R and C Oilfield Services LLC v. American Wind Transport Group

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 21-2742
______________
R AND C OILFIELD SERVICES LLC,
Appellant
v.
AMERICAN WIND TRANSPORT GROUP LLC
______________
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 2-19-cv-01201)
U.S. District Judge: Honorable William S. Stickman, IV
______________
Submitted Under Third Circuit L.A.R. 34.1(a)
July 6, 2022
______________
Before: SHWARTZ, KRAUSE, and ROTH, Circuit Judges.
(Filed: August 15, 2022)
Alicia M. Schmitt
Bruce E. Stanley
Stanley & Schmitt
322 Richland Lane
Pittsburgh, PA 15208
Counsel for Appellant
William B. Pentecost, Jr.
Cipriani & Werner
650 Washington Road
Suite 700
Pittsburgh, PA 15228
Counsel for Appellee
______________
OPINION OF THE COURT
______________
SHWARTZ, Circuit Judge.
R and C Oilfield Services LLC (“R&C”) was ordered to
arbitrate its dispute with American Wind Transport LLC and,
seventeen months later, told the District Court that it had no
plans to do so. As a result, the District Court dismissed the
case with prejudice pursuant to Federal Rule of Civil Procedure
41(b) for failure to prosecute. R&C asks us to review both the
Rule 41(b) order and the interlocutory order compelling
arbitration, after it took no action to seek interlocutory review
as permitted under the Federal Arbitration Act (“FAA”) and
steadfastly refused to proceed to arbitration. Under those
circumstances, prudence counsels against merging the
2
interlocutory order with the final Rule 41(b) order. As a result,
the interlocutory order is not part of the final order, and we
therefore lack jurisdiction to review it. As to the Rule 41(b)
order, the District Court did not abuse its discretion in
dismissing the case and so we will affirm.
I
A
R&C is a very small family corporation, run by Robert
Fleming and his stepson, Wuttichai Timula. Fleming and
Timula are R&C’s only employees. R&C entered an
agreement to haul equipment for American Wind. The
agreement contained an arbitration clause that provides:
any claim, dispute or controversy including, but
not limited to the interpretation of any federal
statutory or regulatory provisions purported to be
encompassed by this Agreement; or the
enforcement of any statutory rights emanating or
relating to this Agreement shall be resolved on
an individual basis (and not as part of a class
action) exclusively between Contractor and
Carrier by final and binding arbitration to be held
in Allegheny County, Pennsylvania before the
American Arbitration Association (“AAA”).
App’x 39. 1
1
The arbitration clause does not apply to claims arising
out of or related to the agreement’s confidentiality/non-
compete provision or American Wind’s actions to collect
deficit balances, nor does it contain a delegation clause
3
R&C alleges that American Wind failed to make certain
agreed-upon detention payments. The missing payments
resulted in a cash shortfall to R&C, forcing it to sell its trucks.
Fleming and Timula continued to haul equipment for
American Wind using these trucks but did so for the trucks’
new owner.
B
R&C filed suit in federal court, asserting that American
Wind breached the agreement by failing to make the payments.
American Wind moved to dismiss the complaint or stay the
case based on the agreement’s arbitration provision. R&C
opposed the motion, contending that the arbitration clause was
unenforceable under New Prime v. Oliveira, 139 S. Ct. 532(2019), because R&C is a transportation worker operating
under a contract of employment and thus exempt from the
FAA. R&C also argued that the arbitration provision was
unconscionable and therefore unenforceable.
The District Court denied American Wind’s motion to
dismiss but granted the alternative motion to compel
arbitration and stayed the case under § 3 of the FAA,
concluding that New Prime did not deprive the Court of the
authority to compel arbitration because the agreement was a
vendor-vendee contract between two businesses, rather than a
contract of employment. R&C Oilfield Servs., LLC v. Am.
Wind Transport Grp., LLC, 447 F. Supp. 3d 339, 347-50 (W.D.
Pa. 2020). The Court did not address R&C’s challenge to
requiring threshold questions of arbitrability to be decided by
the arbitrator.
4
arbitrability on unconscionability grounds. 2
R&C filed a motion for reconsideration, arguing that the
District Court erred in its application of New Prime, and that
enforcement of the arbitration clause would result in manifest
injustice. The Court denied the motion, and the case therefore
remained stayed.
More than a year later, the District Court ordered the
parties to file a joint status report. The parties reported that
“Plaintiff ha[d] not commenced an arbitration, and d[id] not
plan to do so.” App’x 119. American Wind moved to dismiss
the complaint with prejudice under Rule 41(b) because R&C
refused to initiate arbitration and represented it would not do
so. As a result of R&C’s own failure to prosecute its claim,
American Wind argued that the Court need not address the
factors set forth in Poulis v. State Farm & Fire Casualty, Co.,
747 F.2d 863, 868 (3d Cir. 1984). It alternatively argued that
2
R&C raised its unconscionability defense under
Pennsylvania law in opposition to the motion to compel
arbitration and in its motion for reconsideration, but the
District Court did not address unconscionability. Although we
will resolve this appeal on a different basis, we note that
unconscionability presents a “gateway matter for judicial
determination” that must be decided before granting a motion
to dismiss or to compel arbitration because it concerns
arbitrability. Puleo v. Chase Bank USA, N.A., 605 F.3d 172,
180 (3d Cir. 2010) (collecting cases); see also Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002); Nino v.
Jewelry Exch., Inc., 609 F.3d 191, 200 (3d Cir. 2010); Parilla
v. IAP Worldwide Servs., VI, Inc., 368 F.3d 269, 275-76 (3d
Cir. 2004).
5
the Poulis factors favored dismissal. R&C’s response to the
motion to dismiss addressed neither Rule 41(b) nor the Poulis
factors, but instead repeated the arguments it made in its
motion to reconsider the order compelling arbitration.
The District Court weighed the six Poulis factors and
found: (1) R&C alone was responsible for the delay; (2) while
American Wind suffered no prejudice from noncompliance
with discovery, the case was at a standstill because R&C had
no intention to arbitrate; (3) R&C refused to proceed with
arbitration for seventeen months; (4) R&C’s refusal was
willful; (5) sanctions other than dismissal, such as contempt,
were unavailable because the Court could not force R&C to
proceed with its claims, and R&C was not in contempt of the
arbitration order; and (6) the merits of the underlying dispute
were not before the Court because the only issue it had to
decide was the proper forum for R&C’s claims. R&C Oilfield
Servs., LLC v. Am. Wind Transport Grp., LLC, No. 2:19-cv-
1201, 2021 WL 3682712, at *1 (W.D. Pa. Aug. 19, 2021). The
Court concluded that these factors strongly favored dismissal
and observed that dismissal is consistent with how other courts
treated parties who failed to commence arbitration
proceedings. Id. at *1-2 (citing Windward Agency, Inc. v.
Cologne Life Reins. Co., 353 F. Supp. 2d 538, 540-43 (E.D.
Pa. 2003), aff’d, 123 F. App’x 481 (3d Cir. 2005)
(nonprecedential); James v. McDonald’s Corp., 417 F.3d 672,
681 (7th Cir. 2005); and Renobato v. Compass Bank Corp.,
480 F. App’x 764, 766-68 (5th Cir. 2012) (nonprecedential)).
Accordingly, the Court dismissed the case with prejudice. Id.
at *2.
R&C appeals.
6
II 3
We have jurisdiction over “all final decisions of the
district courts of the United States.” 28 U.S.C. § 1291. This
finality rule “preserves the proper balance between trial and
appellate courts, minimizes the harassment and delay that
would result from repeated interlocutory appeals, and
promotes the efficient administration of justice.” Microsoft
Corp. v. Baker, 137 S. Ct. 1702, 1712 (2017).
Rule 3 of the Federal Rules of Appellate Procedure
directs a party to “designate the judgment—or the appealable
order—from which the appeal is taken.” Fed. R. App. P.
3(c)(1)(B). R&C’s notice of appeal identifies the order on
appeal as the District Court’s order dismissing the complaint
with prejudice under Rule 41(b) for failure to prosecute, which
is a final order. See Blair v. Scott Specialty Gases, 283 F.3d
595, 602 (3d Cir. 2002) (citing Green Tree Fin. Corp.-Ala. v.
Randolph, 531 U.S. 79, 86 (2000)).
A notice of appeal also encompasses all orders that
“merge into the designated judgment or appealable order.”
Fed. R. App. P. 3(c)(4). R&C asks us to review the
interlocutory order compelling arbitration, and its brief focuses
mainly on whether that order was proper.
Interlocutory orders generally “merge” into the final
judgment or order and usually can be reviewed on appeal from
the final order. In re Westinghouse Sec. Litig., 90 F.3d 696,
706 (3d Cir. 1996). Where the final order is one dismissing the
3
The District Court had jurisdiction under 28 U.S.C.
§ 1332.
7
case under Rule 41(b) for failure to prosecute, however,
interlocutory orders typically do not merge. See Sullivan v.
Pac. Indem. Co., 566 F.2d 444, 445-46 (3d Cir. 1977) (per
curiam); Marshall v. Sielaff, 492 F.2d 917, 919 (3d Cir. 1974);
see also Shannon v. Gen. Elec. Co., 186 F.3d 186, 192 (2d Cir.
1999) (holding court lacked appellate jurisdiction over
interlocutory order because “interlocutory orders do not
properly merge with a final judgment dismissing an action for
failure to prosecute”). 4 This exception to merger is consistent
4
Other courts agree. See, e.g., Griggs v. S.G.E. Mgmt.,
LLC, 905 F.3d 835, 845 n.54 (5th Cir. 2018) (noting “courts
prudently decline to review adverse interlocutory rulings
because the matter under review is the dismissal itself” and
limiting review to order dismissing under Rule 41(b) for failure
to prosecute, not interlocutory order compelling arbitration);
Knoll v. Am. Tel. & Tel. Co., 176 F.3d 359, 366 (6th Cir. 1999)
(declining to review interlocutory orders where dismissal for
failure to prosecute was not an abuse of discretion); John’s
Insulation, Inc. v. L. Addison & Assocs., Inc., 156 F.3d 101,
105 (1st Cir. 1998) (holding “review of the merits” of
interlocutory orders “is beyond the scope of this appeal”
because “interlocutory rulings do not merge into a judgment of
dismissal for failure to prosecute”); Ash v. Cvetkov, 739 F.2d
493, 497 (9th Cir. 1984) (“dismissal without prejudice because
of failure to prosecute is not to be employed as an avenue for
reaching issues which are not subject to interlocutory appeal as
of right”); Bowe v. First of Denver Mortg. Invs., 613 F.2d 798,
802 (10th Cir. 1980) (concluding court lacked “authority to
review” order denying class certification after dismissal for
failure to prosecute); see also Microsoft, 137 S. Ct. at 1713
(recognizing an exception to the merger doctrine when a party
voluntarily dismisses its case under Rule 41(a) to obtain
8
with the finality interests inherent in § 1291. Indeed, if a party
could “refuse to proceed whenever a trial judge ruled against
him, wait for the court to enter a dismissal for failure to
prosecute, and then obtain review” of an otherwise
unappealable order, Marshall, 492 F.2d at 919, courts would
“reward a party for dilatory and bad faith tactics,” John’s
Insulation, Inc. v. L. Addison & Assocs., Inc., 156 F.3d 101,
105 (1st Cir. 1998) (citation omitted); see also DuBose v.
Minnesota, 893 F.2d 169, 171 (8th Cir. 1990) (concluding no
merger of interlocutory orders because “failure to prosecute a
claim should carry no . . . reward”).
The same prudential considerations counsel against
reviewing the order compelling arbitration here. 5 R&C had
multiple avenues to seek appeal of the District Court’s order to
stay the proceedings and compel arbitration. R&C did not seek
appellate review of an interlocutory order because “voluntary-
dismissal tactic[s]” invite “protracted litigation and piecemeal
appeals” and explaining that if interlocutory orders merged
with the dismissal, a plaintiff “need only dismiss her claims”
to trigger an appeal of right, potentially allowing the plaintiff
to “stop[] and start[] the district court proceedings with
repeated interlocutory appeals”).
5
Because we are evaluating a Rule 41(b) involuntary
dismissal order for failure to prosecute, we need not consider
cases arising from voluntary dismissal orders, such as In re
Pharmacy Benefits Managers Antitrust Litigation, 700 F.3d
109, 114 (3d Cir. 2012), and Camesi v. University of
Pittsburgh Medical Center, 729 F.3d 239, 245-46 (3d Cir.
2013), or Microsoft’s impact on them nor do we consider a
situation where a party sought a voluntary dismissal from the
district court and its request was denied.
9
interlocutory review under § 1292(b) as the FAA provides, 6
see 9 U.S.C. § 16(b), nor did it arbitrate its claims to
completion and appeal to the extent permitted under the FAA,
see 9 U.S.C. § 16(a)(3). Instead, R&C sat on its rights for a
year and a half and told the District Court that it did not intend
to comply with the order, leaving the Court no choice but to
involuntarily dismiss the complaint. See, e.g., Griggs, 905
F.3d at 845 n.54 (“[Plaintiff] should not be permitted, through
recalcitrance, to obtain the review of the arbitration clause that
he was expressly denied in the district court, a review that
Congress has foreclosed under the [FAA].”); Clowdis v. Colo.
Hi-Tec Moving & Storage, Inc., 604 F. App’x 678, 681-82
(10th Cir. 2015) (not precedential) (“[Plaintiff] seeks appellate
review of the interlocutory order [compelling arbitration], with
6
R&C’s contention that the District Court’s denial of its
motion for reconsideration indicates the Court would not
certify an appeal under § 1292(b) is speculative. Moreover, the
standard to obtain certification under § 1292(b) differs from
that to obtain reconsideration. Compare 28 U.S.C. § 1292(b)
(requiring a showing that the order “involves a controlling
question of law as to which there is substantial ground for
difference of opinion and that an immediate appeal from the
order may materially advance the ultimate termination of the
litigation”), with Max’s Seafood Café ex rel. Lou-Ann, Inc. v.
Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (noting that the
purpose of reconsideration “is to correct manifest errors of law
or fact or to present newly discovered evidence,” and a party
seeking reconsideration must show at least one of the following
to obtain relief: “(1) an intervening change in the controlling
law; (2) the availability of new evidence . . . or (3) the need to
correct a clear error of law or fact or to prevent manifest
injustice”).
10
which he made no timely attempts to comply . . . and [of which
he] did not request certification for an interlocutory appeal, . . .
[so] [a]pplying the prudential rule, we decline to review the
interlocutory order.”). As a result, the order compelling
arbitration does not merge into the final order. Because the
interlocutory order does not merge into the final order, it is
outside the notice of appeal and we lack jurisdiction to review
it. The only order we may review is the District Court’s Rule
41(b) order.
III 7
Courts possess inherent power to “manage their own
affairs so as to achieve the orderly and expeditious disposition
of cases.” Link v. Wabash R.R. Co., 370 U.S. 626, 630-31
(1962); cf. United States v. Wright, 913 F.3d 364, 374 n.11 (3d
Cir. 2019) (acknowledging that Link permits a court to dismiss
a civil case to prevent delays and court congestion). This
includes the authority to dismiss a case for lack of prosecution.
Link, 370 U.S. at 630. A court does not abuse its discretion in
dismissing for failure to prosecute where a litigant’s conduct
has made adjudication impossible. Doe v. Megless, 654 F.3d
404, 411 (3d Cir. 2011); see also Guyer v. Beard, 907 F.2d
1424, 1430 (3d Cir. 1990) (observing that where a litigant’s
position “made adjudication of the case impossible,” “any
lesser sanction [than dismissal] would not have furthered the
interests of justice”). Thus, a district court need not balance
the Poulis factors before dismissing a case with prejudice when
7
We review a court’s order to dismiss under Federal
Rule of Civil Procedure 41(b) for abuse of discretion.
Hildebrand v. Allegheny Cnty., 923 F.3d 128, 131 (3d Cir.
2019).
11
a litigant willfully refuses to prosecute after receiving an
adverse ruling. See Spain v. Gallegos, 26 F.3d 439, 454 (3d
Cir. 1994) (“A party disappointed with a court’s ruling may not
refuse to proceed and then expect to obtain relief on appeal
from an order of dismissal or default.”).
The District Court did not abuse its discretion in
dismissing the case with prejudice pursuant to Rule 41(b)
following R&C’s inaction for more than a year and clear
statement that it had no plans to pursue arbitration. In its
opposition to American Wind’s Rule 41 motion to dismiss,
R&C simply repeated that it believed the arbitration clause was
unenforceable and expressed concerns about the expense and
futility of arbitration. R&C’s belief and concern, however,
does not excuse it from either complying with the order or
promptly seeking review. See 9 U.S.C. § 16. It did neither.
The Court, therefore, soundly exercised its discretion in
dismissing this case. Link, 370 U.S. at 630; see also James,
417 F.3d at 681 (dismissing complaint where party refused to
comply with an order compelling arbitration because “[o]nce a
party invokes the judicial system by filing a lawsuit, it must
abide by the rules of the court; a party can not decide for itself
when it feels like pressing its action” (quoting GCIU Emp’r
Ret. Fund v. Chi. Trib. Co., 8 F.3d 1195, 1198-99 (7th Cir.
1993))); Spain, 26 F.3d at 454 (holding no abuse of discretion
where court dismissed remaining counts for failure to
prosecute after litigant “decided not to proceed” following an
adverse ruling); Doe, 654 F.3d at 411 (holding no abuse of
discretion in dismissing action where party refused to file a
complaint using his real identity after court denied motion to
proceed anonymously); Guyer, 907 F.3d at 1430 (holding no
abuse of discretion in dismissing action where party was given
several chances to sign a limited power of attorney form and
12
refused to do so, “ma[king] adjudication of the case
impossible”). Accordingly, we will affirm the District Court’s
dismissal order. 8
IV
For the foregoing reasons, we will affirm.
8
Given R&C’s deliberate inaction, the District Court
did not need to evaluate the Poulis factors, see Spain, 26 F.3d
at 454-55. Thus, we need not decide whether the District Court
correctly evaluated those factors.
13