Western Security Bank v. Schneider Limited Partnership , 816 F.3d 587 ( 2016 )


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  •                  FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    WESTERN SECURITY BANK, a                 No. 15-35617
    division of Glacier Bank,
    Plaintiff-Appellee,      D.C. No.
    1:15-cv-00010-
    v.                       SPW-CSO
    SCHNEIDER LIMITED PARTNERSHIP,
    Defendant,            ORDER
    and
    JAY WINZENREID, M.D.; STEPHEN
    EMERY; BIG HORN BASIN BONE AND
    JOINT, LLC,
    Defendants-Appellants.
    Appeal from the United States District Court
    for the District of Montana
    Susan P. Watters, District Judge, Presiding
    Submitted to Motions Panel
    February 16, 2016
    Filed March 14, 2016
    Before: Susan P. Graber, Johnnie B. Rawlinson,
    and Michelle T. Friedland, Circuit Judges.
    2         WESTERN SECURITY BANK V. WINZENREID
    SUMMARY*
    Appellate Jurisdiction
    The motions panel dismissed for lack of jurisdiction an
    interlocutory appeal from the district court’s denial of a
    motion for a stay, pending a separate arbitration, of a
    diversity action to enforce commercial loan guarantees.
    The panel held that the court of appeals lacked
    jurisdiction under § 16(a) of the Federal Arbitration Act,
    which permits an interlocutory appeal from an order refusing
    a stay under FAA § 3. Although the motion was styled as one
    brought under FAA § 3, the moving party did not seek to
    compel a party to arbitrate. Using a test adopted by the Tenth
    Circuit, the panel held that the court lacked jurisdiction under
    § 16(a) because the essence of the stay motion was not for
    relief under the FAA. In addition, the court of appeals lacked
    jurisdiction to review, on an interlocutory basis, an ordinary
    exercise of discretion to deny a stay.
    COUNSEL
    Scott Stinson, Stinson Law Group, Bozeman, Montana, for
    Defendants-Appellants.
    Shane P. Coleman, Michael P. Manning, and Robert L.
    Sterup, Holland & Hart LLP, Billings, Montana, for Plaintiff-
    Appellee.
    *
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    WESTERN SECURITY BANK V. WINZENREID                        3
    ORDER
    Appellee Western Security Bank (“Western Security”)
    filed in federal district court this diversity action against
    appellants Jay Winzenreid, M.D., Stephen Emery, and Big
    Horn Basin Bone and Joint, LLC (“Wyoming Doctors”)
    seeking to enforce commercial loan guaranties. The
    Wyoming Doctors raised the affirmative defense that
    Meridian Surgical Partners (“Meridian”), which is not a party
    to this action, fraudulently induced them to guarantee the
    loan. The Wyoming Doctors then filed a motion in the
    district court to stay the present action pending a separate
    arbitration between the Wyoming Doctors and non-party
    Meridian. The Wyoming Doctors styled their motion, in part,
    as one brought pursuant to § 31 of the Federal Arbitration Act
    (“FAA”), notwithstanding the fact that they did not seek to
    compel Western Security to arbitrate its claims against them.
    The district court denied the stay motion, and the Wyoming
    Doctors filed this interlocutory appeal.
    Although a court of appeals ordinarily has jurisdiction
    only over a final decision of the district court, Arthur
    1
    Section 3 of the FAA, 9 U.S.C. § 3 (2012), provides:
    If any suit or proceeding be brought in any of the
    courts of the United States upon any issue referable to
    arbitration under an agreement in writing for such
    arbitration, the court in which such suit is pending,
    upon being satisfied that the issue involved in such suit
    or proceeding is referable to arbitration under such an
    agreement, 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, providing the applicant for the stay is not in
    default in proceeding with such arbitration.
    4        WESTERN SECURITY BANK V. WINZENREID
    Andersen LLP v. Carlisle, 
    556 U.S. 624
    , 627 (2009) (citing
    28 U.S.C. § 1291), the Wyoming Doctors invoke § 16(a) of
    the FAA, which permits an interlocutory appeal “from . . . an
    order . . . refusing a stay of any action under section 3 of this
    title.” See 9 U.S.C. §16(a)(1). Western Security contends
    that we lack jurisdiction over this appeal because neither
    FAA § 3 nor § 16(a) applies in the absence of an attempt by
    the Wyoming Doctors to compel Western Security to
    arbitrate. For that reason, it argues, the motion should be
    construed to seek only a discretionary stay, the denial of
    which this court lacks jurisdiction to review in an
    interlocutory appeal. The Wyoming Doctors counter that,
    because Meridian’s alleged fraudulent inducement is at issue
    in the separate arbitration, their affirmative defense in this
    action constitutes an “issue referable to arbitration” within the
    meaning of § 3.
    We have not addressed whether the denial of a stay
    motion purportedly brought under § 3 is immediately
    appealable when the moving party does not seek to compel a
    party to arbitrate. Other circuits have addressed the related
    question of whether an appellate court has jurisdiction over
    an interlocutory appeal from the denial of a motion to dismiss
    premised on the existence of an arbitration agreement,
    notwithstanding the fact that the moving party did not seek to
    compel arbitration or explicitly invoke §§ 3 or 4. These
    circuits have held that, in order to invoke the appellate
    jurisdiction provided in § 16(a), a party in the district court
    “must either move to compel arbitration and stay litigation
    explicitly under the FAA, or must make it plainly apparent
    that he seeks only the remedies provided for by the
    FAA—namely, arbitration rather than any judicial
    determination.” Conrad v. Phone Directories Co., 
    585 F.3d 1376
    , 1385 (10th Cir. 2009); 
    id. at 1386
    (dismissing
    WESTERN SECURITY BANK V. WINZENREID                    5
    interlocutory appeal for lack of jurisdiction because motion
    requested “judicial relief in the form of dismissal, rather than
    a request that the court refer the case to an arbitrator to decide
    the issues”); see also Wabtec Corp. v. Faiveley Transp.
    Malmo AB, 
    525 F.3d 135
    , 140–41 (2d Cir. 2008) (dismissing
    appeal for lack of jurisdiction because motion to dismiss did
    not request arbitration); Bombardier Corp. v. Nat’l R.R.
    Passenger Corp., 
    333 F.3d 250
    , 254 (D.C. Cir. 2003)
    (dismissing appeal for lack of jurisdiction because, “unlike a
    motion to compel or stay under the FAA, Amtrak’s motion
    exhibited no intent to pursue arbitration”); cf. Wheeling
    Hosp., Inc. v. Health Plan of Upper Ohio Valley, Inc.,
    
    683 F.3d 577
    , 585–86 (4th Cir. 2012) (adopting Conrad
    analysis and exercising jurisdiction because moving party
    sought to compel arbitration); Fit Tech, Inc. v. Bally Total
    Fitness Holding Corp., 
    374 F.3d 1
    , 5 (1st Cir. 2004)
    (exercising jurisdiction based on “explicit request for a
    reference to the Chicago arbitrator”).
    In Conrad, the Tenth Circuit adopted a two-step process
    for determining whether a court of appeals has appellate
    jurisdiction under § 16(a):
    The first, simplest, and surest way to
    guarantee appellate jurisdiction under § 16(a)
    is to caption the motion in the district court as
    one brought under FAA §§ 3 or 4. See Fed.
    R. Civ. P. 10(a) (“Every pleading must have a
    caption with the court’s name, a title, a file
    number, and a Rule 7(a) designation.”)
    (emphasis added). This simple rule should
    dispose of the vast majority of cases in this
    area, and those hoping to avail themselves of
    6        WESTERN SECURITY BANK V. WINZENREID
    the immediate appeal provided for in the FAA
    would do well to follow 
    it. 585 F.3d at 1385
    . Although “an approach that looks
    exclusively to the caption of a motion may seem tempting,”
    Conrad observed, “it would be unworkable” because it
    “would violate the spirit of notice pleading embodied in our
    Federal Rules of Civil Procedure” and “create incentives for
    litigants to ‘game’ the captions of their motions in an effort
    to gain an interlocutory appeal where none is warranted.” 
    Id. The court
    therefore articulated a second step in determining
    appellate jurisdiction:
    If a motion denied by the district court is
    not explicitly styled as a motion under the
    FAA, or the court suspects that the motion has
    been mis-captioned in an attempt to take
    advantage of § 16(a), the court must look
    beyond the caption to the essential attributes
    of the motion itself. The goal of this inquiry
    is to determine whether it is plainly apparent
    from the four corners of the motion that the
    movant seeks only the relief provided for in
    the FAA, rather than any other judicially-
    provided remedy.
    
    Id. (citation omitted).
    The Tenth Circuit concluded that, “[i]f
    the essence of the movant’s request is that the issues
    presented be decided exclusively by an arbitrator and not by
    any court, then the denial of that motion may be appealed
    under § 16(a).” 
    Id. at 1386.
    “If, on the other hand, the
    movant in the district court requests a judicial remedy that is
    inconsistent with the position that the issues” in the litigation
    “may be decided only by the arbitrator, the movant is no
    WESTERN SECURITY BANK V. WINZENREID                    7
    longer proceeding exclusively under the FAA and has
    forfeited their right to interlocutory review under § 16(a).”
    
    Id. We find
    this analysis persuasive in the context of an
    interlocutory appeal from the denial of a motion to stay
    proceedings pending arbitration, purportedly brought under
    § 3. Under the test articulated in Conrad, the Wyoming
    Doctors’ motion does not meet the criteria to invoke our
    jurisdiction under § 16(a). Although the Wyoming Doctors
    styled their motion as one brought under § 3, thereby
    satisfying step one of the Conrad analysis, the Wyoming
    Doctors’ motion fails at step two—the motion appears to
    have been mis-captioned in an attempt to take advantage of
    § 16(a). See 
    id. at 1385.
    The Wyoming Doctors repeatedly made clear they do not
    seek to compel Western Security to arbitrate any claims it has
    brought against them in the district court. See, e.g., District
    Court Dkt. No. 18 at 30 (“Memo”) (“[Western Security] will
    not be bound to the arbitrator’s decision . . . .”); 9th Cir. Dkt.
    No. 12 (“Opp.”) at 1 (“[C]ompelling [Western Security] to
    arbitration is superfluous . . . .”), and Opp. at 15 (“[Western
    Security] can join the arbitration if it so chooses . . . .”).
    Although the Wyoming Doctors argued, under principles of
    state contract law, that Western Security is bound by the
    arbitration agreement between the Wyoming Doctors and
    Meridian, an issue we do not decide, they clarified that these
    arguments were meant to illustrate “how they could be
    irreparably harmed absent a stay because issue
    preclusion/collateral estoppel could lead to conflicting
    results” in the arbitration and litigation and that they “are
    intent on resolving the common issues first in arbitration.”
    Opp. at. 14, 15 (emphasis added). In so doing, the Wyoming
    8       WESTERN SECURITY BANK V. WINZENREID
    Doctors made clear that they ultimately seek a judicial
    remedy from the district court after completion of the
    separate arbitration, rather than an exclusive remedy against
    Western Security through arbitration. See 
    Conrad, 585 F.3d at 1385
    ; Memo at 10 (“[Western Security] should now wait
    a few months for the arbitration between [the Wyoming
    Doctors] and Meridian to be resolved before its loan
    obligations are fully satisfied.”); see also IDS Life Ins. v.
    SunAmerica, Inc., 
    103 F.3d 524
    , 529 (7th Cir. 1996) (“The
    only purpose that we can ascribe to the word ‘issue’ in
    section 3 is to enable litigation to be stayed pending
    arbitration even if only one of the issues in the litigation is
    subject to an agreement to arbitrate. The [FAA] has no
    application to ‘issues’ in cases between different parties.”).
    Because the essence of the Wyoming Doctors’ stay motion
    was not for relief under the FAA, no § 16(a) appellate
    jurisdiction exists over the denial of that motion. We lack
    jurisdiction to review, on an interlocutory basis, an ordinary
    exercise of discretion to deny a stay.
    The appeal is therefore dismissed for lack of jurisdiction.
    DISMISSED.
    

Document Info

Docket Number: 15-35617

Citation Numbers: 816 F.3d 587, 2016 WL 946960, 2016 U.S. App. LEXIS 4645

Judges: Friedland, Graber, Johnnie, Michelle, Rawlinson, Susan

Filed Date: 3/14/2016

Precedential Status: Precedential

Modified Date: 11/5/2024