Virgin Islands Water & Power Authority v. General Electric International Inc. , 561 F. App'x 131 ( 2014 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
No. 09-3167
__________
VIRGIN ISLANDS WATER AND POWER AUTHORITY
v.
GENERAL ELECTRIC INTERNATIONAL INC.,
Appellant
__________
On Appeal from the District of the Virgin Islands
(D.C. No. 3-06-cv-00131)
District Judge: Honorable Curtis V. Gomez
Submitted Under Third Circuit LAR 34.1(a)
December 12, 2013
BEFORE: FISHER, SHWARTZ, and NYGAARD, Circuit Judges
(Filed: March 19, 2014)
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OPINION OF THE COURT
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NYGAARD, Circuit Judge.
I.
In 2006, the Virgin Islands Water and Power Authority (WAPA) sued Appellant
General Electric (GE) for an alleged breach of contract. The contract in question
involved the inspection and repair of industrial power production equipment. The parties
engaged in discovery and mediation. However, in May of 2008, GE moved to compel
arbitration and to stay the proceedings during that process.
The Magistrate Judge denied GE’s motion, finding it “mooted by the agreement of
the parties to engage in production and to mediate . . . .” Approximately ten months
later, GE asked the District Court Judge for a hearing on its motion to compel arbitration
and to stay the proceedings. The District Court denied GE’s motion to compel. First, the
Court noted that the Magistrate Judge was not authorized to rule on GE’s motion to
compel because such decisions are not within the purview of 28 U.S.C. § 636, the Federal
Magistrates Act. Then, after engaging in de novo review of the contract and other
relevant documents, the District Court held that the contract did not contain an arbitration
agreement. GE has appealed that decision. WAPA, however, maintains that GE’s failure
to follow the procedures for challenging a Magistrate Judge’s decision, as set out in the
Federal Rules, deprived the District Court, and this Court by extension, of jurisdiction.
II.
The Federal Arbitration Act gives us jurisdiction to review a district court’s denial
of a motion to compel arbitration. 9 U.S.C. § 16(a)(1)(B). WAPA argues that we lack
jurisdiction because GE failed to object to the Magistrate Judge’s ruling that its motion to
compel arbitration was mooted by GE’s agreement to proceed with discovery and
2
mediation. Indeed, the record reflects no objection filed by GE within the 10-day time
period allotted by the Federal Rules. See FED.R.CIV.P. 72(a).1
GE maintains that the Magistrate Judge’s mootness determination merely deferred
or postponed a ruling on its motion to compel arbitration. The District Court agreed,2
despite its own acknowledgement that the motion had been “administratively
terminated.” Not only did the District Court believe GE’s motion to compel remained
pending, it also held that the Magistrate Judge lacked the authority to rule on such matters
in the first place. The District Court gave no reasoning for this determination beyond the
fact that 28 U.S.C. § 636 does not list “motions to compel arbitration” among the type of
motions a magistrate judge is authorized to rule on.
The Local Rules of the District Court for the Virgin Islands refer all pretrial
motions in civil cases to federal Magistrate Judges, so long as permitted by 28 U.S.C. §
636. See LRCi 72.1. That statute provides that a magistrate judge may hear and
determine any pretrial matter pending before the court, with the following exceptions: 1)
a motion for injunctive relief; 2) a motion for a judgment on the pleadings; 3) a motion
for summary judgment; 4) a motion to dismiss or quash an indictment or information; 5)
a motion to suppress evidence in a criminal case; 6) a motion to dismiss or permit
1
Rule 72(a) was amended in 2009 to provide a 14-day period to object to a Magistrate
Judge’s Report and Recommendation.
2
Judge Shwartz would agree that the Magistrate Judge’s Order finding the motion was
moot was a case management order and not a ruling on the merits of the motion to
compel arbitration. As a result, she would find it unnecessary to address whether the
Magistrate Judge had the authority to rule on the merits of such a motion. Nonetheless,
Judge Shwartz joins in Part III of this Opinion and agrees that the District Court should
be affirmed.
3
maintenance of a class action; 7) a motion to dismiss for failure to state a claim; and 8) a
motion to involuntarily dismiss an action. 28 U.S.C. § 636(b)(1)(A). This list of
dispositive motions is not an exhaustive one, but instead merely “informs the
classification of other motions as dispositive or nondispositive.” PowerShare, Inc., v.
Syntel, Inc., 597 F.3d 10, 13 (1st Cir 2010) (internal quotation marks and citation
omitted). The Federal Rules of Civil Procedure are consistent with these classifications.
Rule 72 sets out procedures and standards of review for district courts to follow when
reviewing dispositive and nondispositive rulings made by Magistrate Judges.
As noted previously, the District Court concluded that Section 636(b)(1)(A) does
not authorize a Magistrate Judge to rule on a motion to compel arbitration. It offered no
reasoning for this conclusion beyond noting that § 636 did not mention such motions.
The fact that the statute does not specifically mention motions to compel arbitration is
irrelevant, however. The appropriate inquiry is whether such a motion is dispositive and
motions to compel arbitration and stay the proceedings are not. Such motions, to begin
with, are not among those listed in § 636(b)(1)(A) and are therefore not specifically
excluded. Nor, as the Court of Appeals for the First Circuit has noted, are they the same
type of motion as those delineated in the statute. Powershare, 597 F.3d at 14. We agree
with the First Circuit. A ruling on a motion to compel arbitration does not dispose of the
case, or any claim or defense found therein. Instead, orders granting this type of motion
merely suspend the litigation while orders denying it continue the underlying litigation.
See id. And, even where motions to compel arbitration are granted, federal courts
continue to retain the authority to dissolve any stay or make any orders effectuating
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arbitration awards. See id. (citing 9 U.S.C. § 9 (permitting parties to apply to the court
for an order confirming an arbitration award); id. at § 10 (providing the district courts
with authority to vacate an arbitration award); id. at § 11 (providing district courts with
authority to modify an arbitration award)). Given this, we see no exercise of Article III
power when a Magistrate Judge rules on a motion to compel arbitration. Therefore, the
District Court incorrectly concluded that Magistrate Judges lack the authority to rule on
such requests.
Given that the motion to compel arbitration was properly before the Magistrate
Judge, GE was obligated to seek review of that order in the District Court within fourteen
days of its issuance. See Washington v. Hovensa LLC, 652 F.3d 340, 348 (3d Cir. 2011);
United Steelworkers of Amer. v. New Jersey Zinc Co., Inc., 828 F.3d 1001, 1007-08 (3d
Cir. 1987) (“[P]arties who wish to preserve their objections to a magistrate[] [judge’s]
order entered pursuant to 28 U.S.C. § 636(b)(1)(A) must file their objections in the
district court.”). GE did not seek review of the Magistrate Judge’s mootness order.3 See
FED.R.CIV.P. 72(a); LRCi 72.1. This failure deprived the District Court of the
opportunity to remedy any error on the question of mootness. However, while GE’s
failure to seek review is not a jurisdictional defect, see United States v. Polishan, 336
F.3d 234, 239-40 (3d Cir. 2003) (citation omitted), a waiver rule does apply. See
3
GE argued and the District Court apparently agreed that the Magistrate Judge’s order
finding the motion to compel arbitration moot had no effect. We disagree. A ruling on
mootness, while not dispositive, is a determination nonetheless. By finding the motion
moot, the Magistrate Judge, in effect, denied it.
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Steelworkers, 828 F.2d at 1007-08. Accordingly, GE’s challenge to the propriety of the
Magistrate Judge’s order is waived because GE failed to object and we will not review it.
III.
Even were we not to find waiver here, we are satisfied that the contract in question
lacks a valid agreement to arbitrate and, on that point, the District Court did not err.4
Arbitration “is a matter of consent, not coercion.” Volt Info. Scis., Inc. v. Bd. of Trs. of
Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989). “[A] party may not be
compelled under the [Federal Arbitration Act] to submit to . . . arbitration unless there is
a contractual basis for concluding that the party agreed to do so.” Stolt–Nielsen S.A. v.
AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010) (discussing class arbitration). To
determine whether the parties agreed to arbitrate a dispute, we employ state principles of
contract law. See Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584
F.3d 513, 532 (3d Cir. 2009).5
Because the actual contract between the parties does not contain an arbitration
agreement, GE calls our attention to a document referenced in that contract entitled
4
Our review of the District Court’s order denying the motion to compel arbitration is
plenary. Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 159 (3d Cir. 2009)
(citations omitted). That means we apply the same standard as the District Court, and we
will compel arbitration only where there is “no genuine issue of fact concerning the
formation of the agreement” to arbitrate. Id. (citing Par–Knit Mills, Inc. v. Stockbridge
Fabrics Co., 636 F.2d 51, 54 (3d Cir.1980)).
5
Virgin Islands law upholds contracts where there is “mutual assent” between the parties.
See Morales v. Sun Constructors, Inc., 541 F.3d 218, 221 (3d Cir. 2008) (citations
omitted).
6
“General Terms and Conditions,” as the location for such an agreement. The section GE
relies on is entitled “Dispute Resolution” and provides:
The Arbitration will be conducted by three (3) arbitrators in
accordance with the American Arbitration Rules in effect at
the time of the controversy. Each side will appoint one
arbitrator, and the two arbitrators so appointed will appoint
the third arbitrator. The arbitrators shall render any decision
or award based solely on “baseball” or “winner-take-all” type
of arbitration and they will only have the authority to select
either the amount or remedy proposed by Buyer or by Seller,
and none other. The decision of the arbitrators shall be final
and binding upon both parties, and neither party shall seek
recourse to a law court or other authorities to appeal for
revisions of such decision. The reasonable costs of
arbitration as well as reasonable legal fees and expenses of
any dispute conducted pursuant to this Article, shall be borne
solely by the loser at arbitration.
As the District Court correctly noted, there simply is no express or implied clause in this
passage evincing the parties’ agreement to arbitrate. Further, there is no language from
which we could ascertain what type of disputes the parties are subjecting to arbitration.
Instead, this clause merely relates procedures for selecting arbitrators, and sets out how
those arbitrators will make their decisions and which party will pay the costs of any such
proceedings.
IV.
In sum, by failing to appeal the decision of the Magistrate Judge, GE waived any
challenge to the propriety of his order. And, even were we to excuse such a waiver, the
contract in question does not contain an agreement to arbitrate and, therefore, we see no
error in the District Court’s decision to deny GE’s motion to compel arbitration.
Accordingly, we will affirm.
7