Michael Sherwood v. Marquette Transportation ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-2045
M ICHAEL L. S HERWOOD,
Plaintiff-Appellee,
v.
M ARQUETTE T RANSPORTATION C OMPANY, LLC, and
B LUEGRASS M ARINE, LLC,
Defendants-Appellants.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 08-cv-849-JPG—J. Phil Gilbert, Judge.
A RGUED O CTOBER 27, 2009—D ECIDED N OVEMBER 23, 2009
Before EASTERBROOK, Chief Judge, and EVANS and
W ILLIAMS, Circuit Judges.
E ASTERBROOK, Chief Judge. Michael Sherwood filed this
suit under the Jones Act, 46 U.S.C. §§ 30101–06, and
general maritime law, alleging that he suffered an
injury while working as a deckhand. Defendants (collec-
tively Bluegrass Marine, Sherwood’s employer), whose
vessels ply the Mississippi River, asked the judge to stay
2 No. 09-2045
the suit in favor of arbitration. The Federal Arbitration
Act does not apply because Sherwood was a seaman, and
“nothing [in the Act] shall apply to contracts of employ-
ment of seamen” and some other workers. 9 U.S.C. §1. See
Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (dis-
cussing §1). But Bluegrass Marine did not rely on the
federal Act. Instead it invoked a clause of Sherwood’s
employment contract providing that all disputes will be
arbitrated under the Illinois Uniform Arbitration Act,
710 ILCS 5/1 to 5/23.
Sherwood replied with a number of arguments that are
difficult to square with the law of this circuit, such as a
contention that arbitration clauses in form contracts are
inadequate to waive the right to trial by jury. See Carbajal
v. H&R Block Tax Services, Inc., 372 F.3d 903 (7th Cir.
2004) (rejecting that position). The district court none-
theless denied the motion to stay. Bypassing all issues
that the parties had briefed, the judge concluded that the
Federal Arbitration Act preempts any state law that
concerns arbitration. If the federal Act applies, then
arbitration must proceed under its terms; if the federal
Act does not apply, because of §1 or any other clause,
then arbitration is forbidden. Any other outcome, the
judge wrote, would interfere with the federal Act’s objec-
tives. 2009 U.S. Dist. L EXIS 26934 (S.D. Ill. Mar. 31, 2009).
Perhaps because the issue had not been briefed, the
district court did not consider a third possibility: When
a contract is covered by the federal Act, states are forbid-
den to interfere with the parties’ agreement (save on a
ground, such as the need for a signed writing, applicable
No. 09-2045 3
to any contract, see 9 U.S.C. §2), but that, when a con-
tract is not covered by the federal Act, states are free to
favor, disfavor, or even ban arbitration. At least two
courts of appeals have reached this conclusion, rejecting
the argument that exceptions to the federal Act preempt
state law. See Palcko v. Airborne Express, Inc., 372
F.3d 588, 595–96 (3d Cir. 2004); Davis v. EGL Eagle Global
Logistics, L.P., 243 Fed. App’x 39, 44 (5th Cir. 2007)
(nonprecedential disposition). And this court has held
that the limited scope of a federal enactment does not
preempt state legislation on subjects that Congress has
chosen not to regulate. See, e.g., Amanda Acquisition Corp.
v. Universal Foods Corp., 877 F.2d 496 (7th Cir. 1989); Joliet
v. New West, L.P., 562 F.3d 830 (7th Cir. 2009). This
means, we concluded in Omni Tech Corp. v. MPC
Solutions Sales, LLC, 432 F.3d 797 (7th Cir. 2005), that
provisions for alternative dispute resolution may be
enforced as contracts under state law, even if the pro-
visions are outside the Federal Arbitration Act’s scope.
See also Hall Street Associates, L.L.C. v. Mattel, Inc., 552
U.S. 576, 128 S. Ct. 1396, 1406–07 (2008) (agreements that
differ from the federal Act’s rules may be enforced as
contracts, though not under the Act’s procedures). But
the district court, acting sua sponte, appears to have
been unaware of these decisions.
Bluegrass Marine appealed, relying on 9 U.S.C.
§16(a)(1)(A), which authorizes interlocutory review of
any order “refusing a stay of any action under section 3
of this title”. There are two problems: First, §16 is part
of the Act and so, under the language of §1, does not
apply to any employment contract involving a seaman.
4 No. 09-2045
See Pryner v. Tractor Supply Co., 109 F.3d 354, 360 (7th Cir.
1997). Second, §3 also is inapplicable, and Bluegrass
Marine’s motion for a stay did not rely on it. Instead
Bluegrass Marine founded its motion on the parties’
contract and Illinois law. Neither §3 nor §16 applies to
a motion to stay litigation when state rather than federal
law is the source of the obligation to arbitrate. Conse-
quently we lack appellate jurisdiction, for Sherwood’s
action is ongoing in the district court.
According to Bluegrass Marine, Palcko holds that §16
supports an interlocutory appeal even when §1 excludes
a particular contract from the federal Act’s scope.
Actually, however, Palcko stands for the more modest
proposition that, when there is a bona fide dispute
about whether a particular contract is within the federal
Act’s scope, §16 applies. Accord, Brown v. Nabors Offshore
Corp., 339 F.3d 391 (5th Cir. 2003). We took the same
approach in Omni Tech. When the parties disagree about
the scope of the Federal Arbitration Act’s coverage, the
motion (by the proponent of arbitration) seeking a stay
is one “under section 3 of this title.” The fact that the
proponent makes a bad argument does not put the
motion outside §3. See Arthur Andersen LLP v. Carlisle,
129 S. Ct. 1896, 1900–01 (2009). But Bluegrass Marine did
not seek a stay “under section 3 of this title”; it has
never contended that the Federal Arbitration Act ap-
plies. Section 16 of the Act therefore cannot provide
jurisdiction. See also Bombardier Corp. v. National Railroad
Passenger Corp., 333 F.3d 250 (D.C. Cir. 2003) (§16
does not permit interlocutory review of all decisions
No. 09-2045 5
adverse to a party that wants to arbitrate; review is
limited to the situations enumerated in §16(a)).
This leads Bluegrass Marine to invoke the collateral-
order doctrine. See Cohen v. Beneficial Industrial Loan
Corp., 337 U.S. 541 (1949). The last decision treating the
denial of a stay as an appealable collateral order came
in 1988, and there is a good reason for recent silence.
The Supreme Court has held that a district judge’s
refusal to stay, dismiss, or transfer a case under a forum-
selection clause is not appealable as a collateral order,
because the issue can be resolved on appeal from the
final decision. See Lauro Lines s.r.l. v. Chasser, 490 U.S. 495(1989). See also Digital Equipment Corp. v. Desktop Direct,
Inc., 511 U.S. 863 (1994) (refusal to stay or dismiss a
suit under a settlement contract is not appealable as a
collateral order); Van Cauwenberghe v. Biard, 486 U.S. 517(1988) (refusal to stay, dismiss, or transfer a suit in re-
sponse to an assertion of forum non conveniens is not
appealable as a collateral order). An arbitration agree-
ment is a specialized forum-selection clause. See Vimar
Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528(1995); Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U.S. 477 (1989). It follows that a district judge’s
decision to proceed with the suit is not a “final decision”
immediately appealable under 28 U.S.C. §1291. See
Wabtec Corp. v. Faiveley Transport Malmo AB, 525 F.3d 135,
138 (2d Cir. 2008).
Bluegrass Marine also maintains that the district
court’s order is appealable under 28 U.S.C. §1292 as the
denial of an injunction. An old line of cases supports
6 No. 09-2045
that position, but “old” is a vital qualifier. An equation
between denials of stays and injunctions reflected
the Enelow–Ettelson doctrine, which was overruled in
Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S.
271 (1988). Doubtless it is possible for a district judge’s
procedural order to be treated as the denial of an injunc-
tion when it postpones resolution of the dispute and
causes the same sort of irreparable injury as the denial of
an interlocutory injunction would do. Gulfstream
Aerospace itself said as much. Perhaps this is what
McNamara v. Yellow Transportation, Inc., 570 F.3d 950 (8th
Cir. 2009), meant when stating that a refusal to stay a
suit may be appealed under §1292(a)(1). But Sherwood’s
suit seeks damages, not an injunction; thus the
choice between resolving the dispute in court or before
an arbitrator could not grant or deny an injunction.
If the eighth circuit believes that every anti-arbitration
order is appealable as an injunction, it is at odds with this
circuit and many others. See Briggs & Stratton Corp. v.
Industrial Workers Union, 36 F.3d 712, 714 (7th Cir. 1994)
(disagreeing with Nordin v. Nutri/System, Inc., 897 F.2d 339(8th Cir. 1990), the sole decision on which McNamara
relied); Central States Pension Fund v. Central Cartage Co.,
84 F.3d 988 (7th Cir. 1996). Section 16 supplied appellate
jurisdiction in McNamara; that court’s invocation of
§1292(a)(1) was unnecessary as well as imprudent, for
the reasons Briggs & Stratton develops.
Bluegrass Marine seems to think that any judicial order
that could increase the cost of litigation—which will
occur if the district court holds a trial and we later set
No. 09-2045 7
aside the judgment and remand with instructions to
arbitrate—must be treated as an injunction because
needless costs of litigation are “irreparable injury.” On
that understanding, every order denying a motion for
summary judgment, or requiring costly discovery,
would be immediately appealable as an injunction. That
is not the way §1292 works. An injunction is a form of
relief on the merits; orders that increase the expense
of litigation are not injunctions. See Moglia v. Pacific
Employers Insurance Co., 547 F.3d 835 (7th Cir. 2008). What’s
more, the expense of litigation is not “irreparable injury.”
See Petroleum Exploration, Inc. v. Public Service Commission,
304 U.S. 209, 222 (1938); FTC v. Standard Oil Co., 449 U.S.
232, 244 (1980); Renegotiation Board v. Bannercraft Clothing
Co., 415 U.S. 1, 24 (1974). This proposition is so funda-
mental to our legal system that we have labeled frivolous
the sort of argument Bluegrass Marine presents. See
PaineWebber Inc. v. Farnam, 843 F.2d 1050 (7th Cir. 1988).
The district court may be able to avert a good deal of
wasted motion by taking a fresh look at the preemption
question. But if the court stands pat and resolves the
suit on the merits, Bluegrass Marine will be entitled to
contend on appeal from the final decision that the
dispute should have been arbitrated instead. The appeal
is dismissed for lack of jurisdiction.
11-23-09