Can an order ruling on a motion or petition to compel arbitration in federal court be appealed? While federal appellate jurisdiction is generally limited to “final decisions” of the district courts (28 U.S.C. § 1291), the Federal Arbitration Act (“FAA”) authorizes interlocutory appeals from orders denying arbitration. But the ability to appeal an order that compels arbitration depends on whether the district court dismisses the civil action. Before appealing an order on a motion or petition to compel arbitration, consider the following principles and pitfalls:
FAA appellate jurisdiction extends to orders “refusing a stay of any action under section 3” and orders “denying a petition under section 4 … to order arbitration to proceed.” 9 U.S.C. § 16(a)(1)(A)-(B). Section 16 promotes appeals from orders denying arbitration and limits appeals directing arbitration, consistent with Congress’s intent to have arbitrable disputes proceed quickly to arbitration. Bushley v. Credit Suisse First Bos., 360 F.3d 1149, 1153 (9th Cir. 2004). Thus, a district court’s denial of a motion or petition to compel arbitration will generally give a party the right to appeal.
Appealing an order compelling arbitration is more complicated. There is no FAA provision expressly allowing for appeal of such orders. However, section 16(a)(3) allows for an appeal of any “final decision with respect to an arbitration that is subject to” the FAA. But what does that mean, exactly? The district court’s dismissal of an action is considered a final decision and thus, appealable, whereas a stay of the action pending arbitration is not.
Must, or should, courts avoid dismissing the action? The Circuit Courts are split on whether a district court is required to enter a stay or has the discretion to dismiss the action when it compels arbitration of all claims. One group of Circuits has held that section 3 of the FAA mandates a stay of proceedings when compelling arbitration on all claims to accomplish the goal of having arbitrable disputes quickly proceed to arbitration. See Katz v. Cellco P’ship, 794 F.3d 341, 345-46 (2d Cir. 2015) (describing Circuit split and joining line of cases holding a stay is required). This makes intuitive sense given the FAA’s distinction between orders denying arbitration (appealable) and orders granting arbitration (non-appealable).
But another group—including the Ninth Circuit—have held that district courts have the inherent authority to manage their dockets and the discretion to stay or dismiss the action when all of the claims are compelled to arbitration. See, e.g., Johnmohammadi v. Bloomingdale’s, Inc., 755 F.3d 1072, 1073-74 (9th Cir. 2014) (considering appeal of district court’s order compelling arbitration of all claims and dismissing action without prejudice). In these Circuits, if the district court dismisses the action, the Court of Appeals has jurisdiction under FAA section 16(a)(3). Arbitration proceedings are not automatically stayed pending an appeal, although the district court has discretion to grant a party’s request to stay arbitration.
There is one other scenario: what if the court stays the action, and the plaintiff voluntarily dismisses the action without a court order under Federal Rule of Civil Procedure 41(a)(1)? A recently issued decision in the Ninth Circuit treated that scenario as distinct from a court’s dismissal, and eliminated plaintiff’s ability to create appellate jurisdiction in that manner. Langere v. Verizon Wireless Servs., LLC, 983 F.3d 1115, 1124 (9th Cir. 2020). In Langere, after the district court granted a stay of all claims pending arbitration, the plaintiff voluntarily dismissed the case without leave from the district court. Under a previous Ninth Circuit decision, the plaintiff would have been permitted to appeal the order compelling arbitration as part of an appeal from the dismissal of the case, but in light of superseding Supreme Court precedent, the Ninth Circuit held that a party can no longer “create appellate jurisdiction” by voluntarily dismissing claims after being forced to arbitrate them. For a broader discussion on “manufacturing appellate jurisdiction” through voluntary dismissal and the Langere case, see: “Manufacturing Appellate Jurisdiction: A Dangerous Gambit.”
The takeaway for Ninth Circuit litigants: if opposing arbitration, and the court grants a motion or petition to compel arbitration, seek dismissal of the action in order to appeal. Conversely, proponents of arbitration would be wise to seek a stay so the claims can proceed to arbitration without having to fight an appeal. While other potential avenues for appeal may be available, such as filing a writ of mandamus or seeking an interlocutory appeal under 28 U.S.C. §1292(b), such requests are rarely granted. Thus, litigants should pay careful attention to not only the goal of requiring or avoiding arbitration, but also how the court deals with the pending civil action after ruling on the motion or petition.