Western Security Bank v. Schneider Limited Partnership

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.