.
In Huffman v. Hilltop Cos., LLC, 747 F.3d 391, 396-97 (6th Cir. 2014), the Sixth Circuit
concluded—in light of the strong federal presumption in favor of arbitration—that the
arbitration clause survived expiration of the contract because the parties did not clearly
indicate that it was to expire with the contract.
The Facts and Procedural History of Huffman
In the district court, former employees of The Hilltop Companies (“Hilltop”) sued Hilltop
alleging that it violated federal and state fair wage laws by requiring them to work overtime,
but not compensating them accordingly. 1 The employees had each signed a Hilltop-drafted
employment contract that included both an arbitration clause and survival clause, which
listed half of the contract’s paragraphs but not the arbitration clause.2 Hilltop attempted to
compel arbitration arguing that the contract provided for arbitration of all disputes, even those
that arose after the employment agreement expired. 3 The district court denied Hilltop’s
motion to compel arbitration, stating that the arbitration clause “had no post-expiration effect
because the ‘more specific survival clause that excludes arbitration from survival trumps the
more general arbitration clause in the contract[.]’” 4
Overturning the district court, the Sixth Circuit held that the contract’s arbitration clause
survived the contract’s expiration because of the strong federal policy favoring arbitration and
the absence of a clear intention by the parties to prevent survival of the arbitration clause
beyond the expiration of the contract.5
Huffman’s Implications—Particularly for Oil and Gas Lease Disputes
The holding in Huffman has not yet been extended to other circuits. However, Huffman
indicates that an arbitration clause is likely to survive the expiration of a contract unless the
parties expressly provide otherwise. To avoid a contrary result, though, parties who favor
1
Id. at 393.
Id.
3
Id. at 394.
4
Id. (quoting Huffman v. Hilltop Cos., LLC, 2013 WL 3944478, *1 (S.D. Ohio July 31, 2013)).
5
Id. at 398.
2
The Sixth Circuit Holds That an Arbitration Clause in an
Expired Contract Still Applies
arbitration should consider specifically listing their arbitration clause in the contract’s survival
provision. In the alternative, or additionally, a short survivability provision could be included
in the arbitration clause itself.
This case is particularly helpful for oil and gas producers who favor the arbitration of lease
disputes because it provides a basis for compelling arbitration even when the owner/lessor
alleges the lease has expired. Lawsuits filed against natural gas producers have become
increasingly common. For example, in Pennsylvania over the last several years,
owners/lessors have filed a number of lawsuits seeking a judicial determination that gas
leases have expired. In light of the costs and risks involved in lease dispute litigation, not to
mention class action lease disputes, producers have begun including arbitration clauses in
their oil and gas leases.
To avoid judicial adjudication of lease disputes where the owner/lessor alleges the lease has
expired (whether after the primary term or the secondary term), it may be appropriate for the
lease to include the arbitration clause in its survival provision and/or clearly state in the
arbitration provision itself that it will survive termination of the lease.
As always, contracts and oil and gas leases should be reviewed by legal counsel with
experience and competency in contract and oil and gas law and the law of arbitration.
Authors:
Thomas R. Johnson
tom.johnson@klgates.com
+1.412.355.6488
David I. Kelch
david.kelch@klgates.com
+1.412.355.7427
Anchorage Austin Beijing Berlin Boston Brisbane Brussels Charleston Charlotte Chicago Dallas Doha Dubai Fort Worth Frankfurt
Harrisburg Hong Kong Houston London Los Angeles Melbourne Miami Milan Moscow Newark New York Orange County Palo Alto Paris
Perth Pittsburgh Portland Raleigh Research Triangle Park San Francisco São Paulo Seattle Seoul Shanghai Singapore Spokane
Sydney Taipei Tokyo Warsaw Washington, D.C. Wilmington
K&L Gates comprises more than 2,000 lawyers globally who practice in fully integrated offices located on five
continents. The firm represents leading multinational corporations, growth and middle-market companies, capital
markets participants and entrepreneurs in every major industry group as well as public sector entities, educational
institutions, philanthropic organizations and individuals. For more information about K&L Gates or its locations,
practices and registrations, visit www.klgates.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in
regard to any particular facts or circumstances without first consulting a lawyer.
© 2015 K&L Gates LLP. All Rights Reserved.
2