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Adair Bus Sales, Inc. v. Blue Bird Corp.

United States Court of Appeals, Tenth Circuit
Jun 3, 1994
25 F.3d 953 (10th Cir. 1994)

Summary

holding that where a defendant moved for a stay pending arbitration under 9 U.S.C. § 3, the District court erred in instead entering a dismissal and the proper course would have been to enter the stay

Summary of this case from Lloyd v. Hovensa, LLC

Opinion

No. 93-2269.

June 3, 1994.

Submitted on the briefs:

After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed.R.App.P. 34(a); 10th Cir.R. 34.1.9. The cause is therefore ordered submitted without oral argument.

Warren F. Frost, Clovis, NM, for appellant.

Thomas W. Rhodes and Edward H. Wasmuth, Jr. of Smith, Gambrell Russell, Atlanta, GA, John R. Cooney, Patrick J. Rogers of Modrall, Sperling, Roehl, Harris and Sisk, Albuquerque, NM, for appellee.

Appeal from the United States District Court for the District of New Mexico.

Before BRORBY and EBEL, Circuit Judges, and KANE, District Judge.

The Honorable John L. Kane, Jr., Senior District Judge, United States District Court for the District of Colorado, sitting by designation.


This appeal arises out of Plaintiff's complaint against Defendant for breach of contract and declaratory judgment. Between 1978 and 1991, the parties entered into several contracts whereby Plaintiff was authorized to sell Blue Bird school buses. A dispute arose between the parties when a Texas school district canceled a substantial order with Plaintiff because it questioned Plaintiff's authority to sell Blue Bird buses in Texas. Plaintiff brought an action against Blue Bird in the United States District Court for the District of New Mexico, alleging breach of contract and requesting damages. The complaint also sought a declaratory judgment that the arbitration clause in the 1991 Distribution Agreement between the parties did not apply to that particular dispute.

Defendant filed a motion for stay pending arbitration, to which Plaintiff responded by seeking a temporary injunction and, ultimately, a preliminary injunction prohibiting Defendant from pursuing litigation to compel arbitration. The district court held an evidentiary hearing on the scope of the distribution contract and existence of an oral contract between the parties. The district court found that the dispute was within the scope of the arbitration agreement. The court then lifted the temporary restraining order, dismissed the complaint, and ordered the parties to proceed to arbitration under the terms of the Distribution Agreement. Plaintiff appeals the district court's order, arguing that it was entitled to a jury trial on the arbitration issue and that Blue Bird was estopped from asserting a claim for arbitration.

Regarding a suit brought in federal court "upon any issue referable to arbitration under an agreement in writing for such arbitration," the Federal Arbitration Act provides the district court "shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3. Blue Bird did indeed move the district court for a stay pending arbitration. The proper course, therefore, would have been for the district court to grant Defendant's motion and stay the action pending arbitration. See Quinn v. CGR, 828 F.2d 1463, 1465 n. 2 (10th Cir. 1987); see also Filanto, S.P.A. v. Chilewich Int'l Corp., 984 F.2d 58, 61 n. 3 (2d Cir. 1993).

The posture and characterization of the district court's action becomes acutely relevant when the question of appealability is raised. Amending the Arbitration Act to clarify the right of appeal, Congress intended to "promote appeals from orders barring arbitration and limit appeals from orders directing arbitration." Filanto, 984 F.2d at 60; Gammaro v. Thorp Consumer Discount Co., 15 F.3d 93, 95 (8th Cir. 1994); see also Perera v. Siegel Trading Co., 951 F.2d 780, 782-83 (7th Cir. 1992). That general policy was not, however, fully implemented. Section 16(b)(1) and (2) prohibits appeals from interlocutory orders staying an action pending arbitration pursuant to § 3 and from orders compelling arbitration to proceed under § 4, but § 16(a)(3) allows an appeal to be taken from "a final decision with respect to an arbitration." Thus, § 16 forecloses appellate review unless the district court order can be characterized as a final decision or falls within the limited exceptions found in § 16(a)(1) or (2).

A majority of the circuits have adopted the view that an order can only be final within the meaning of § 16(a)(3) and therefore immediately appealable if arbitrability is the sole issue before the district court. Conversely, an order does not constitute a final decision, and is not immediately reviewable on appeal, if issues other than the propriety of arbitration are raised or relief other than a determination as to the arbitrability of the dispute is sought. Gammaro, 15 F.3d at 95; Humphrey v. Prudential Sec. Inc., 4 F.3d 313, 317-18 (4th Cir. 1993); S + L + H S.p.A v. Miller-St. Nazianz, Inc., 988 F.2d 1518, 1522 (7th Cir. 1993); Filanto, 984 F.2d at 60-61; Thomson McKinnon Sec., Inc. v. Salter, 873 F.2d 1397, 1399 (11th Cir. 1989); see Delta Computer Corp. v. Samsung Semiconductor Telecommunications Co., 879 F.2d 662, 664-65 (9th Cir. 1989); but see Arnold v. Arnold Corp., 920 F.2d 1269, 1274-76 (6th Cir. 1990) (holding dismissal, in deference to arbitration, of complaint raising issues other than arbitrability was final and appealable under § 16(a)(3)). We agree with and adopt the majority approach. Consistent with that analysis, we note a stay pending arbitration entered pursuant to § 3 will virtually always be characterized as interlocutory, and not as a final decision within § 16(a)(3). Because § 3 contemplates a suit brought on "any issue referable to arbitration under an agreement in writing," the likelihood of the presence of issues other than the dispute's arbitrability is inherent.

Thus, had the district properly granted Defendant's motion for stay, the stay order would have been interlocutory because Plaintiff sought the arbitrability of the dispute. We would have no appellate jurisdiction. See 9 U.S.C. § 16. Because, however, the appeal is presented to us upon the district court's order of dismissal, we have appellate jurisdiction, see 28 U.S.C. § 1291, and may correct the procedural error. We decline to reach the merits of Plaintiff's appeal in light of our adoption of the majority view discouraging immediate appellate review in a proceeding in which relief other than a determination of arbitrability is sought. We therefore VACATE the district court's order of dismissal and REMAND for entry of a stay pending arbitration in accordance with 9 U.S.C. § 3.


Summaries of

Adair Bus Sales, Inc. v. Blue Bird Corp.

United States Court of Appeals, Tenth Circuit
Jun 3, 1994
25 F.3d 953 (10th Cir. 1994)

holding that where a defendant moved for a stay pending arbitration under 9 U.S.C. § 3, the District court erred in instead entering a dismissal and the proper course would have been to enter the stay

Summary of this case from Lloyd v. Hovensa, LLC

holding that, because appeal was presented to the appellate court upon the district court's order of dismissal, the appellate court had jurisdiction and could correct procedural error where the district court erroneously dismissed the action instead of granting defendant's motion for stay of action pending outcome of arbitration

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holding that under Section 3, the "proper course" of action for the district court would be to "stay the action pending arbitration"

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holding that it was error, under the plain language of the FAA, to dismiss an action and order arbitration where the moving party moved for a stay of the action

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holding that it was procedural error for district court to dismiss claims rather than staying them when compelling arbitration

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holding that district court erred in dismissing case in which defendant moved for a stay pending arbitration under 9 U.S.C. § 3, and should have instead entered stay

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vacating district court's order of dismissal and remanding for entry of a stay pending arbitration

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recognizing Congressional intent to permit appeals from orders denying arbitration, but limiting appeals from orders granting arbitration

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In Adair Bus Sales, Inc. v. Blue Bird Corp., 25 F.3d 953 (10th Cir. 1994), we held that interlocutory appellate review of a district court's grant of a motion to compel arbitration was inappropriate when the district court also should have granted the motion to stay proceedings pending arbitration.

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In Adair, the plaintiff brought a breach of contract claim, along with a claim for declaratory judgment that an arbitration clause in the parties' agreement did not compel arbitration of the particular contract dispute at issue.

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stating that “[t]he proper course” is “for the district court to grant Defendant's motion and stay the action pending arbitration”

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stating that, upon a motion to stay pending arbitration, the “proper course . . . would have been for the district court to grant Defendant's motion and stay the action pending arbitration” rather than dismiss the action

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noting that if a party requests a stay of the case pending arbitration, the district court must grant it in accordance with 9 U.S.C. § 3

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explaining "proper course" for suit with issues that are referable to arbitration under FAA is to stay case until arbitration has been completed

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noting that it is reversible error for a district court to dismiss a case rather than entering a stay pending arbitration

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stating that, upon a motion to stay pending arbitration, the "proper course . . . would have been for the district court to grant Defendant's motion and stay the action pending arbitration" rather than dismiss the action

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calling a district court's dismissal of an arbitrable case when the request to dismiss was made under section three a "procedural error"

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In Adair Bus Sales, Inc. v. Blue Bird Corp., 25 F.3d 953, 955 (10th Cir. 1994), the Tenth Circuit Court of Appeals held, following a district court's order dismissing the complaint, that "[t]he proper course... would have been for the district court to grant Defendant's motion and stay the action pending arbitration."

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Case details for

Adair Bus Sales, Inc. v. Blue Bird Corp.

Case Details

Full title:ADAIR BUS SALES, INC., PLAINTIFF-APPELLANT, v. BLUE BIRD CORPORATION…

Court:United States Court of Appeals, Tenth Circuit

Date published: Jun 3, 1994

Citations

25 F.3d 953 (10th Cir. 1994)

Citing Cases

Dreamstyle Remodeling, Inc. v. Renewal By Andersen LLC

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Armijo v. Prudential Ins. Co. of America

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