Corion Corporation v. Chen
U.S. Court of Appeals for the First Circuit
Corion Corporation v. Chen
Opinion
USCA1 Opinion
May 12, 1992 ____________________
No. 92-1133
CORION CORPORATION,
Plaintiff, Appellant,
v.
GIH-HORNG CHEN,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
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Before
Breyer, Chief Judge,
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Campbell, Senior Circuit Judge,
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and Cyr, Circuit Judge.
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Richard L. Alfred, Robert A. Bertsche and Hill and Barlow on
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Response to Order to Show Cause and Reply Memorandum Regarding
Appellate Jurisdiction, for appellant.
Ellen J. Messing and Shilepsky, Messing & Rudavsky, P.C., on
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Memorandum in Opposition to Appellant's Response to Show Cause Order
and Reply Regarding Appellate Jurisdiction, for appellee.
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Per Curiam. The question before us is whether the
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district court's lengthy memorandum and order determining
that the parties' dispute is arbitrable is a final appealable
order. We conclude that it is not. We turn to the
background.
I.
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Plaintiff Corion Corporation discharged defendant
Gih-Horng Chen. Chen then invoked a provision in Corion's
Personnel Policies Manual which provided that "[i]n
situations involving . . . termination . . . , an aggrieved
employee who is dissatisfied with top management's decision
will be permitted to have the grievance arbitrated by an
impartial third party" and demanded arbitration. Corion did
not agree to arbitration and instead filed the instant action
seeking 1) a declaration that Chen was not entitled to
arbitrate the discharge decision (count 1) and 2) a
declaration that plaintiff was entitled to discharge Chen
(count 2). Corion maintained that the personnel handbook had
no contractual force, but, even if it did, Chen had waived
any right to arbitrate by failing to attend hearings Corion
had scheduled to obtain Chen's input.
Chen responded with two motions. The first asked
the court to dismiss count two (Corion's request for a
declaration that Corion was entitled to discharge Chen). The
second sought both a stay of all court proceedings (including
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filing an answer) pending arbitration and an order compelling
arbitration.
After briefing and argument, the district court
issued an opinion concluding that the arbitration provision
in the manual was contractually enforceable and applied to
termination decisions. As for Corion's argument that Chen
had waived any right to arbitrate, the district court ruled
that the arbitrator was the one to decide that issue. The
court's twenty-one page memorandum and order concluded with
the following paragraph:
For the foregoing reasons, Chen's
motion to stay and compel arbitration is
ALLOWED. For the same reasons, this
Court has determined that an enforceable
agreement to arbitrate exists. Chen's
Motion to Dismiss Count II of the
Complaint is ALLOWED. The case is
ordered administratively closed pending
the outcome of the arbitration.
No separate document embodying the order has entered.
II.
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Corion has appealed from the memorandum and order.
Corion argues that the memorandum and order is a final
decision appealable under 28 U.S.C. 1291 because Corion's
entire lawsuit has been adjudicated. Count 2 (for a
declaration that plaintiff was entitled to discharge Chen)
has been dismissed, and count 1 (for a declaration that Chen
is not entitled to arbitrate the discharge decision) has been
effectively resolved against plaintiff by granting the motion
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to compel arbitration, Corion contends. We disagree that the
order is final.
A
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First, the district court has not entered a
judgment on a piece of paper separate from the underlying
opinion as required by Fed. R. Civ. P. 58. Were the absence
of a separate document a mere formality, the omission might
be overlooked. See Fiore v. Washington County Community
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Mental Health Center, Nos. 91-1027, 91-1842, slip op. 21 (1st
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Cir. March 30, 1992) (appellant waives the separate document
rule by appealing). But cf. Wang Laboratories, Inc. v.
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Applied Computer Sciences, Inc., 926 F.2d 92, 96 (1st Cir.
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1991) (case remanded to district court for entry of a
separate document where appellee refused to waive separate
document requirement).
B
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Here, however, we think more than informality is
involved. The court did not enter a separate document
labelled final judgment, which would have signalled its view
that the case had concluded. Nor did it dismiss the entire
action. Rather, it granted defendant's motion to stay
proceedings pending arbitration. This suggests that the
district court itself did not intend to terminate its role or
to enter a final judgment, but rather acted in a manner to
retain jurisdiction pending the outcome of arbitration. To
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be sure, the district court directed that the case be
"administratively closed" pending arbitration. In the
circumstances of this case, however, we do not think this is
equivalent to a final judgment of dismissal. See Quinn v.
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CGR, 828 F.2d 1463 (10th Cir. 1987) (dismissing appeal from
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order compelling arbitration and ordering the case "closed,
to be reopened upon a showing of good cause" entered in a
breach of contract action); Campbell v. Dominick & Dominick,
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Inc., 872 F.2d 358 (11th Cir. 1989) (dismissing appeal from
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order directing arbitration, staying judicial proceedings,
and closing the case for statistical purposes entered in an
action seeking damages under the securities act); 15B C.
Wright, A. Miller, & E. Cooper, Federal Practice and
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Procedure 3914.17 at p. 13 n.11 (1992) (concluding that the
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result in the Campbell case "implies that an order closing
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the case for statistical purposes does not make a final
judgment"). Rather, it is a reflection of the fact that the
case is likely to be dormant until arbitration concludes. In
short, we conclude that the district court has retained
jurisdiction.
In previous cases where a district court has
retained jurisdiction pending the outcome of arbitration, we
have concluded that an order staying proceedings pending
arbitration or directing arbitration is not final or
immediately appealable. De Fuertes v. Drexel, Burnham,
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Lambert, Inc., 855 F.2d 10 (1st Cir. 1988), is instructive.
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There, the plaintiff sought to compel defendant to deliver
securities. Defendant moved to refer the controversy to
arbitration. Plaintiffs opposed arbitration, arguing the
agreement to arbitrate was not valid but forged. Plaintiffs
lost on that point in the district court, and the court
ordered arbitration, but specifically retained jurisdiction
pending the outcome of arbitration. Plaintiffs appealed.
This court concluded that the order compelling arbitration
and retaining jurisdiction was not appealable as a final
decision because
no judgment determining the entire
controversy between the parties has
entered. Contrary to appellant's
assertion, the litigation has not ended.
Rather, it has moved to another forum
with the expectation that it will return
to the [district court] for entry of a
final judgment.
Id. at 11. The opinion then went on to say that the
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arbitration order was not immediately appealable under any
exception to the final judgment rule and dismissed the
appeal.
Corion contends that De Fuertes is not controlling
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and relies on a different line of cases for appealability.
It points out that most courts have accepted that an order
adjudicating an action which seeks nothing more than an order
to compel arbitration is a final appealable order. See,
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e.g., Abernathy v. Southern California Edison, 885 F.2d 525,
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530 n.18 (9th Cir. 1989) ("[A]n order compelling arbitration
may be immediately appealed if it is the full relief sought.
However, when the order staying the proceeding or compelling
arbitration is only one step in the judicial proceedings and
the case can be expected to return to the district court, the
order is nonfinal and not subject to immediate appeal.")
(citations omitted); 15C C. Wright, A. Miller, & E. Cooper,
Federal Practice and Procedure, 3914.17 at pp. 10 n.7 and
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15-19 (1992) ("an order granting or denying arbitration in an
action that seeks only to compel arbitration ordinarily is
appealable as a final judgment; if the same order is entered
in an action seeking other relief, ordinarily it is not
appealable as a final judgment"). It then argues that
because the district court dismissed count two (the count
seeking a declaration that Corion was entitled to discharge
Chen) and effectively disposed of count one (seeking a
declaration of non-arbitrability) by deciding that the
dispute was arbitrable, Corion's action is now analogous to
one in which the sole issue is arbitrability and the same
finality rules should apply. In other words, just as a
litigant desiring arbitration obtains a final judgment by
structuring a lawsuit to seek no more than an order
compelling arbitration, so too should a litigant who believes
a dispute is not arbitrable obtain a final judgment by
phrasing his action to seek no more than a declaration that
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the dispute is not arbitrable. Now that, through dismissal
of count two, Corion is in the position of the latter,
finality should not be defeated by the district court's
reaching out prematurely to assert jurisdiction over post-
arbitration proceedings, or so the argument would run.
We leave for another day the question whether, had
Corion's action been limited to the request in count one for
a declaration that the dispute was not arbitrable, finality
could be defeated by the district court's purported retention
of jurisdiction pending the outcome of arbitration, see
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University Life Ins. Co. v. Unimarc Ltd., 699 F.2d 846, 848-
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50 (7th Cir. 1983) (finality of order directing arbitration
in an independent action seeking only an arbitration order
was not defeated by court's retention of jurisdiction to
resolve any future disputes or to enforce any future award);
Cincinnati Gas & Elec. Co. v. Benjamin F. Shaw Co., 706 F.2d
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155, 157-58 (6th Cir. 1983) (order compelling arbitration,
but retaining jurisdiction pending the outcome of
arbitration, entered in an action seeking a declaration of
non-arbitrability treated as final), for that is not this
case. Corion did not ask the court to decide only
arbitrability; it also asked the court to determine that
Corion was entitled to discharge Chen. To be sure, the court
has dismissed the second count in view of its determination
that the personnel manual arbitration provision was
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enforceable. But it has not purported to enter a final
order, and it may well contemplate re-examining that
dismissal depending upon the outcome of arbitration. For
example, the court declined to determine whether Chen had
waived his right to arbitrate, as it concluded that that
issue was for the arbitrator. Should the arbitrator,
however, agree with Corion's position that Chen waived
arbitration, then, presumably, the court may reinstate count
two. Until a final judgment enters, the court is free,
subject to law of the case principles, to re-examine its
orders. In short, we do not think that the district court
has impermissibly reached out to assert or retain
jurisdiction over the lawsuit.
Corion points to several cases which, it says,
support its position that the district court's memorandum and
order is final and appealable. We address two which are
representative of Corion's position. First is County of
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Middlesex v. Gevyn Constr. Corp., 450 F.2d 53 (1st Cir.
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1971), cert. denied, 405 U.S. 955 (1972). There, the county
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sought a declaration that it was not obligated to arbitrate
various construction disputes. The defendant responded with
a motion to compel arbitration and to enjoin the county from
spending the unpaid construction balance. The district court
did not grant the injunction, but did order arbitration and
stayed further judicial proceedings. The county appealed the
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arbitration order, and this court decided the merits of the
appeal without discussing appealability. Subsequently, this
court in Langley v. Colonial Leasing Co. of New England, 707
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F.2d 1 (1st Cir. 1983), in an effort to explain the basis for
appellate jurisdiction in the Middlesex case, stated that
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"Middlesex was a declaratory judgment action in which the
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district court's 'order compelling arbitration' was in
reality a full final judgment." Langley, 707 F.2d at 3.
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Corion argues the same principles apply to it. The district
court's determination that the dispute is arbitrable coupled
with its dismissal of count two is in reality a full final
judgment.
Middlesex is distinguishable. The county in the
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Middlesex case did not ask the court to decide the merits of
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the parties' underlying dispute as did Corion in the present
case by requesting a declaration that it was entitled to
discharge Chen. Hence, the arbitration order in Middlesex
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did dispose of the one substantive dispute -- arbitrability -
- submitted to the court (albeit leaving unresolved the
matter of ancillary injunctive relief). In contrast, in the
present case, Corion has asked the district court to
adjudicate the parties' dispute, and the district court, by
declining to enter a final judgment on a separate piece of
paper, has left open the possibility that it may, depending
upon the results of arbitration, do just that.
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Second, Corion points to Robbins v. George W.
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Prescott Pub. Co., 614 F.2d 3 (1st Cir. 1980). There, the
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plaintiff sued his employer for breach of an employment
contract. The district court ordered the defendant to
arbitrate the dispute even though, under the terms of the
applicable collective bargaining agreement, the union -- not
the employee -- had the power to initiate arbitration, but
the union (not a party to the suit) had declined to do so.
In according appellate review, this court noted that the
order might be appealable as a final judgment under 28 U.S.C.
1291 because, arbitration having been ordered, "it could be
thought that nothing was left for the court but supervision."
Ultimately, however, this court did not definitely so hold
because it concluded that even if the order was not
appealable under 1291, mandamus was appropriate in view of
the importance of guarding against federal court interference
with the collective bargaining process. We are not presented
here with such policy concerns. Furthermore, we do not think
the district court was necessarily left with "nothing . . .
but supervision." Rather, if the arbitrator decides that
Chen waived his right to arbitration, the court may end up
adjudicating exactly what Corion asked the court to decide --
whether Corion was entitled to discharge Chen. On these
grounds Robbins is not controlling.
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C
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In addition to the absence of a separate document
and the wording of the final paragraph of the 21-page
memorandum and order, policy considerations influence our
conclusion that no final judgment has entered in the present
action and our disinclination to analogize the present action
to one seeking no more than a determination concerning
arbitrability.
It is true that an order compelling arbitration
entered in an action seeking only an arbitration order has
been considered final and immediately appealable by the party
resisting arbitration. See, e.g., Graphic Communications
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Union, Local 2 v. Chicago Tribune Co., 779 F.2d 13, 14-16
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(7th Cir. 1985). That is not because it is desirable or
efficient to bifurcate a controversy over termination into
two separate lawsuits -- the first concerning the forum and
the second either the merits (if the dispute is not
arbitrable) or challenges to the arbitrator's decision (if
the dispute is arbitrable). It is not. See Abernathy, 885
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F.2d at 528 n.13 (9th Cir. 1989) ("We recognize that under
1291 an order compelling arbitration may be immediately
appealed if it is the complete relief sought. . . . We also
recognize that permitting direct appeals of such orders is
inconsistent with the policies underlying the arbitration
process. Nevertheless, until the Supreme Court or Congress
acts, the final judgment cases require such an outcome.");
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Zosky v. Boyer, 856 F.2d 554, 560 (3d Cir. 1988), cert.
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denied, 488 U.S. 1042 (1989) (same); Graphic Communications
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Union, 779 F.2d at 15 ("it is rather a fluke in the law that
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allows an order to arbitrate to be appealed before the
arbitration is completed"). Immediate appellate review of an
order compelling arbitration "frustrate[s] the policy
favoring speedy resolution of labor disputes through
arbitration." United Food & Commercial Workers Local 197 v.
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Alpha Beta Co., 736 F.2d 1371, 1373-74 n.3 (9th Cir. 1984).
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The delay in arbitration wrought by immediate appellate
review of the forum decision plus the inefficiency of an
appellate court having to hear two appeals (first from the
arbitration order and second from the order enforcing (or
setting aside) the arbitrator's decision), rather than one,
make for lengthier and more expensive dispute resolution, at
least in circumstances where the dispute was arbitrable. But
immediate appealability of an arbitration order in a lawsuit
which seeks no more than an order directing arbitration is
the price or consequence of the final judgment rule, for once
the order to arbitrate enters, the court has disposed of the
entire controversy then before it. But see 15C C. Wright, A.
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Miller, & E. Cooper, Federal Practice and Procedure,
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3914.17 at p. 26 (1992) (suggesting a revision of finality
concepts under which an arbitration order entered in an
independent action brought solely to compel arbitration would
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not be immediately appealable, the theory being that "it is
always better to keep a case open after ordering arbitration
as the most efficient vehicle for reviewing any subsequent
challenges and ordering enforcement").
The systemic delay and inefficiency caused by
immediate appeals of arbitration orders will tend to
predispose us, whenever possible consistent with the final
judgment rule, to view an arbitration order as but an
interlocutory order entered in an ongoing lawsuit (and not
immediately appealable), rather than as a final resolution of
a discrete controversy. Here, for the reasons earlier
explained, we think that the district court has not finally
resolved the entire controversy before it, but rather has
specifically left open the possibility of revisiting the
decision to dismiss count two and that consequently the
district court's order allowing Chen's motion to stay and
compel arbitration is not a final appealable order.
Appeal dismissed.
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