Kum Tat Limited v. Linden Ox Pasture, LLC
845 F.3d 979
9th Cir.2017Background
- Kum Tat (a Chinese corporation) negotiated to buy California real property from Linden Ox (a Florida LLC); the offer and counteroffers contained an arbitration clause referencing the California Code of Civil Procedure.
- Parties exchanged inclusion/exclusion lists and price proposals; Kum Tat accepted the exclusion list contingent on a $500,000 price reduction, which Linden Ox did not accept and terminated negotiations.
- Kum Tat sued Linden Ox in California state court for breach of contract and filed a lis pendens; Linden Ox removed the case to federal court and moved to expunge the lis pendens, which the district court granted.
- Kum Tat moved in federal court to compel arbitration and stay the action relying solely on California arbitration statutes (Cal. Code Civ. Proc. §§ 1281.2, 1281.4) and expressly disclaimed filing under the Federal Arbitration Act (FAA).
- The district court denied Kum Tat’s motion to compel arbitration, finding no binding agreement to arbitrate; Kum Tat filed an interlocutory appeal invoking FAA § 16(a)(1) appellate jurisdiction and alternatively sought mandamus relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAA § 16(a)(1) authorizes interlocutory appeal of district court order denying motion to compel arbitration when the motion invoked only state arbitration law | Kum Tat: § 16(a)(1) permits interlocutory appeal because essence of the motion was to compel arbitration | Linden Ox: Motion invoked only state law, so FAA interlocutory provisions do not apply | Court: Dismissed appeal for lack of jurisdiction because motion was brought under state law, not the FAA |
| Whether the court should treat the appeal as a petition for a writ of mandamus | Kum Tat: Alternatively, treat appeal as mandamus to review district court's denial | Linden Ox: Mandamus inappropriate; district court decision not clearly erroneous | Court: Declined; mandamus not warranted because district court did not clearly err on contract formation or on reserving existence issues for the court |
| Whether the question of contract existence is for the court or arbitrator | Kum Tat: (implicit) contesting arbitrability | Linden Ox: Challenge was to existence of contract, so for the court | Court: Challenge to contract existence is for the court; district court properly decided existence issue |
| Whether appellate jurisdiction could be founded on hypothetical FAA application | Kum Tat: Even if invoked state law, FAA could have applied, so appeal should be allowed | Linden Ox: Jurisdiction depends on whether FAA was actually invoked | Court: Jurisdiction turns on whether party invoked FAA; hypothetical ability to plead FAA does not confer jurisdiction |
Key Cases Cited
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (statutory text controls whether interlocutory FAA appeals lie)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (validity challenges to a contract with an arbitration clause generally for arbitrator; existence challenges for court)
- Van Dusen v. Swift Transp. Co., 830 F.3d 893 (9th Cir. 2016) (do not expand FAA § 16 appellate jurisdiction beyond Congress’s text)
- KCOM, Inc. v. Emp’rs Mut. Cas. Co., 829 F.3d 1192 (10th Cir. 2016) (§ 16(a) does not open interlocutory appeals for motions invoking state arbitration law)
- Palcko v. Airborne Express, Inc., 372 F.3d 588 (3d Cir. 2004) (§ 16(a) does not permit review of non-FAA state-law arbitration claims)
- Sherwood v. Marquette Transp. Co., 587 F.3d 841 (7th Cir. 2009) (§ 16 does not apply when state law is the source of the obligation to arbitrate)
- Stanley v. Chappell, 764 F.3d 990 (9th Cir. 2014) (standards for treating appeals as mandamus petitions)