Gaspar Salas v. GE Oil & Gas , 857 F.3d 278 ( 2017 )

Case: 16-20379 Document: 00513991832 Page: 1 Date Filed: 05/12/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fif h Circuit
No. 16-20379 FILED
May 12, 2017
GASPAR SALAS, Lyle W. Cayce
Clerk
Plaintiff–Appellee,
v.
GE OIL & GAS,
Defendant–Appellant.
Appeal from the United States District Court
for the Southern District of Texas
Before SMITH, PRADO, and GRAVES, Circuit Judges.
EDWARD C. PRADO, Circuit Judge:
Plaintiff–Appellee Gaspar Salas brought claims against Defendant–
Appellant GE Oil & Gas (“GE”) for discrimination and retaliation. The district
court granted GE’s motion to compel arbitration and dismissed the case.
However, the court later reopened the case and withdrew its prior order
compelling arbitration. Because the district court lacked jurisdiction to do so,
we VACATE and REMAND for further proceedings consistent with this
decision.
I. BACKGROUND
Salas is a former employee of GE. When Salas accepted employment at
GE’s predecessor, Dresser, Inc., he agreed to arbitrate all disputes between the
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two parties. After GE acquired Dresser, Inc., GE introduced its own dispute
resolution program called Solutions. GE advised Salas that if he continued to
work at the company after November 1, 2013, he would “agree to participate
in and abide by” this arbitration program. Salas did continue to work at GE
past this date. In June 2014, Salas brought suit against GE in the district court
claiming discrimination and retaliation in violation of Title VII. GE then
moved to compel arbitration. The district court granted this motion in
December 2014 and dismissed Salas’s claims without prejudice.
The parties did not move forward with arbitration. Each side blames the
other for the delay. In February 2016, Salas filed a motion in the district court
to compel arbitration; GE opposed this motion as redundant. After a telephonic
conference on this motion, the district court issued an order on March 30, 2016,
reopening the case and withdrawing its earlier order compelling arbitration.
The district court noted in this order that the parties had “failed” to arbitrate.
After the court denied GE’s motion for reconsideration, GE timely appealed.
II. DISCUSSION
The parties contest both whether the district court had subject matter
jurisdiction to issue its March 30, 2016 order and whether we have appellate
jurisdiction over that order. We address appellate jurisdiction first.
A. Appellate Jurisdiction
GE contends that this Court has appellate jurisdiction under the Federal
Arbitration Act (“FAA”), which permits an appeal from an order “denying an
application . . . to compel arbitration.” 9 U.S.C. § 16(a)(1)(C). Salas argues that
the district court’s order dated March 30, 2016, was not an order denying a
motion to compel arbitration, and that in any event GE appealed the order
denying its motion for reconsideration.
The district court’s order dated March 30, 2016, followed a telephonic
conference on Salas’s motion to compel arbitration. Although the order did not
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explicitly mention Salas’s motion, the order withdrew the court’s prior order
granting GE’s motion to compel arbitration and reopened the case. In essence,
then, the court’s March 30, 2016 order did deny an application to compel
arbitration. Compare Moss v. First Premier Bank, 835 F.3d 260, 264 (2d Cir.
2016) (finding appellate jurisdiction over an order that “lifted a prior stay
under Section 3 [of the FAA] and vacated a prior order compelling arbitration”),
and Koveleskie v. SBC Capital Mkts., Inc., 167 F.3d 361, 363 (7th Cir. 1999)
(finding appellate jurisdiction over “a minute order”—in which “the district
court refused to compel arbitration”—because “there [was] no doubt from the
record that the district court denied the defendant’s motion [to compel
arbitration] and clearly meant to foreclose arbitration”), with Van Dusen v.
Swift Transp. Co., 830 F.3d 893, 897 (9th Cir. 2016) (finding no appellate
jurisdiction over “a case management order designed to lead to a decision on a
motion to compel arbitration”). Additionally, GE’s motion for reconsideration
tolled its time to appeal. Fed. R. App. P. 4. This Court therefore has appellate
jurisdiction under 9 U.S.C. § 16(a)(1)(C).
B. Subject Matter Jurisdiction
GE principally argues that the district court lacked subject matter
jurisdiction to reopen the case. Because the district court fully dismissed this
case in December 2014, GE contends, the court could no longer exercise
jurisdiction other than to enforce an arbitration award. In response, Salas
argues that GE has waived its right to arbitration.
“We exercise plenary, de novo review of a district court’s assumption of
subject matter jurisdiction.” Adam Techs. Int’l S.A. de C.V. v. Sutherland Glob.
Servs., Inc., 729 F.3d 443, 447 (5th Cir. 2013) (quoting Local 1351 Int’l
Longshoremens Ass’n v. Sea-Land Serv. Inc., 214 F.3d 566, 569 (5th Cir. 2000)).
This Court has held that a district court may retain ancillary jurisdiction
(beyond merely enforcing the arbitration award) even after compelling
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arbitration and dismissing a case. Id. at 449. Thus, the fact that the district
court fully dismissed this case is not necessarily fatal to the court’s exercise of
jurisdiction.
But the FAA limits “jurisdiction by the courts to intervene into the
arbitral process prior to issuance of an award.” Gulf Guar. Life Ins. v. Conn.
Gen. Life Ins., 304 F.3d 476, 486 (5th Cir. 2002). Even if some default occurs in
the arbitral process, courts may not intervene “beyond the determination as to
whether an agreement to arbitrate exists and enforcement of that agreement.”
Id. at 487; 9 U.S.C. § 4 (“If the making of the arbitration agreement or the
failure, neglect, or refusal to perform the same be in issue, the court shall
proceed summarily to the trial thereof. . . . If the jury find that an agreement
for arbitration was made in writing and that there is a default in proceeding
thereunder, the court shall make an order summarily directing the parties to
proceed with the arbitration in accordance with the terms thereof.”). For
example, in Gulf Guaranty, we found that a district court could not entertain
torts claims alleging “failure or breach of the agreed upon arbitral process”
prior to issuance of an award; such claims do “not appear to fall within the
ambit of a court’s authority to enforce a valid arbitration agreement under the
FAA.” 304 F.3d at 486, 488. Nor does the FAA authorize a court to hear pre-
award “disputes over the qualifications of an arbitrator to serve,” unless the
dispute raises concerns “that the very validity of the agreement [is] at issue.”
Id. at 491. As an example of appropriate judicial intervention, in Adam
Technologies we held that the district court possessed jurisdiction to hear a
motion to appoint an arbitrator even though the court had already entered
judgment. 729 F.3d at 447–49. “[A]ncillary jurisdiction existed” in that case “to
evaluate whether the dismissal that allowed the dispute to be taken to
arbitration was being thwarted.” Id. at 449.
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The district court’s order of March 30, 2016, did not fall within the
narrow scope of this ancillary jurisdiction. The court neither determined
whether the parties’ agreement to arbitrate was valid nor enforced that
agreement. Instead, the court found that the parties had “failed” to arbitrate
and withdrew its prior order compelling arbitration. This was not permitted
under the FAA. 9 U.S.C. § 4.
Salas’s counterargument—that GE has waived its right to arbitration—
does pertain to whether an arbitration agreement exists. But the district court
did not address this issue, and in any event the argument is meritless. We have
made clear that “there is a strong presumption against finding a waiver of
arbitration.” Al Rushaid v. Nat’l Oilwell Varco, Inc., 757 F.3d 416, 421–22 (5th
Cir. 2014) (quoting Republic Ins. v. PAICO Receivables, LLC, 383 F.3d 341, 344
(5th Cir. 2004)). “[A] party waives its right to arbitrate if it (1) ‘substantially
invokes the judicial process’ and (2) thereby causes ‘detriment or prejudice’ to
the other party.” Id. at 421 (quoting Miller Brewing Co. v. Fort Worth Distrib.
Co., 781 F.2d 494, 497 (5th Cir. 1986)). GE has not invoked the judicial process
at all in this case; accordingly, it has not waived its right to arbitration.
“[B]ased on a court’s limited authority under the FAA to intervene in the
arbitral process prior to issuance of an award,” Gulf Guar., 304 F.3d at 488, we
conclude that the district court lacked jurisdiction to withdraw its order
compelling arbitration and reopen the case due to a default in the arbitral
process. On remand, the court’s jurisdiction is limited to (1) determining
whether an agreement to arbitrate still exists and (2) enforcing that
agreement.
III. CONCLUSION
For the foregoing reasons, the district court’s order of March 30, 2016,
withdrawing its previous order compelling arbitration, is VACATED, and this
case is REMANDED for further proceedings consistent with this decision.
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