Klepper v. SLI, Inc.

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
5-28-2002
Klepper v. SLI Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 01-2848
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"Klepper v. SLI Inc" (2002). 2002 Decisions. Paper 308.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 01-2848
___________
EDWARD M. KLEPPER;
MEDIATOR
v.
SLI, INC. f/k/a Chicago Miniature Lamp, Inc.;
CHICAGO MINIATURE LAMP, INC.;
CHICAGO MINIATURE LAMP, INC. 1995 INCENTIVE
AND NON-STATUTORY STOCK OPTION PLAN;
CHICAGO MINIATURE LAMP, INC. INCENTIVE
AND NON-STATUTORY STOCK OPTION GRANT;
FRANK M. WARD, President of SLI, Inc.
f/k/a Chicago Miniature Lamp Co., Inc.
SLI, Inc.; Chicago Miniature Lamp, Inc.;
Chicago Miniature Lamp, Inc. 1995 Incentive
and Non-Statutory Stock Option Plan;
Chicago Miniature Lamp, Inc. Incentive and
Non-Statutory Stock Option Grant;
Frank M. Ward,
Appellants
_______________________________________________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
D.C. Civil Action No. 99-cv-02256
(Honorable Yvette Kane)
___________________
Argued April 23, 2002
Before: SCIRICA, RENDELL and NOONAN*, Circuit Judges
(Filed: May 28, 2002)
MICHAEL A. PAVLICK, ESQUIRE (ARGUED)
Kirkpatrick & Lockhart
Henry W. Oliver Building
535 Smithfield Street
Pittsburgh, Pennsylvania 15222
Attorney for Appellants
FRANK P. CLARK, ESQUIRE (ARGUED)
3045 Market Street, 2nd Floor
Camp Hill, Pennsylvania 17011
Attorney for Appellee
__________________
OPINION OF THE COURT
__________________
SCIRICA, Circuit Judge.
Defendant appeals a discovery order on the ground that it was the equivalent of a
refusal to enforce an arbitration clause in violation of the Federal Arbitration Act.
*The Honorable John T. Noonan, Jr., United States Circuit Judge for the Ninth
Judicial Circuit, sitting by designation.
I.
Our review over legal issues is plenary. Sandvik v. Advent Int’l Corp., 220 F.3d
99, 102 (3d Cir. 2000).
II.
Before considering the merits of defendant’s appeal, we must determine whether
we have appellate jurisdiction. Section 16 of the Federal Arbitration Act provides that
an appeal may be taken from an order refusing to stay an action pending arbitration
pursuant to FAA 9 U.S.C. 3. See 9 U.S.C. 16(a)(1)(A); Smith v. Equitable, 209
F.3d 268, 272 (3d Cir. 2000) ("Section 16(b) makes [it] clear that with respect to an
interlocutory order issued in an ongoing proceeding, any order favoring litigation over
arbitration is immediately appealable . . . ."); Corpman v. Prudential-Bache Securities,
Inc., 907 F.2d 29, 30 (3d Cir. 1990) (per curiam) (stating that when a district court’s
order "is in essence an order refusing to stay [litigation] under section 3 of the Federal
Arbitration Act," we have jurisdiction to hear an appeal under FAA 9 U.S.C. 16).
Here, plaintiff Edward Klepper seeks to exercise stock options under a stock
option incentive plan administered by his former employer SLI, Inc. The SLI stock
option incentive plan contains an arbitration clause providing that "[a]ny dispute or
disagreement which shall arise under or as the result of this Option Grant shall be settled
by an arbitrator." Rather than submit his stock option claim to arbitration, plaintiff
brought this suit for breach of contract and violation of the Pennsylvania Wage Payment
and Collection Law, 43 P.S. 260.1.
Defendant has requested a ruling on the arbitrability of the stock option claim. On
June 22, 2001, the District Court issued an order requiring the parties to complete
discovery "on all pending issues, including the stock option issue." In so doing, it
appears the district judge may have permitted the litigation to proceed without a prior
ruling on the arbitrability issue. Or she may have simply wanted the parties to develop a
record on the arbitrability of the stock option claims. Cf. Suarez-Valdez v. Shearson
Lehman, Inc., 858 F.2d 648, 649 (11th Cir. 1988) (Tjoflat, J., concurring) ("The district
court erred in refusing to stay discovery. An agreement to arbitrate is an agreement to
proceed under arbitration and not under court rules [like the Fed. R. Civ. P.] . . . ."),
quoted in Corpman, 907 F.2d at 31. We are not certain, but to move this matter along,
we hold the District Court’s Order "in essence" constituted a declination to stay litigation
pending arbitration under FAA 9 U.S.C. 3. Therefore we have jurisdiction to hear
defendant’s appeal from the Order of June 22, 2001.
III.
The Federal Arbitration Act "federalizes arbitration law" and "creates a body of
federal substantive law establishing and regulating the duty to honor an agreement to
arbitrate . . . ." John Hancock Mutual Life Ins. v. Olick, 151 F.3d 132, 136 (3d Cir.
1998). See also Seus v. Nuveen & Co., 146 F.3d 175, 178 (3d Cir. 1998) (asserting the
FAA was enacted to make agreements to arbitrate enforceable to the same extent as other
contracts); Sharon Steel Corp. v. Jewell Coal, 735 F.2d 775,778 (3d Cir. 1984) (stating
the FAA reflects "a legislative determination of the desirability of arbitration as an
alternative to litigation . . . ."). Accordingly, FAA 3 provides that "upon being satisfied
that the issue involved in such suit or proceeding is referable to arbitration," the court
"shall on application of one of the parties stay the trial of the action until such arbitratio
has been had in accordance with the terms of the agreement." 9 U.S.C. 3. Thus
requiring the parties to submit to full discovery under the Federal Rules of Civil
Procedure may unnecessarily subject them "to the very complexities, inconveniences and
expenses of litigation that they determined to avoid." Suarez, 858 F.2d at 649 (Tjoflat,
J., concurring). IV.
For these reasons, we will vacate the District Court’s discovery order of June 22,
2001 and remand for examination of the scope and applicability of the stock option
plan’s arbitration clause in accordance with Blair v. Scott, 283 F.3d 595, 604 (3d Cir.
2002) (examining the enforceability of an arbitration agreement under basic contract
principles) and Hancock, 151 F.3d at 137 (describing "the threshold questions a district
court must answer before compelling or enjoining arbitration . . . ."). Of course, to the
extent discovery is appropriate on the arbitrability issue, we leave that to the sound
discretion of the able District Judge.
TO THE CLERK:
Please file the foregoing opinion.
Circuit Judge
DATED: UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 01-2848
___________
EDWARD M. KLEPPER;
MEDIATOR
v.
SLI, INC. f/k/a Chicago Miniature Lamp, Inc.;
CHICAGO MINIATURE LAMP, INC.;
CHICAGO MINIATURE LAMP, INC. 1995 INCENTIVE
AND NON-STATUTORY STOCK OPTION PLAN;
CHICAGO MINIATURE LAMP, INC. INCENTIVE
AND NON-STATUTORY STOCK OPTION GRANT;
FRANK M. WARD, President of SLI, Inc.
f/k/a Chicago Miniature Lamp Co., Inc.
SLI, Inc.; Chicago Miniature Lamp, Inc.;
Chicago Miniature Lamp, Inc. 1995 Incentive
and Non-Statutory Stock Option Plan;
Chicago Miniature Lamp, Inc. Incentive and
Non-Statutory Stock Option Grant;
Frank M. Ward,
Appellants
_______________________________________________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
D.C. Civil Action No. 99-cv-02256
(Honorable Yvette Kane)
___________________
Argued April 23, 2002
Before: SCIRICA, RENDELL and NOONAN*, Circuit Judges
JUDGMENT
This cause came to be heard on the record from the United States District
Court for the Middle District of Pennsylvania and was argued by counsel on April 23,
2002. On consideration whereof, it is now hereby
ORDERED and ADJUDGED by this Court that the judgment of the
District Court entered June 22, 2001, be, and the same is hereby vacated and the case
remanded for proceedings consistent with this opinion. No costs taxed. All of the above
in accordance with the opinion of this Court.
ATTEST:
Clerk
DATED: 28 May 2002
*The Honorable John T. Noonan, Jr., United States Circuit Judge for the Ninth
Judicial Circuit, sitting by designation. May 23, 2002
TO: Marcia M. Waldron, Clerk
FROM: Judge Scirica
RE: Klepper v. SLI, Inc., et al.
No. 01-2848
Argued: April 23, 2002
Dear Marcy:
Please file the attached not precedential opinion which has been cleared in
accordance with our procedure. The signed original is being delivered to your office.
Sincerely,
Anthony J. Scirica
AJS/sss
cc (letter only): Judge Rendell
Judge Noona