Alpine Glass, Inc. v. Illinois Farmers Insurance Com ( 2008 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 07-2021
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Alpine Glass, Inc., *
*
Plaintiff - Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Illinois Farmers Insurance Company; *
Mid-Century Insurance Company. *
*
Defendants - Appellants. *
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Submitted: January 16, 2008
Filed: July 9, 2008
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Before WOLLMAN, BRIGHT, and SMITH, Circuit Judges.
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BRIGHT, Circuit Judge.
Illinois Farmers Insurance Company and Mid-Century Insurance Company
(collectively “Illinois Farmers”) appeal from the district court’s1 orders: (1)
dismissing their counterclaim for breach of contract and three requests for declaratory
relief; and (2) consolidating Alpine Glass, Inc.’s (“Alpine Glass”) short-pay claims
in a single arbitration under Minnesota’s No-Fault Automobile Insurance Act (“No-
1
The Honorable Patrick J. Schiltz, United States District Judge for the District
of Minnesota.
Fault Act”), Minn. Stat. §§ 65B.41-65B.71. We dismiss this appeal for want of
jurisdiction.
Alpine Glass repairs and replaces broken automobile glass. Illinois Farmers
provides, among other services, automobile insurance. In this case, Alpine Glass
apparently fixed or replaced Illinois Farmers’ insureds’ automobile glass on more than
a thousand occasions. And in every instance, Alpine Glass, after allegedly receiving
an assignment from the insured, submitted an invoice to Illinois Farmers to recoup
payment for its services. Alpine Glass claims that in every case Illinois Farmers paid
less than the amount stated on Alpine Glass’s invoice (i.e., short-pays). Alpine Glass
filed suit in Minnesota state court to recover the difference. Because Alpine Glass’s
claims – so called short-pay claims – are subject to mandatory arbitration under the
No-Fault Act,2 Alpine Glass sought a declaration ordering that its claims be
consolidated for arbitration. Illinois Farmers subsequently removed this action to
federal district court.
Before the district court, Illinois Farmers argued that arbitration was improper
in this case because: (1) Alpine Glass lacked standing to proceed as an assignee of
Illinois Farmers’ insureds by virtue of an anti-assignment clause in its automobile
insurance contracts; and (2) Alpine Glass’s policy of receiving assignments in
exchange for performing glass replacement services violated Minnesota’s anti-
incentive statute, Minn. Stat. § 325F.783. Separately, Illinois Farmers also sought a
declaration from the district court regarding “coverage” (i.e., which of the policy’s
endorsements applied) and asserted several breach of contract claims.
After briefing and oral argument, the district court granted (in a series of orders)
Alpine Glass’s motion to consolidate its claims in a single No-Fault Act arbitration,
2
See Ill. Farmers Ins. Co. v. Glass Serv. Co., 683 N.W.2d 792, 800 (Minn.
2004); Minn. Stat. § 65B.525, subdiv. 1.
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dismissed (or denied) the majority of Illinois Farmers’ legal contentions and “entered
judgment.” The district court did not address, however, the endorsement issue. This
appeal followed.
Following briefing and oral argument to this Court, we sua sponte requested
supplemental briefing on whether we properly could exercise jurisdiction either
pursuant to 28 U.S.C. § 1291 or under the collateral order doctrine. See Dieser v.
Cont’l Cas. Co., 440 F.3d 920, 923 (8th Cir. 2005) (“‘[J]urisdiction issues will be
raised sua sponte by a federal court when there is an indication that jurisdiction is
lacking, even if the parties concede the issue.’”) (quoting Thomas v. Basham, 931
F.2d 521, 523 (8th Cir. 1991)). After reviewing the parties’ submissions, we conclude
that we lack jurisdiction.
Under § 1291, the courts of appeals have jurisdiction over “all final decisions
of the district courts of the United States.” A district court’s order is a “final decision”
for the purposes of § 1291 if it “‘ends the litigation on the merits and leaves nothing
more for the [district] court to do but execute the judgment.’” Green Tree Fin. Corp.-
Ala. v. Randolph (“Green Tree”), 531 U.S. 79, 86 (2000) (holding that an order
compelling arbitration and dismissing any remaining claims is a “final decision” under
§ 16(a)(3) of the Federal Arbitration Act) (quoting Catlin v. United States, 324 U.S.
239, 233 (1945)); see also Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863,
867 (1994); Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978). Illinois
Farmers contends that the district court’s orders denying its counterclaims and
requests for declaratory relief and granting Alpine Glass’s motion to compel
consolidated arbitration together constitute a “final decision” because they resolved
all the issues before the district court and left it with nothing to do but execute a
judgment following arbitration. In support of its position, Illinois Farmers relies on
cases arising under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., in
which courts of appeals have consistently held that a district court’s order compelling
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arbitration and “dismissing” any remaining claims is a final appealable decision.3
See, e.g., Skirchak v. Dynamics Research Corp., 508 F.3d 49, 55 (1st Cir. 2007)
(holding order compelling arbitration and dismissing claims is final and appealable
under 9 U.S.C. § 16(a)(3)) (citing Green Tree, 531 U.S. at 86); Comedy Club, Inc. v.
Improv West Assoc., 502 F.3d 1100, 1106 (9th Cir. 2007) (same). Even though the
FAA does not apply to Alpine Glass’s arbitration demand, Illinois Farmers contends
these cases are nevertheless apposite because the Supreme Court adopted the well-
established meaning of “final decision”, as understood with respect to § 1291, in
defining the term for the purposes of the FAA. See Green Tree, 531 U.S. at 86(“Because the FAA does not define ‘a final decision with respect to an arbitration’ or
otherwise suggest that the ordinary meaning of ‘final decision’ should not apply, we
accord the term its well-established meaning.”) (citing Evans v. United States, 504
U.S. 255, 259-260 (1992)). Thus, Illinois Farmers argues, regardless of the statutory
basis for a party’s arbitration demand, a district court’s order compelling arbitration
and dismissing any remaining claims is a “final decision” immediately appealable
under § 1291. Although Illinois Farmers correctly reads Green Tree and its progeny,
we conclude those cases do not control here.
The critical difference between this case and those Illinois Farmers relies upon
is that the district court will have more to do than simply “execute the judgment”
following the No-Fault arbitration. Under the No-Fault Act, “an arbitrator’s decision
on a legal question is subject to de novo review by the district court.” Gilder v. Auto-
Owners Ins. Co., 659 N.W.2d 804, 807 (Minn. Ct. App. 2003); see also Weaver v.
3
Illinois Farmers does not suggest that the FAA applies in this case. And nor
could it as the parties did not have a written agreement requiring arbitration. See 9
U.S.C. § 4 (“A party aggrieved by the alleged failure, neglect, or refusal of another to
arbitrate under a written agreement for arbitration may petition any United States
district court which, save for such agreement, would have jurisdiction under Title 28,
in a civil action . . . of the subject matter of a suit arising out of the controversy
between the parties, for an order directing that such arbitration proceed in the manner
provided for in such agreement.") (emphasis added).
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State Farm Ins. Co., 609 N.W.2d 878, 882 (Minn. 2000) (“To achieve the consistency
desired in interpreting the [N]o-[F]ault [A]ct, this court and the district court review
de novo the arbitrator’s legal determinations necessary to granting relief.”) (citing
Neal v. State Farm Mut. Ins. Co., 529 N.W.2d 330, 331 (Minn. 1995)). And so, the
district court will not only have to confirm (or vacate, or modify) any arbitral award,
but it will also have to review the arbitrator’s legal determinations de novo.
In this case, for example, the district court failed to resolve a key legal
contention - which of Illinois Farmers’ policy’s endorsements applied - before
compelling arbitration. See, e.g., Ill. Farmers Ins. Co. v. Glass Serv. Co., 683 N.W.2d
792, 799 (Minn. 2004) (“The interpretation of contractual language is an issue of law
for the court to decide.”) (citing Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339,
346 (Minn. 2003)).4 Thus, after the arbitration concludes, if either party (or both)
disagree with the arbitrator’s decision with respect to this issue, it (or they) can obtain
de novo review from the district court. Indeed, the district court must review de novo
not only pure questions of law but the arbitrator’s application of the law to the facts.
See Gilder, 659 N.W.2d at 807. Because the parties’ liabilities may be affected by the
district court’s de novo review of the arbitrator’s legal determinations, we conclude
that an order compelling mandatory arbitration under the No-Fault Act does not “end[]
the litigation on the merits and leave[] nothing for the court to do but execute the
judgment.” Cunningham v. Hamilton County, 527 U.S. 198, 204 (1999) (emphasis
added) (citations omitted); see also Maristuen v. Nat’l States Ins. Co., 57 F.3d 673,
678 (8th Cir. 1995) (“A judgment awarding damages but not deciding the amount of
4
We note that there is no per se requirement under Minnesota’s No-Fault Act
that courts resolve any legal issues before ordering arbitration. See Costello v. Aetna
Cas. & Surety Co., 472 N.W.2d 324, 326 (Minn. 1991) (“Where the coverage dispute
arises on a motion to compel arbitration or to enjoin arbitration, the court ought to
decide the issue in the first instance.”) (emphasis added); Gilder, 659 N.W.2d at 807(“In other words, when called upon to grant relief, an arbitrator need not refrain from
deciding a question simply because it is a legal question.”) (emphasis added).
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the damages or finding liability but not fixing the extent of the liability [are] not . . .
final decision[s] within the meaning of § 1291.”) (emphasis added). In short, the
district court could not have entered a final judgment in light of its mandatory
obligation under Minnesota law to review the arbitrator's legal conclusions de novo.
We are, of course, aware of the Supreme Court’s observation that the possibility
of bringing a “separate proceeding [under §§ 9, 10 or 11 of the FAA] in a district
court to enter judgment on an arbitration award once it is made (or to vacate or modify
it) . . . does not vitiate the finality of [a] [d]istrict [c]ourt’s” order compelling
arbitration and dismissing the claims before it. Green Tree, 531 U.S. at 86 (emphasis
added). The type and degree of “judicial review” available to parties under the FAA
differs materially, however, from that which the district court must conduct following
the No-Fault arbitration in this case. Under the FAA, a district court may “modify or
vacate” an arbitration award on grounds principally relating to egregious conduct by
the arbitrator but unrelated to the merits. See Hall Street Assoc. v. Mattel, Inc., 128
S. Ct. 1396, 1404-05 (2008) (“To begin with, even if we assumed §§ 10 and 11 could
be supplemented to some extent, it would stretch basic interpretive principles to
expand the stated grounds to the point of evidentiary and legal review generally.
Sections 10 and 11, after all, address egregious departures from the parties’ agreed-
upon arbitration . . . ; the only ground with any softer focus is ‘imperfect[ions],’ and
a court may correct those only if they go to ‘[a] matter of form not affecting the
merits.’ Given this emphasis on extreme arbitral conduct . . . then surely a statute
with no textual hook for expansion cannot authorize contracting parties to supplement
review for specific instances of outrageous conduct with review for just any legal
error.”) (emphasis added, alterations in original).
As such, the FAA, unlike Minnesota’s approach to No-Fault arbitration,
severely cabins a district court’s authority to “modify or vacate” an arbitration award.
We therefore understand Green Tree to hold that subsequent intervention by the
district court that has no bearing on the merits does not affect the finality of its order
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compelling arbitration and dismissing any remaining claims. That is not the case here,
however. As we emphasized above, the district court will review de novo the
arbitrator’s legal determinations, and that review necessarily touches upon the merits.5
We understand Illinois Farmers’ desire to have this Court decide the merits of
its appeal. It contends that the district court erred by holding that Alpine Glass had
standing to proceed to arbitration. If the district court erred in this regard, Illinois
Farmers would likely avoid an unnecessary arbitration proceeding. But if the flip
were true – and the district court ruled correctly (we express no view on the merits)
– then this appeal did little but delay the inevitable. And no doubt, following
arbitration and de novo review by the district court, we would again see these parties
on appeal. In short, we can never be confident that permitting an appeal from an order
compelling arbitration (and dismissing any remaining claims) would conserve judicial
resources. Indeed, such a practice might encourage piecemeal appeals – a practice we
must be careful to discourage “because [of] the strong bias of § 1291 against [such]
appeals.” Digital Equip. Corp., 511 U.S. at 872; see also Will v. Hallock, 546 U.S.
345, 349-50 (2006).
5
We recognize that our analysis of the finality of the district court’s order
compelling arbitration depends largely on the fact that Minnesota law requires district
courts to review de novo a No-Fault arbitrator’s legal determinations. Our decision
nevertheless reflects an interpretation of § 1291. We are not considering whether such
orders would or would not be immediately appealable under Minnesota law. See
Budinich v. Becton Dickinson & Co., 486 U.S. 196, 198-99 (1988) (holding in
diversity cases, federal – not state – law controls construing whether an order is a
“final decision” for appealability purposes under § 1291). Rather, our discussion
focuses on whether the district court’s decision compelling arbitration in this case
ended the litigation on the merits. That determination cannot be made without
reference to Minnesota law. Moreover, it should come as no surprise that procedural
niceties can affect the appealability of an order compelling arbitration. Under the
FAA, for example, the appealability of such orders turns directly on whether a district
court “dismisses” or “stays” the litigation. Only in the former case is an order
compelling arbitration immediately appealable. See Green Tree, 531 U.S. at 86 n.2.
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The district court’s decision is also not appealable under the collateral order
doctrine. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)
(holding that a small class of decisions are immediately appealable even though the
decision did not terminate the litigation before the district court). A district court’s
decision is immediately appealable as a collateral order if it: (1) conclusively
determines a disputed issue; (2) which is an important issue completely separate from
the merits; and (3) is effectively unreviewable on appeal from a final judgment. Digital
Equip. Corp., 511 U.S. at 867; Coopers & Lybrand, 437 U.S. at 468; Kassuelke v.
Alliant Techsystems, Inc., 223 F.3d 929, 931 (8th Cir. 2000). As a narrow exception
to the general rule that a single appeal, taken after the entry of a final judgment,
provides a party with a sufficient opportunity to complain of all of the district court’s
errors, the Supreme Court has described the conditions for satisfying the collateral
order doctrine as stringent. See Will, 546 U.S. at 349-50; Digital Equip. Corp., 511
U.S. at 868. Accordingly, “the chance that the litigation at hand might be speeded, or
a ‘particular injustice’ averted by a prompt appellate decision” are, standing alone,
insufficient reasons for classifying a district court’s decision as an appealable
collateral order. Id. (internal citation omitted).
Although the district court conclusively decided each of the issues raised by
Illinois Farmers’ appeal, we need not decide whether any are “important” because
none are “effectively unreviewable” on appeal from a final judgment. Id. at 869. To
satisfy this condition, a party, at a minimum must demonstrate that the interest it seeks
to vindicate immediately would be “irretrievably lost” if it had to wait to appeal until
after a final judgment. See id. at 872 (“[A]nd so the mere identification of some
interest that would be ‘irretrievably lost’ has never sufficed to meet the third Cohen
requirement.”) (citing Lauro Lines s.r.l. v. Chasser, 490 U.S. 495, 499 (1989)).
Illinois Farmers doesn’t contend, however, that any of the issues it raises would
be “irretrievably lost” if forced to wait to appeal after the entry of a final judgment.
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And nor could it. Each of the issues raised by its appeal: (1) whether Alpine Glass
has standing to assert the short-pay claims; (2) whether Minnesota’s anti-incentive
statute proscribes Alpine Glass’s practice of receiving assignments in exchange for
performing glass repair services; and (3) whether the district court erred by dismissing
Illinois Farmers’ requests for declaratory relief and breach of contract claim are issues
of law that this Court can review de novo following a judgment on the merits. Thus,
the district court’s orders are not appealable under the collateral order doctrine.
For the foregoing reasons, we dismiss the appeal for want of jurisdiction.
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