Medivas, LLC v. Marubeni Corporation , 741 F.3d 4 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MEDIVAS, LLC, a California limited No. 12-55375
liability company,
Plaintiff-Appellant, D.C. No.
3:10-cv-01001-
and W-RBB
KENNETH W. CARPENTER; JOSEPH D.
DOWLING; T. KNOX BELL; DARI OPINION
DARABBEIGI; LINDY HARTIG;
SACHIO OKAMURA; WILLIAM
SUMMER; PAUL TEIRSTEIN; WILLIAM
G. TURNELL, individuals,
Plaintiffs,
v.
MARUBENI CORPORATION, a
Japanese corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of California
Thomas J. Whelan, Senior District Judge, Presiding
Argued and Submitted
November 7, 2013—Pasadena, California
Filed January 27, 2014
2 MEDIVAS, LLC V. MARUBENI CORP.
Before: Alfred T. Goodwin, Raymond C. Fisher
and Richard R. Clifton, Circuit Judges.
Opinion by Judge Fisher
SUMMARY*
Appellate Jurisdiction
The panel dismissed for lack of jurisdiction an appeal
from an order compelling arbitration where the district court
neither explicitly dismissed nor explicitly stayed the action.
The panel held that such an order implicitly stays the
action and thus is not “a final decision with respect to an
arbitration” under the Federal Arbitration Act. The panel also
adopted a rebuttable presumption that an order compelling
arbitration but not explicitly dismissing the underlying claims
stays the action as to those claims pending the completion of
the arbitration.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
MEDIVAS, LLC V. MARUBENI CORP. 3
COUNSEL
Stephen L. Schreiner (argued), Solomon Ward Seidenwurm
& Smith, LLP, San Diego, California, for Plaintiff-Appellant.
Jeffry A. Davis (argued) and Nathan R. Hamler, Mintz Levin
Cohn Ferris Glovsky and Popeo, San Diego, California, for
Defendant-Appellee.
OPINION
FISHER, Circuit Judge:
We address whether an order compelling arbitration is
appealable when the district court neither explicitly dismisses
nor explicitly stays the action. We hold that such an order
implicitly stays the action and thus is not “a final decision
with respect to an arbitration” under the Federal Arbitration
Act, 9 U.S.C. § 16(a)(3). We also adopt a rebuttable
presumption that an order compelling arbitration but not
explicitly dismissing the underlying claims stays the action as
to those claims pending the completion of the arbitration.
Accordingly, we dismiss this appeal for lack of jurisdiction.
BACKGROUND
MediVas is a small biomedical company based in San
Diego, California, that specializes in developing new methods
for pharmaceutical drug delivery. Marubeni is a Japanese
multinational trading corporation. Between April 2004 and
October 2007, Marubeni and MediVas executed various
contracts in connection with a $5 million loan from Marubeni
to MediVas. One of these contracts required the parties to
4 MEDIVAS, LLC V. MARUBENI CORP.
submit contractual disputes to international arbitration in
Tokyo, Japan, whereas another designated the courts of San
Diego as the exclusive forum for such disputes. The
contracts also granted Marubeni a security interest in all of
MediVas’ assets.
After MediVas defaulted on the loan, Marubeni
foreclosed on promissory notes held by MediVas and
threatened to foreclose on additional MediVas assets. In
response, MediVas and several individual plaintiffs filed suit
against Marubeni in San Diego Superior Court, raising
numerous state law claims arising out of this series of
transactions. Invoking the contractual arbitration clause,
Marubeni removed the action to federal court under the
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, also known as the New York Convention,
moved to compel arbitration and initiated arbitration against
the plaintiffs. See 9 U.S.C. §§ 205–06. MediVas opposed
arbitration, relying on the forum selection clause, and moved
to remand the action to state court.
In an August 2011 order, the district court ruled that many
of MediVas’ claims against Marubeni were subject to the
arbitration clause and ordered arbitration of those claims.
Because it concluded that federal jurisdiction rested solely on
the New York Convention, the court remanded the remaining
claims, including all claims brought by the individual
plaintiffs, to state court.1 Neither the August 2011 order nor
1
The parties did not dispute this jurisdictional conclusion and it is not
at issue in this appeal. We therefore do not decide whether the district
court did have supplemental jurisdiction over these claims under
28 U.S.C. § 1367(a) or whether they were properly remanded under
MEDIVAS, LLC V. MARUBENI CORP. 5
any other order explicitly stayed or dismissed the arbitrable
claims, and no judgment was entered in the action.
The arbitration panel ruled in favor of Marubeni on all
claims save one, which the panel concluded fell outside its
jurisdiction. Marubeni then filed a second action in district
court to confirm the arbitration award, which action was
assigned to the same district judge as the original action. In
February 2012, a few days after Marubeni filed the final
award in the confirmation action, MediVas filed in the
original action its notice of appeal from the district court’s
August 2011 order. Then, also in the original action,
Marubeni moved to remand the unarbitrated claim to state
court. The district court stayed proceedings in both actions
in light of MediVas’ pending appeal, which the court believed
may have divested it of jurisdiction to proceed.
DISCUSSION
A.
The Federal Arbitration Act permits immediate appeal of
“a final decision with respect to an arbitration,” 9 U.S.C.
§ 16(a)(3),2 which is a decision that “ends the litigation on the
§ 1367(c). See ESAB Grp., Inc. v. Zurich Ins. PLC, 685 F.3d 376, 393–95
(4th Cir. 2012).
2
The full text of this section provides:
(a) An appeal may be taken from –
(1) an order –
6 MEDIVAS, LLC V. MARUBENI CORP.
merits and leaves nothing more for the court to do but execute
(A) refusing a stay of any action under section
3 of this title,
(B) denying a petition under section 4 of this
title to order arbitration to proceed,
(C) denying an application under section 206
of this title to compel arbitration,
(D) confirming or denying confirmation of an
award or partial award, or
(E) modifying, correcting, or vacating an
award;
(2) an interlocutory order granting, continuing, or
modifying an injunction against an arbitration that
is subject to this title; or
(3) a final decision with respect to an arbitration
that is subject to this title.
(b) Except as otherwise provided in section 1292(b) of
title 28, an appeal may not be taken from an
interlocutory order –
(1) granting a stay of any action under section 3 of
this title;
(2) directing arbitration to proceed under section 4
of this title;
(3) compelling arbitration under section 206 of this
title; or
(4) refusing to enjoin an arbitration that is subject
to this title.
9 U.S.C. § 16.
MEDIVAS, LLC V. MARUBENI CORP. 7
the judgment.” Green Tree Fin. Corp.-Ala. v. Randolph,
531 U.S. 79, 86 (2000) (quoting Digital Equip. Corp. v.
Desktop Direct, Inc., 511 U.S. 863, 867 (1994); Coopers &
Lybrand v. Livesay, 437 U.S. 463, 467 (1978)) (internal
quotation marks omitted). Thus, an order compelling
arbitration may be appealed if the district court dismisses all
the underlying claims, but may not be appealed if the court
stays the action pending arbitration. See id. at 87 n.2, 89;
Bushley v. Credit Suisse First Bos., 360 F.3d 1149, 1153 n.1
(9th Cir. 2004).
In Green Tree, the district court had ordered the parties to
arbitrate their dispute and dismissed the underlying claims
with prejudice. See 531 U.S. at 83, 86. The Supreme Court
acknowledged that the parties could bring a separate
proceeding to confirm, vacate or modify any award made in
the arbitration, but held that the district court’s order was
final and appealable because it disposed of the entire action
then pending before the district court. See id. at 86–87.
Significantly, the Court noted that an appeal would not have
been allowed had the district court stayed the action instead
of dismissing it. See id. at 87 n.2 (citing 9 U.S.C. § 16(b)(1)).
In Interactive Flight Technologies, Inc. v. Swissair Swiss
Air Transport Co., 249 F.3d 1177 (9th Cir. 2001), we
extended Green Tree to an order compelling arbitration and
dismissing the underlying claims without prejudice. See id.
at 1179. Because the district court had dismissed the action
without prejudice solely to allow the parties to “bring[] a new
action after completing arbitration,” we held that the
distinction was not sufficient “to show that the dismissal was
interlocutory rather than an appealable final decision.” Id.
8 MEDIVAS, LLC V. MARUBENI CORP.
Since Interactive Flight, we have consistently treated
orders compelling arbitration but not explicitly dismissing the
underlying claims as unappealable interlocutory orders. In
Dees v. Billy, 394 F.3d 1290 (9th Cir. 2005), for example, we
held that a district court order compelling arbitration, staying
the proceedings and administratively closing the case was not
final because the plaintiff’s claim for relief was still pending
before the district court. See id. at 1293–94. Similarly,
Sanford v. Memberworks, Inc., 483 F.3d 956 (9th Cir. 2007),
held that an order directing arbitration, denying the
defendant’s motion to stay and stating that the case would be
terminated if arbitration was not completed within a year was
not final, again because the plaintiff’s claims remained before
the trial court. See id. at 961–62. Most importantly for this
appeal, in Bushley, when the district court ordered several
claims to arbitration, dismissed a nonarbitrable claim for
failure to state a claim and did not enter judgment or rule on
the defendant’s motions to stay or dismiss the proceedings,
we concluded that the order compelling arbitration was not
final because the action was effectively stayed pending the
conclusion of the arbitration. See 360 F.3d at 1151–53.
We have little trouble concluding that Bushley extends to
the facts of this case. In both cases, the district court fully
disposed of the nonarbitrable claims but not of the arbitrable
claims, which were ordered to arbitration and neither
dismissed nor stayed. The claims sent to arbitration therefore
remained pending before the district court, albeit subject to an
implicit stay pending the outcome of the arbitration. Because
those claims were implicitly stayed rather than dismissed, the
August 2011 order compelling arbitration did not constitute
a “final decision with respect to an arbitration” under section
16(a)(3) of the Federal Arbitration Act. See Green Tree,
531 U.S. at 86–87 & n.2; Sanford, 483 F.3d at 962; Dees,
MEDIVAS, LLC V. MARUBENI CORP. 9
394 F.3d at 1294; Bushley, 360 F.3d at 1153; Interactive
Flight, 249 F.3d at 1179.
Our conclusion that the proceedings were implicitly
stayed pending arbitration is bolstered by the procedural
history of this case. The district court’s August 2011 order
ruled on Marubeni’s “motion to compel arbitration and stay
litigation,” which explicitly requested that the district court
stay the proceedings. Because the district court granted the
motion as to the claims it decided were arbitrable, the most
reasonable inference is that the court intended to stay, not to
dismiss, those claims. See McCaskill v. SCI Mgmt. Corp.,
298 F.3d 677, 679 (7th Cir. 2002) (holding that the district
court dismissed the action without prejudice because, among
other facts, “the district court granted [the defendant]’s
motion which actually requested the court to compel
arbitration and dismiss the case”). Indeed, in this sense the
inference of an implicit stay is stronger here than in Bushley,
where the defendant moved to stay proceedings or to dismiss
the action.3
The parties’ actions also support our conclusion that the
August 2011 order implicitly stayed the arbitrated claims.
MediVas, which asserts that it “anxiously awaited the first
opportunity to appeal” the court’s decision, did not file a
notice of appeal until after the arbitration had finished and the
award had been finalized. Moreover, in its application for
leave to file a motion for reconsideration, MediVas requested
as an alternative an order certifying an appeal under
3
We recognize that the August 2011 order said that “a stay is not
warranted,” but that statement referred only to the nonarbitrable claims.
This statement therefore did not manifest any intent not to stay
proceedings on those claims it ordered to arbitration.
10 MEDIVAS, LLC V. MARUBENI CORP.
28 U.S.C. § 1292(b), acknowledging that the court’s order
compelling arbitration was an interlocutory order under
9 U.S.C. § 16(b)(3). Because the district court allowed
MediVas to file a motion for reconsideration, it did not
explicitly address this alternative request.
For its part, Marubeni originally argued that this appeal
was premature because the district court had not issued a final
order in either the original action or in the confirmation
action. Only after we ordered supplemental briefing to
address appellate jurisdiction, including “whether the notice
of appeal was timely filed,” did Marubeni argue that the
August 2011 order was a final decision for which the time to
appeal had expired.
Finally, it would be difficult to conclude that the August
2011 order “end[ed] the litigation on the merits and le[ft]
nothing more for the court to do but execute the judgment,”
Green Tree, 531 U.S. at 86, when even now, after the
arbitration has ended, one of MediVas’ claims for relief
remains pending before the district court. Moreover, the
district court will at some point have to rule on Marubeni’s
pending motion to remand that claim to state court. Under
these circumstances, we cannot conclude that the August
2011 order “plainly disposed of the entire case on the merits
and left no part of it before the court.” Id.
B.
We decline MediVas’ invitation to follow the approach
once taken by the Second Circuit by putting this appeal on
hold while the parties request a clarifying order from the
district court. See Cap Gemini Ernst & Young, U.S., L.L.C.
v. Nackel, 346 F.3d 360, 363 (2d Cir. 2003) (per curiam).
MEDIVAS, LLC V. MARUBENI CORP. 11
The Cap Gemini court itself noted that although the
procedure was necessitated by the ambiguity in the record, it
would not again be permitted. See id. Because the record
here is not ambiguous for the reasons explained above, we
conclude that no clarifying order is necessary.
We fully endorse the Second Circuit’s statement that
“parties and district courts have an obligation to ensure that
the finality of the district court’s decision is evident from the
record, so that no further reconstruction of the district court’s
intent need be attempted on appeal.” Id. We again urge
district courts to be as clear as possible about whether they
intend to dismiss, stay or “do something else entirely” when
they order arbitration. Bushley, 360 F.3d at 1153 n.1 (quoting
Salim Oleochemicals v. M/V Shropshire, 278 F.3d 90, 93 (2d
Cir. 2002)). Had MediVas requested a clarifying order from
the district court before taking this appeal, the substantial
time and effort expended on this procedural issue could have
instead been spent advancing this litigation toward its
ultimate resolution.
Moreover, though we decline to follow the Second Circuit
and “require an official dismissal of all claims before
reviewing an order to compel arbitration,” Cap Gemini,
346 F.3d at 363, we adopt a rebuttable presumption that an
order compelling arbitration but not explicitly dismissing the
underlying claims stays the action as to those claims pending
the completion of the arbitration. This presumption accords
with our preference for staying an action pending arbitration
rather than dismissing it. See Bushley, 360 F.3d at 1153 n.1.4
4
We recognize that the pro-arbitration policies undergirding this
preference are not served by a stay when the practical realities of
arbitration and litigation suggest either that no arbitration will actually
12 MEDIVAS, LLC V. MARUBENI CORP.
Indeed, the wisdom of this preference is underlined here,
where the arbitration panel left undecided a claim that the
district court had ordered to arbitration. Cf. Coopers &
Lybrand, 437 U.S. at 468 (noting that the purpose of the final
judgment rule “is to combine in one review all stages of the
proceeding that effectively may be reviewed and corrected if
and when final judgment results” (quoting Cohen v.
Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949))).
Accordingly, the finality of an order compelling arbitration is
determined by the context in which it was issued, but our
review of that context is weighted against finality.
C.
Finally, we reject the argument that the issuance of the
arbitral award somehow “‘finalized’ the district court order,”
making this appeal both proper and timely. Dannenberg v.
Software Toolworks Inc., 16 F.3d 1073, 1075 (9th Cir. 1994).
Had the August 2011 order been final, it was “immediately
appealable,” Dees, 394 F.3d at 1292, and this appeal would
not have been timely. See Comedy Club, Inc. v. Improv W.
Assocs., 553 F.3d 1277, 1283–84 (9th Cir. 2009). Because
the order was not final, it did not become final through events
external to the district court proceedings without any further
action taken by the court itself. This court reviews the
judgments and orders of the district courts, not the awards of
arbitration panels. See 9 U.S.C. § 16.
take place or that the arbitration will be so different in character as to
make staying the original action useless. See, e.g., Am. Express Co. v.
Italian Colors Rest., 133 S. Ct. 2304 (2013); AT&T Mobility LLC v.
Concepcion, 131 S. Ct. 1740 (2011). Under such circumstances, a
dismissal allowing immediate appeal might be appropriate.
MEDIVAS, LLC V. MARUBENI CORP. 13
CONCLUSION
The circumstances surrounding the district court’s August
2011 order show that the arbitrated claims were implicitly
stayed pending the conclusion of the arbitration. To simplify
the analysis in circumstances that are less clear, we adopt a
rebuttable presumption that an order compelling arbitration
but not explicitly dismissing the underlying claims stays the
action as to those claims pending the completion of the
arbitration. Because the district court’s August 2011 order
was not “a final decision with respect to an arbitration,”
9 U.S.C. § 16(a)(3), we are without jurisdiction to review it.
DISMISSED.