31 F.4th 333
5th Cir.2022Background
- Noble Capital and US Capital formed a joint Texas real‑estate fund; Noble created two Feeder Funds that invested $25 million. The Limited Partnership Agreement and a Management Advisory Services Agreement governed the Fund and both contained JAMS arbitration clauses.
- Noble and the Feeder Funds began a JAMS arbitration in January 2019 alleging fraud, conversion, breach of contract, and fiduciary duty violations by US Capital; the Fund separately sued Noble in California, and that suit was consolidated into the JAMS proceeding.
- A JAMS emergency arbitrator and later a JAMS panel issued orders freezing Fund assets; a final merits hearing was set for January 2021.
- The Fund said it could not pay its share of JAMS fees because of the freeze and sought an order compelling Noble to pay; the parties did not pay, JAMS exercised its rule allowing termination for nonpayment, and the arbitration was terminated on October 26, 2020.
- Noble sued US Capital in Texas state court in November 2020; the case was removed to federal court. The district court denied US Capital’s motions to compel arbitration and stay proceedings and to transfer venue. US Capital appealed; the Fifth Circuit affirmed the denial to compel arbitration and dismissed the appeal of the transfer denial for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument (Noble) | Defendant's Argument (US Capital) | Held |
|---|---|---|---|
| Whether arbitration “has been had” under FAA §3 so as to prevent a stay and compel arbitration | The parties already arbitrated under the agreement and JAMS terminated the proceeding; arbitration has been had and court proceedings are proper | The termination for nonpayment does not constitute that arbitration “has been had,” so FAA §3 requires a stay and enforcement of arbitration | Arbitration was “had” under the contracts and JAMS rules despite termination for nonpayment; district court’s denial of stay/compel arbitration is affirmed |
| Whether the Fifth Circuit has pendent appellate jurisdiction to review denial of a motion to transfer venue | (Implicit) Review of transfer denial is not necessary to resolve the arbitration issue | The denial of transfer should be reviewed on appeal | No pendent appellate jurisdiction; appeal of transfer denial dismissed for lack of jurisdiction |
Key Cases Cited
- Tillman v. Tillman, 825 F.3d 1069 (9th Cir. 2016) (arbitration terminated for nonpayment may constitute that arbitration "has been had")
- Pre‑Paid Legal Servs., Inc. v. Cahill, 786 F.3d 1287 (10th Cir. 2015) (lift of judicial stay appropriate after arbitrator terminated proceedings for nonpayment)
- Freeman v. SmartPay Leasing, LLC, [citation="771 F. App'x 926"] (11th Cir. 2019) (affirming lift of stay after JAMS terminated arbitration for unpaid fees)
- Galey v. World Mktg. All., 510 F.3d 529 (5th Cir. 2007) (standard of review for denial to compel arbitration)
- Thornton v. General Motors Corp., 136 F.3d 450 (5th Cir. 1998) (pendent appellate jurisdiction standards)
- Lavigne v. Herbalife, Ltd., 967 F.3d 1110 (11th Cir. 2020) (refusal to exercise pendent jurisdiction over venue transfer when arbitration issue is separately reviewable)