Federal Appellate Jurisdiction Over Orders Compelling Arbitration and Staying Litigation
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This page was exported from - The Arbitration Law Forum Export date: Thu Sep 30 3:49:39 2021 / +0000 GMT Arbitration Nuts and Bolts: Federal Appellate Jurisdiction over Orders Compelling Arbitration and Staying Litigation Introduction Today we look at federal appellate jurisdiction over orders compelling arbitration and staying litigation. Sections 3 and 4 of the Federal Arbitration Act (the "FAA") provide remedies for a party who is aggrieved by another party's failure or refusal to arbitrate under the terms of an FAA-governed agreement. FAA Section 3, which governs stays of litigation pending arbitration, requires courts, ?upon application of one of the parties,? to stay litigation of issues that are ?referable to arbitration? ?until arbitration has been had in accordance with the terms of the parties' arbitration agreement, providing [the party applying for a stay] is not in default in proceeding with such arbitration.? 9 U.S.C. § 3. Faced with a properly supported application for a stay of litigation of an arbitrable controversy, a federal district court must grant the stay. 9 U.S.C. § 3. Section 4 of the FAA authorizes courts to make orders ?directing arbitration [to] proceed in the manner provided for in [the [parties' written arbitration] agreement[,]? and sets forth certain procedures for adjudicating petitions or motions to compel arbitration. 9 U.S.C. § 4. It provides that when a court determines ?an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.? 9 U.S.C. § 4 (emphasis added). Just as courts must grant properly supported applications for relief under Section 3, so too must they grant properly supported applications for relief under Section 4. See 9 U.S.C. §§ 3 & 4. There is much to be said about the many issues that may arise out of applications to stay litigation, compel arbitration, or both, but our focus here is on the appellate jurisdiction of the U.S. Circuit Courts of Appeals over appeals from the grant or denial of such applications. Before a U.S. Circuit Court of Appeals can hear an appeal on the merits of a federal district court's order and judgment, it must be satisfied that: (a) the federal district court had original subject matter jurisdiction (e.g., diversity jurisdiction or federal question jurisdiction); (b) there is still a ?case or controversy? within the meaning of Article III of the U.S. Constitution (e.g., the controversy has not become moot by settlement or otherwise); and (c) the order or judgment appealed from is one over which it has appellate jurisdiction. Appellate Jurisdiction and the FAA Output as PDF file has been powered by [ Universal Post Manager ] plugin from www.ProfProjects.com | Page 1/6 | This page was exported from - The Arbitration Law Forum Export date: Thu Sep 30 3:49:39 2021 / +0000 GMT Appellate jurisdiction refers to a Circuit Court of Appeals' power to review, amend, vacate, affirm, or reverse the orders and judgments of the district courts within the judicial circuit over which the Court of Appeals presides. Generally, and outside the context of injunctions and the certification procedure of 28 U.S.C. § 1292(b), U.S. Courts of Appeal have jurisdiction to review only ?final decisions? of district courts. See 28 U.S.C. §§ 1291, 1292. A ?final decision? ?is a decision that ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.? Green Tree Financial Corp. v. Randolph, 531 U.S. 79, 86 (2000) (citations and quotations omitted). But Federal Arbitration Act litigation is quite different from ordinary litigation from both a substantive and procedural prospective, and so it comes as no surprise that the FAA features its own set of appellate jurisdiction rules. Appellate Jurisdiction: Section 16 of the FAA Section 16 of the FAA governs the appellate jurisdiction of the U.S. Circuit Courts of Appeal over orders and decisions concerning applications for relief under the FAA. Section 16 reflects, for the most part, a Congressional policy to: (a) facilitate appeals as early as possible of certain decisions finding disputes not to be arbitrable; and (b) delay appeals of certain decisions finding disputes to be arbitrable, at least until the arbitration has taken place. This pro-arbitration policy is in line with the general federal policy in favor of arbitration that is the bedrock of the FAA. Section 16(a) of the FAA provides that ?[a]n appeal may be taken from an order[:]? (A) refusing a stay of any action under section 3 of this title[;](B) denying a petition under section 4 of this title to order arbitration to proceed[;] [and] (C) denying an application under section 206 of this title to compel arbitration?. 9 U.S.C. § 16(a)(1)(A)-(C). To much the same effect is Section 16(a)(2), which provides that an appeal may be taken from ?an interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to this title. .? 9 U.S.C. § 16(a)(2). Section 16(b) compliments 16(a) by prohibiting certain interlocutory appeals not authorized by Section 16(a). Section 16(b) states that ?[e]xcept as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order? Output as PDF file has been powered by [ Universal Post Manager ] plugin from www.ProfProjects.com | Page 2/6 | This page was exported from - The Arbitration Law Forum Export date: Thu Sep 30 3:49:40 2021 / +0000 GMT (1) granting a stay of any action under section 3 of this title;(2) directing arbitration to proceed under section 4 of this title;(3) compelling arbitration under section 206 of this title; or(4) refusing to enjoin an arbitration that is subject to this title.9 U.S.C. § 16(b). In addition to addressing the appealability of interlocutory orders concerning stays of litigation, stays or injunctions of arbitration, and orders compelling or refusing to compel arbitration, Section 16 addresses three other types of orders or decisions: (a) orders confirming or denying confirmation of awards; (b) orders vacating, modifying, or correcting awards; and (c) ?final decision[s] with respect to?arbitration?.? 9 U.S.C. § 16(a)(3). Section 16(a)(1)(D) makes appealable an order ?confirming or denying confirmation of an award or partial award.? 9 U.S.C. § 16(a)(1)(d). Section 16(a)(1)(E) authorizes appeals of an order ?modifying, correcting, or vacating an Award.? In many or most instances these provisions make FAA litigation concerning final arbitration awards appealable, irrespective of the outcome. Section 16(a)(3) is a catch-all provision of sorts. It makes appealable ?a final decision with respect to an arbitration that is subject to this title.? 9 U.S.C. § 16(a)(3). Appellate Jurisdiction: Application of Section 16 to Orders made under Sections 3 and 4 While Section 16's provisions are relatively easy to apply in many situations, they can cause some confusion in others, principally ones involving stays of litigation under Section 3 of the FAA and orders compelling arbitration under Section 4. Suppose A parties A and B have a dispute on which A has demanded arbitration, and B has failed or refused to arbitrate the dispute. Neither party has commenced an action on the merits of the dispute. A commences a summary proceeding to compel arbitration pursuant to Section 4 of the FAA, but does not seek a stay of litigation because there is no merits litigation to stay pending arbitration. The application is briefed and the Court determines that it should compel arbitration, grants A's application, and renders a final decision entering final judgment in favor of A, leaving the Court with nothing to do other than execute the judgment. Is the district court's decision immediately appealable under the FAA, or must an appeal await the conclusion of the arbitration? It is immediately appealable because it is a Output as PDF file has been powered by [ Universal Post Manager ] plugin from www.ProfProjects.com | Page 3/6 | This page was exported from - The Arbitration Law Forum Export date: Thu Sep 30 3:49:40 2021 / +0000 GMT ?final decision with respect to? arbitration within the meaning of 9 U.S.C. § 16(a)(3). See Randolph, 531 U.S. at 89. Indeed, even without Section 16(a)(3) it would be appealable under 28 U.S.C. § 1291(a). See 531 U.S. at 86-89. Now suppose A and B have a dispute, A demands arbitration, B not only refuses to arbitrate but files a lawsuit asking a court to resolve the dispute. A then moves to compel arbitration, but does not seek a stay of litigation. The Court grants the motion and dismisses the case, leaving nothing for the Court to do but execute the judgment. Like our first hypothetical, the district court's decision is appealable, because it is a ?final decision with respect to? arbitration. Randolph, 531 U.S. at 89. But let's modify our second hypothetical so that A seeks not only an order compelling arbitration, but also requests a stay of litigation under Section 3. The Court grants A's motion, compels arbitration, and directs the Clerk of the Court to ?close the case.? The clerk enters judgment in favor of A, which ?closes the case.? The clerk attaches to the judgment official forms notifying B of its right to appeal the judgment.