Kum Tat Limited v. Linden Ox Pasture, LLC

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
KUM TAT LIMITED, No. 14-17472
Plaintiff-Appellant,
D.C. No.
v. 3:14-cv-02857-WHO
LINDEN OX PASTURE, LLC,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the Northern District of California
William Horsley Orrick, III, District Judge, Presiding
Argued and Submitted December 15, 2016
San Francisco, California
Filed January 13, 2017
Before: Carlos F. Lucero, * Susan P. Graber,
and Andrew D. Hurwitz, Circuit Judges.
Opinion by Judge Hurwitz
*
The Honorable Carlos F. Lucero, Circuit Judge, United States
Court of Appeals for the Tenth Circuit, sitting by designation.
2 KUM TAT LTD. V. LINDEN OX PASTURE
SUMMARY **
Jurisdiction / Arbitration
The panel dismissed for lack of jurisdiction an
interlocutory appeal from the district court’s order denying
Kum Tat Limited’s motion to compel arbitration of a claim
against Linden Ox Pasture, LLC, where the arbitration
motion relied only on state law and was not filed pursuant to
the Federal Arbitration Act.
The Federal Arbitration Act authorizes interlocutory
appeals from the orders described in 9 U.S.C. § 16(a)(1).
The panel held that the district court order denying the
motion to compel arbitration was not an order from which
§ 16(a)(1) permitted an interlocutory appeal because the
arbitration motion urged application only of California
arbitration law and contained no citation to the Federal
Arbitration Act.
The panel declined to treat the appeal as a petition for a
writ of mandamus given that mandamus is warranted only if,
among other requirements, a district court order was clearly
erroneous. The panel held that the district court did not
clearly err in reserving for itself the question of whether the
parties agreed to arbitrate. The panel also held that the
district court did not clearly err in concluding that the parties
did not form a contract.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
KUM TAT LTD. V. LINDEN OX PASTURE 3
COUNSEL
Charles Michael Schaible (argued) and Patrick P. Gunn,
Cooley LLP, San Francisco, California, for Plaintiff-
Appellant.
Jeffrey L. Fillerup (argued), Rincon Law LLP, San
Francisco, California, for Defendant-Appellee.
OPINION
HURWITZ, Circuit Judge:
Kum Tat Limited (“Kum Tat”) moved to compel
arbitration of a claim against Linden Ox Pasture, LLC
(“Linden Ox”), in connection with an attempted purchase of
a California residence. The arbitration motion relied only on
state law, and Kum Tat later emphasized that the motion was
not filed pursuant to the Federal Arbitration Act (“FAA”),
9 U.S.C. §§ 1–16. The district court denied the motion, and
Kum Tat filed this interlocutory appeal, invoking appellate
jurisdiction under the FAA. We dismiss the appeal for lack
of jurisdiction.
BACKGROUND
A. Contract negotiations
In May 2014, Kum Tat, a Chinese corporation, offered
to buy a residential property from Linden Ox, a Florida
limited liability corporation, for $38 million. The offer
included all “furniture,” “art work,” and “decorative items,”
and required Linden Ox to submit an “[e]xclusion list of any
personal items” within five days of acceptance. The offer
provided that any disputes “arising out of this Contract”
4 KUM TAT LTD. V. LINDEN OX PASTURE
would be arbitrated and that the parties “MAY BE
COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE.”
Linden Ox initialed the arbitration clause in the offer, but
counter-offered to sell for $43 million. The counter-offer
included “furniture” but excluded certain artwork and other
items, and it provided that Linden Ox would send “a specific
exclusion list” within seven days of acceptance of the
counter-offer for Kum Tat to “approve.”
Kum Tat then counter-offered at $41 million; the
counter-offer included “furniture” and “decorative items”
but excluded certain artwork. The counter-offer stated that
Kum Tat had to “review and approve” Linden Ox’s inclusion
and exclusion lists in order to “Fully Ratify” the contract:
Seller to provide a specific exclusion and
inclusion lists the same day signing Counter
Offer No. Two (2) as the Record, and Buyer
to review and approve in order to Fully Ratify
this Purchase Contract.
Linden Ox signed this counter-offer in the space marked
“Acceptance” and sent Kum Tat detailed inclusion and
exclusion lists.
Several days later, Kum Tat notified Linden Ox that it
“disapproved the exclusion list” and was “requesting a small
reduction” in price. That evening, Kum Tat notified Linden
Ox that it “accepts” the exclusion list and that the contract
would be “fully ratified” upon Linden Ox’s acceptance of a
price reduction:
KUM TAT LTD. V. LINDEN OX PASTURE 5
Buyers accepts seller’s exclusion list
delivered on 5/30/2014, with a purchase price
reduction of $500,000.00 – total purchase
price to be $40,500,000.00. Contract to be
fully ratified by acceptance of this addendum.
Linden Ox did not accept the addendum. Rather, on the next
day, Linden Ox rejected the price reduction and terminated
negotiations. It later agreed to sell the property to a third
party.
B. Litigation
Kum Tat sued Linden Ox in California state court,
claiming breach of contract and recording a lis pendens on
the property. Asserting diversity, Linden Ox removed the
suit to the Northern District of California and moved to
expunge the lis pendens. The district court granted the
motion.
Kum Tat then moved “for an order compelling
arbitration and staying this action” pursuant to California
“Code of Civil Procedure sections 1281.2 and 1281.4.” Kum
Tat’s motion did not cite the FAA, instead arguing that
“California law governs this motion” and that, “under
California law, this dispute must be arbitrated.” The district
court denied the motion, finding that the parties had not
entered a binding agreement to arbitrate.
Kum Tat filed a notice of appeal and sought a stay
pending appeal. Kum Tat’s stay motion, in attempting to
distinguish an unfavorable Ninth Circuit case interpreting
6 KUM TAT LTD. V. LINDEN OX PASTURE
the FAA, emphasized that Kum Tat’s motion to compel
arbitration was made under state law only. 1
Kum Tat’s opening brief in this court cited 9 U.S.C.
§ 16(a)(1) as the source of appellate jurisdiction. Although
Linden Ox’s answering brief did not contest jurisdiction, we
requested supplemental briefing on the applicability of
§ 16(a)(1), in view of our independent obligation to ensure
jurisdiction. See WMX Techs., Inc. v. Miller, 104 F.3d 1133,
1135 (9th Cir. 1997) (en banc) (holding that we must
consider our jurisdiction). Kum Tat’s supplemental brief
maintains that § 16(a)(1) authorizes this interlocutory appeal
and, alternatively, asks us to construe the appeal as a petition
for a writ of mandamus.
DISCUSSION
A. 9 U.S.C. § 16(a)(1)
Although our appellate jurisdiction is generally limited
to “final decisions” of district courts, 28 U.S.C. § 1291, the
FAA authorizes interlocutory appeals from the orders
described in 9 U.S.C. § 16(a)(1). See Arthur Andersen LLP
1
The case in question was Britton v. Co-op Banking Group,
916 F.2d 1405 (9th Cir. 1990). Kum Tat stated:
Britton was decided pursuant to §§ 15(a)(1)(A) and
(B) of the Federal Arbitration Act, and concerned a
motion to compel arbitration made pursuant to § 4 of
the Federal Arbitration Act. In contrast, Kum Tat’s
motion to compel arbitration was made pursuant to
section 1281.2 of the [California] Code of Civil
Procedure . . . .
The district court denied a stay pending appeal, but this court granted a
stay.
KUM TAT LTD. V. LINDEN OX PASTURE 7
v. Carlisle, 556 U.S. 624, 627–28 (2009). FAA appellate
jurisdiction extends to orders “refusing a stay of any action
under section 3 of this title,” § 16(a)(1)(A), and orders
“denying a petition under section 4 of this title to order
arbitration to proceed,” § 16(a)(1)(B). We interpret this
statute “according to its ordinary meaning” and “do not add
to the jurisdictional provisions set forth by Congress.” Van
Dusen v. Swift Transp. Co., 830 F.3d 893, 897 (9th Cir.
2016).
Kum Tat’s motion to compel arbitration and stay
litigation was neither “under section 3” nor “under section
4” of the FAA. The motion expressly urged application only
of California arbitration law and contained no citation to the
FAA. Significantly, Kum Tat later emphasized that the
motion was not made under the FAA. 2 Thus, we hold that
the order denying the motion was not an order from which
§ 16(a)(1) permits an interlocutory appeal.
Our sister circuits have reached similar conclusions. The
Third Circuit has held that § 16(a) does not permit appellate
“review of a non-FAA, state-law arbitration claim in an
otherwise nonappealable interlocutory order.” Palcko v.
Airborne Express, Inc., 372 F.3d 588, 594 (3d Cir. 2004).
The Seventh Circuit has held that § 16(a) does not apply “to
a motion to stay litigation when state rather than federal law
is the source of the obligation to arbitrate.” Sherwood v.
Marquette Transp. Co., 587 F.3d 841, 843 (7th Cir. 2009).
And the Tenth Circuit has held that § 16(a) is not “an avenue
for interlocutory appeal of a motion to confirm brought
2
We therefore need not decide today whether a more ambiguous
arbitration motion—for example, one that cites neither state nor federal
arbitration law—is “under” the FAA.
8 KUM TAT LTD. V. LINDEN OX PASTURE
under one of any fifty state laws.” KCOM, Inc. v. Emp’rs
Mut. Cas. Co., 829 F.3d 1192, 1197–98 (10th Cir. 2016).
Kum Tat argues that its state-law motion is appealable
under § 16(a)(1) because the “essence” of the motion was a
request for arbitration. But the cases cited by Kum Tat are
inapposite. In Western Security Bank v. Schneider Ltd.
Partnership, the question was whether a stay motion that did
“not seek to compel a party to arbitrate” was brought under
the FAA. 816 F.3d 587, 588–89 (9th Cir. 2016) (order). We
said no and dismissed for lack of jurisdiction. Id. at 590.
Similarly, in Conrad v. Phone Directories Co., the question
was whether a “generic motion to dismiss under Rule 12”
was brought under the FAA. 585 F.3d 1376, 1379–81 (10th
Cir. 2009). The Tenth Circuit said no and dismissed for lack
of jurisdiction. Id. at 1386. In both cases, the movant did
not seek the remedy provided by the FAA: arbitration. This
case is different. There is no question that Kum Tat sought
arbitration, but it did not invoke—and indeed disclaimed—
the FAA as the source of that remedy.
Allowing an appeal from the denial of a state-law
arbitration motion might well comport with “the FAA’s
policy favoring arbitration agreements.” Green Tree Fin.
Corp.–Ala. v. Randolph, 531 U.S. 79, 85–86 (2000). But
Congress chose to authorize interlocutory review only of
denials of arbitration motions brought “under” the FAA, and
we cannot “invoke the policy of the FAA to expand the scope
of appellate jurisdiction in § 16.” Van Dusen, 830 F.3d at
898. Of course, as “the master of its motion,” a litigant may
simply request arbitration under the FAA, rendering
appellate jurisdiction over an adverse decision “crystal
clear.” KCOM, 829 F.3d at 1196–97.
Kum Tat also argues that, though it chose to seek
arbitration under state law, it would have been entitled to
KUM TAT LTD. V. LINDEN OX PASTURE 9
arbitration under the FAA had it so claimed. But our
jurisdiction turns on whether Kum Tat “invoked” the FAA,
see Arthur Andersen, 556 U.S. at 629, not whether it
theoretically could have. Kum Tat “cannot now morph a
motion brought under [state law] into one brought under the
FAA.” KCOM, 829 F.3d at 1197. 3
B. Mandamus
Kum Tat alternatively requests that we construe its
appeal as a petition for a writ of mandamus. Our
discretionary decision to do so “depends on whether
mandamus is itself justified.” Stanley v. Chappell, 764 F.3d
990, 996 (9th Cir. 2014) (quoting Hernandez v. Tanninen,
604 F.3d 1095, 1099 (9th Cir. 2010)). And, mandamus is
warranted only if, among other requirements, a district court
order is clearly erroneous. Id.
The district court did not clearly err in reserving for itself
the question whether the parties agreed to arbitrate.
Although challenges to the validity of a contract with an
arbitration clause are to be decided by the arbitrator, see
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,
444–46 & n.1 (2006), challenges to the very existence of the
contract are, in general, properly directed to the court, see
3
The parties dispute whether the FAA could govern any motion to
compel because the arbitration clause at issue cites California law. The
parties also dispute whether the underlying transaction involves
interstate commerce for FAA purposes. See Saneii v. Robards, 289
F. Supp. 2d 855, 860 (W.D. Ky. 2003) (concluding that “a residential
real estate sales contract does not evidence or involve interstate
commerce”). Had Kum Tat moved for arbitration under the FAA, the
district court could have addressed these issues. We decline to adopt a
rule that would allow a party to avoid a decision on such issues in the
district court by moving for arbitration solely under state law, yet require
us to confront them in the first instance on appeal.
10 KUM TAT LTD. V. LINDEN OX PASTURE
Sanford v. MemberWorks, Inc., 483 F.3d 956, 962 (9th Cir.
2007); Three Valleys Mun. Water Dist. v. E.F. Hutton & Co.,
925 F.2d 1136, 1140–41 (9th Cir. 1991). Linden Ox’s
argument that there was “no contract” was a challenge to the
existence of a contract.
Nor did the district court clearly err in concluding the
parties did not form a contract. “Contract formation requires
mutual consent, which cannot exist unless the parties ‘agree
upon the same thing in the same sense.’” Bustamante v.
Intuit, Inc., 45 Cal. Rptr. 3d 692, 698 (Ct. App. 2006)
(quoting Cal. Civ. Code § 1580). The district court did not
clearly err in interpreting Kum Tat’s “review and approve”
clause in its counter-offer and its subsequent request for a
$500,000 price reduction as showing an absence of mutual
consent, rather than as an application of an inspection
contingency clause in Kum Tat’s initial offer. We therefore
decline to treat its appeal as a petition for a writ of
mandamus. Stanley, 764 F.3d at 996. 4
APPEAL DISMISSED.
4
Kum Tat also appealed the district court’s order expunging the lis
pendens and asks us either to exercise pendent appellate jurisdiction or
to treat that appeal as a petition for mandamus. We cannot exercise
pendent jurisdiction in the absence of other appellate jurisdiction, and
mandamus is not justified for the lis pendens order in the absence of clear
error in the district court’s finding that no contract was formed.