Western Security Bank v. Schneider Limited Partnership
816 F.3d 587
9th Cir.2016Background
- Western Security Bank sued Jay Winzenreid, Stephen Emery, and Big Horn Basin Bone and Joint, LLC (the "Wyoming Doctors") in federal court to enforce commercial loan guaranties.
- The Wyoming Doctors asserted as an affirmative defense that non-party Meridian Surgical Partners fraudulently induced them into the guarantees.
- The Wyoming Doctors moved to stay the district-court litigation pending a separate arbitration between themselves and Meridian; they styled the motion in part under FAA § 3 but did not seek to compel Western Security to arbitrate.
- The district court denied the stay; the Wyoming Doctors filed an interlocutory appeal under FAA § 16(a), which allows appeals from orders refusing a stay under § 3.
- The Ninth Circuit considered whether § 16(a) jurisdiction applies when the movant does not seek to compel arbitration of the plaintiff’s claims and whether the stay motion was truly an FAA § 3 motion or a request for ordinary discretionary relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 16(a) grants appellate jurisdiction over denial of a § 3 stay when movant did not seek to compel the plaintiff to arbitrate | Western Security: § 16(a) does not apply because the Wyoming Doctors never sought to compel Western Security to arbitrate, so no FAA stay remedy was sought | Wyoming Doctors: Their defense raises an "issue referable to arbitration," so § 3 applies and § 16(a) permits immediate appeal | Court: No jurisdiction under § 16(a); movants must seek FAA remedies (or make it plainly apparent they seek only FAA remedies) and here they did not |
| Whether the Conrad two-step test controls analysis of § 16(a) jurisdiction in this context | Western Security: Conrad’s approach is persuasive and bars appeals where movant seeks judicial remedies inconsistent with exclusive arbitration | Wyoming Doctors: Styled motion under § 3; thus step one satisfied — § 3 applies | Court: Adopted Conrad test; although styled as § 3, the motion failed step two because movants sought judicial remedies, so § 16(a) does not apply |
| Whether a stay denying ordinary discretionary relief is appealable interlocutorily | Western Security: Denial of a discretionary stay is not immediately appealable | Wyoming Doctors: Denial implicates FAA and should be reviewable under § 16(a) | Court: Denial of an ordinary discretionary stay is not appealable under § 16(a); appeal dismissed |
| Whether collateral-estoppel/issue-preclusion concerns convert the motion into an FAA stay request | Western Security: Such concerns do not transform a non-FAA remedy into an FAA remedy | Wyoming Doctors: Risk of conflicting results justifies staying litigation pending arbitration | Court: These concerns did not make the essence of the motion FAA relief; movants sought judicial relief after arbitration, so § 16(a) jurisdiction lacking |
Key Cases Cited
- Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (discusses final-judgment rule and appellate jurisdiction)
- Conrad v. Phone Directories Co., 585 F.3d 1376 (10th Cir.) (articulates two-step test to determine if § 16(a) jurisdiction exists when FAA relief is not clearly invoked)
- Wabtec Corp. v. Faiveley Transp. Malmo AB, 525 F.3d 135 (2d Cir.) (dismissed appeal where movant did not seek arbitration relief)
- Bombardier Corp. v. Nat’l R.R. Passenger Corp., 333 F.3d 250 (D.C. Cir.) (no jurisdiction where motion showed no intent to pursue arbitration)
- Wheeling Hosp., Inc. v. Health Plan of Upper Ohio Valley, Inc., 683 F.3d 577 (4th Cir.) (exercised § 16(a) jurisdiction where movant sought to compel arbitration)
- Fit Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1 (1st Cir.) (exercised jurisdiction based on explicit request to refer dispute to arbitrator)
- IDS Life Ins. v. SunAmerica, Inc., 103 F.3d 524 (7th Cir.) (FAA § 3 does not apply to issues among different parties where arbitration is between different parties)