Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-02-07119/USCOURTS-caDC-02-07119-0/pdf.json

Parties Involved:
Convera Corporation
Appellant
DSMC Incorporated
Appellee
NGT Library, Incorporated
Appellee

Document Text:

Notice: This opinion is subject to formal revision before publication in the

Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify

the Clerk of any formal errors in order that corrections may be made

before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 16, 2003 Decided November 21, 2003

No. 02-7118

DSMC INCORPORATED,

APPELLEE

v.

CONVERA CORPORATION,

APPELLEE

NGT LIBRARY, INCORPORATED,

APPELLANT

Consolidated with

02-7119

Appeals from the United States District Court

for the District of Columbia

(No. 01cv02284)

–————

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

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Anthony Herman argued the cause for Convera Corporation and NGT Library, Incorporated. With him on the briefs

were James M. Garland and James S. Kurz.

Peter H. Gunst argued the cause for appellee DSMC

Incorporated. With him on the brief was Julie R. Rubin.

Before: HENDERSON, TATEL, and ROBERTS, Circuit Judges.

ROBERTS, Circuit Judge: In these consolidated appeals,

National Geographic Television Library, Incorporated

(NGTL) and Convera Corporation (Convera) (collectively ‘‘appellants’’) seek interlocutory review of a district court order

denying (1) Convera’s motion to compel arbitration and (2)

NGTL’s motion to stay all litigation pending arbitration.

NGTL and Convera invoke Section 16 of the Federal Arbitration Act (FAA), 9 U.S.C. § 16, which permits interlocutory

appeal of orders denying motions to stay litigation under

Section 3 of the FAA and of orders denying motions to

compel arbitration under Section 4 of the Act. We conclude

that the underlying motions were not under Sections 3 or 4 of

the FAA, because they did not seek to stay litigation or

compel arbitration between parties subject to a written agreement to arbitrate. The appeals accordingly do not fall within

Section 16, and we dismiss them for lack of jurisdiction.

I. Background

A. Factual History

NGTL is a part of the National Geographic Society responsible for managing, preserving, and distributing the many

hours of archive film footage produced by National Geographic Television. Appellee DSMC Incorporated (DSMC) uses

proprietary software, architecture, and techniques to provide

digitizing, cataloguing, archiving, and hosting services to media organizations with extensive audio and video libraries. In

September 2000, NGTL entered into a contract with DSMC

under which DSMC agreed (1) to digitize, catalogue, and

encode two thousand hours of NGTL’s video material; (2) to

create a database for NGTL with archival and retrieval

software; and (3) to provide website hosting services to

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NGTL, allowing database users to access the digitized footage

from desktop computers. The contract, which contained a

confidentiality provision to protect proprietary material, specified that DSMC would host NGTL’s website until July 2001,

at which time NGTL had the option to extend the hosting

term. The contract also contained an arbitration clause:

‘‘Any dispute arising out of or in connection with this Agreement including any question regarding its existence, validity

or termination, that can not be resolved through mediation

TTT shall be referred to and finally resolved by arbitration

under the Rules of the American Arbitration Association.’’

Integration Services Agreement Between NGTL and DSMC

(Sept. 13, 2000) ¶ 15c.

NGTL became dissatisfied with DSMC’s performance and,

on July 20, 2001, entered into a contract with Convera — a

direct competitor of DSMC — to perform many of the same

functions previously performed by DSMC. To facilitate the

switch, NGTL provided Convera with a copy of NGTL’s

database — created by DSMC — and gave Convera a username and password to access NGTL’s website.

B. Procedural History

DSMC claims that NGTL breached the September 2000

contract and unlawfully disclosed DSMC’s trade secrets to

Convera when it provided Convera unauthorized access to the

software, architecture, and functionality DSMC employed in

providing services to NGTL. On October 31, 2001, DSMC

referred its claims against NGTL to arbitration, pursuant to

the contract’s arbitration clause. The next day, DSMC filed

suit against Convera in district court. In its complaint,

DSMC alleged that Convera (1) misappropriated DSMC’s

trade secrets, (2) conspired with NGTL to misappropriate

trade secrets, and (3) was unjustly enriched through its

misappropriation of DSMC’s trade secrets. DSMC later

dropped the unjust enrichment claim but added claims of

copyright infringement. Convera responded by filing a motion to dismiss for failure to state a claim and a motion to

dismiss or transfer on venue grounds. The parties comUSCA Case #02-7119 Document #786646 Filed: 11/21/2003 Page 3 of 9
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menced discovery, with Convera deposing DSMC’s corporate

designee and DSMC producing thousands of documents.

Meanwhile, on December 17, 2001, NGTL filed motions to

intervene and to stay the litigation between DSMC and

Convera pending resolution of the arbitration proceeding

between DSMC and NGTL. NGTL sought to intervene in

the lawsuit between DSMC and Convera for the sole purpose

of seeking the stay. NGTL claimed that the parallel proceedings — the DSMC/NGTL arbitration and the DSMC/Convera

lawsuit — contained the same issues, and that the litigation

threatened to undermine the arbitration. Convera consented

to the motion to stay; DSMC opposed it. On April 9, 2002,

the district court heard oral argument on all pending motions.

Following the hearing, Convera filed a motion to compel

DSMC to arbitrate its claims against Convera. Although

DSMC and Convera were not parties to any agreement to

arbitrate, Convera argued that equitable estoppel and the

federal policy favoring arbitration supported its motion.

By order dated August 29, 2002, the district court denied

NGTL’s motion to intervene for the limited purpose of seeking a stay, but allowed NGTL to intervene for all purposes.

The district court then denied NGTL’s motion to stay the

litigation. Turning to Convera’s motions, the district court

denied the motion to dismiss for failure to state a claim and

the venue motion. Finally, the district court denied Convera’s motion to compel arbitration on the basis of equitable

estoppel.

NGTL appeals the district court’s denial of its motion to

stay the litigation pending completion of arbitration. Convera appeals the district court’s denial of its motion to compel

DSMC to arbitrate. We consolidated the appeals.

II. Analysis

‘‘Jurisdiction is, of necessity, the first issue for an Article

III court.’’ Tuck v. Pan Am. Health Org., 668 F.2d 547, 549

(D.C. Cir. 1981). Generally, this court has appellate jurisdiction over only ‘‘final decisions’’ of the district courts. 28

U.S.C. § 1291; Bombardier Corp. v. National R.R. PassenUSCA Case #02-7119 Document #786646 Filed: 11/21/2003 Page 4 of 9
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ger Corp., 333 F.3d 250, 253 (D.C. Cir. 2003). The Supreme

Court ‘‘long has stated that as a general rule a district court’s

decision is appealable under [§ 1291] only when the decision

‘ends the litigation on the merits and leaves nothing for the

court to do but execute the judgment.’ ’’ Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 275 (1988)

(quoting Catlin v. United States, 324 U.S. 229, 233 (1945)). A

denial of a motion to compel arbitration obviously fails to end

the litigation on the merits and is not a final judgment. A

denial of a motion to stay litigation pending arbitration is just

as clearly not a final decision under the final judgment rule.

See Adams v. Georgia Gulf Corp., 237 F.3d 538, 541–42 (5th

Cir. 2001).

This court also lacks jurisdiction to hear the appeals under

28 U.S.C. § 1292(a)(1). In Gulfstream Aerospace Corp. v.

Mayacamas Corp., 485 U.S. at 287, the Supreme Court held

that orders denying stays of litigation are not appealable as

interlocutory orders denying injunctions under Section

1292(a)(1). NGTL’s appeal accordingly cannot be based on

that provision. And this court has long held that orders

denying motions to compel arbitration are not appealable

under Section 1292(a)(1), see John Thompson Beacon Windows, Ltd. v. Ferro, Inc., 232 F.2d 366, 368–69 (D.C. Cir.

1956), so that provision does not help Convera, either.

That leaves Section 16 of the FAA. Section 16 provides for

interlocutory appeals from an order ‘‘refusing a stay of any

action under section 3 of this title,’’ 9 U.S.C. § 16(a)(1)(A),

and from an order ‘‘denying a petition under section 4 of this

title to order arbitration,’’ id. § 16(a)(1)(B). The question

thus becomes whether Convera’s motion was under Section 4

of the FAA and whether NGTL’s motion was under Section 3.

A. Convera’s Motion to Compel

Under Section 4, ‘‘[a] party aggrieved by the alleged failure

TTT of another to arbitrate under a written agreement for

arbitration may petition any United States district court TTT

for an order directing that such arbitration proceed in the

manner provided for in such agreement.’’ 9 U.S.C. § 4.

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Nothing about Convera’s motion to compel suggests that it

was filed pursuant to Section 4. Convera did not cite Section

4 in the motion, and did not comply with the requirement in

Section 4 that five days’ notice be given of the motion to

compel. Convera’s contention that DSMC should be compelled to arbitrate its claims against Convera was not based

on any alleged failure of DSMC ‘‘to arbitrate under a written

agreement for arbitration’’ — the only such agreement was

between DSMC and NGTL, and Convera acknowledged that

‘‘[t]he DSMC[ ] claims against National Geographic are already in arbitration.’’ Convera’s Mem. Supp. Mot. to Compel, at 1. Nor did Convera seek an order directing that

arbitration ‘‘proceed in the manner provided for in such

agreement,’’ 9 U.S.C. § 4 — there was no such agreement

between Convera and DSMC. Instead, Convera’s motion to

compel was expressly based on principles of equitable estoppel. Convera contended that the relation between DSMC’s

claims against it and DSMC’s claims against NGTL was such

that DSMC should be compelled to arbitrate the former along

with the latter.

Section 4, however, applies only to an ‘‘alleged failure TTT

to arbitrate under a written agreement for arbitration’’ — not

an alleged failure to arbitrate when principles of equitable

estoppel indicate that you should. Convera argued that the

DSMC/NGTL contract ‘‘satisfies the written arbitration

agreement requirement,’’ Convera’s Mem. Supp. Mot. to

Compel, at 6, but Section 4 does not merely require that

there be a written agreement somewhere in the picture. It

requires that the motion to compel be based on an alleged

failure to arbitrate under that written agreement. Convera’s

motion to compel is not based on any alleged failure by

DSMC to arbitrate under the only written agreement at issue

here — the one between DSMC and NGTL. The motion is

instead based on an effort to expand DSMC’s obligation

beyond the terms of that written agreement pursuant to

principles of equitable estoppel. As appellants acknowledge,

‘‘[t]he doctrine of equitable estoppel TTT by definition applies

where there is no written contract between the partiesTTTT’’

Reply Br. at 6.

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Convera recognizes that there is no precedent from this

court compelling a party to an arbitration agreement to

arbitrate with a non-signatory on the basis of equitable

estoppel, see Appellants’ Br. at 22, but cites cases from other

circuits that have done so. Those cases typically did not

address jurisdiction under Section 16 of the FAA, but instead

simply proceeded directly to consider the propriety of compelling signatories to arbitrate with non-signatories. We

need not and do not decide whether such an effort can ever

succeed. What we do decide is that an effort to compel

arbitration in such circumstances on the basis of equitable

estoppel does not fall within Section 4 of the FAA. Accordingly, we hold that this court has no jurisdiction under

Section 16(a)(1)(B) to hear an appeal of an order denying a

motion to compel arbitration between parties not under a

written agreement to arbitrate.

In doing so we are mindful that ‘‘Section 16 is a limited

grant of jurisdiction,’’ that ‘‘[i]n general, statutes authorizing

appeals should be narrowly construed,’’ and that this is

particularly true with respect to statutes allowing interlocutory appeals. Bombardier, 333 F.3d at 253. We are also

cognizant that jurisdictional rules should be, to the extent

possible, clear, predictable, bright-line rules that can be applied to determine jurisdiction with a fair degree of certainty

from the outset. See, e.g., Grubart, Inc. v. Great Lakes

Dredge & Dock, 513 U.S. 527, 547 (1995) (rejecting multifactor jurisdictional test in part because it ‘‘would be hard to

apply, jettisoning relative predictability for the open-ended

rough-and-tumble of factors’’). Asking whether the parties

are signatories to a written agreement to arbitrate satisfies

these criteria. On the other hand, the application of equitable

estoppel — if permitted in this context — requires a multifactor factual and legal inquiry to determine whether the

issues to be litigated by the non-signatory and signatory are

sufficiently intertwined with the issues subject to arbitration.

That type of analysis, in turn, would require this court to

delve deeply into the merits of a case before even deciding

whether we had interlocutory appellate jurisdiction — an

unattractive prospect.

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B. NGTL’s Motion to Stay

NGTL argues that this court has jurisdiction to hear its

appeal of the district court’s denial of its motion to stay the

litigation pending arbitration under Section 16(a)(1)(A), because that provision authorizes interlocutory appeals from the

denial of stay motions under Section 3 of the FAA. Section 3

states that district courts shall stay litigation until the completion of arbitration ‘‘upon being satisfied that the issue

involved in such suit or proceeding is referable to arbitration

under TTT an agreement [in writing]TTTT’’ 9 U.S.C. § 3.

NGTL contends that the arbitration agreement in its contract

with DSMC allows it to seek to stay this action under Section

3, because the action involves an issue that is referable to

arbitration under a written agreement. See Reply Br. at 26.

We disagree.

In IDS Life Insurance Co. v. SunAmerica, Inc., 103 F.3d

524 (7th Cir. 1996), the Seventh Circuit faced a similar claim.

Two defendants were parties to an arbitration agreement

with the plaintiff; two defendants were not. The defendants

without an arbitration agreement appealed from the district

court’s denial of their motion to stay the litigation pending

arbitration. The court held that there was no jurisdiction

under Section 16(a)(1) to hear the appeal because the issues

involved were not referable to arbitration ‘‘under an agreement in writing’’ pursuant to Section 3, even though largely

indistinguishable issues involving the other two defendants

were subject to arbitration. See id. at 530.

Similarly in this case, NGTL — which does have an arbitration agreement with DSMC — seeks to stay an action

between parties that have no such agreement. That this is

the focus of NGTL’s effort is clear from its original desire to

intervene in litigation to which it was not a party solely for

the purpose of seeking to stay that litigation. There are no

issues referable to arbitration under an agreement in writing

between Convera and DSMC because there is no arbitration

agreement between those two parties. Even assuming that

the issues involved in the DSMC/Convera litigation and the

DSMC/NGTL arbitration are identical, intertwined, closely

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related, whatever — a matter of hot dispute — the litigation

may not be stayed under Section 3 because the issues in the

litigation are not ‘‘referable to arbitration under an agreement.’’ See Adams, 237 F.3d at 540 (‘‘The denial of the

benefit of the mandatory stay provision to non-signatories has

been grounded in the recognition that the non-signatory’s

litigation with an arbitrating party cannot be referred to

arbitration.’’); Sierra Rutile Ltd. v. Katz, 937 F.2d 743, 748

(2d Cir. 1991) (holding Section 16 does not provide jurisdiction when the parties to an action had no agreement to

arbitrate, because no issue was referable to arbitration under

an agreement pursuant to Section 3). As the Seventh Circuit

explained in IDS Life, ‘‘[t]he issues in the suits against the

nonmembers may be substantively related to the issues in the

other suits, but they are not referable to arbitration ‘under an

agreement in writing for such arbitration,’ because there is no

such agreement between these partiesTTTT The statute has

no application to ‘issues’ in cases between different parties.’’

103 F.3d at 529.

NGTL is a signatory, to be sure, but its issues with DSMC

are already subject to arbitration. There is no arbitration

agreement between DSMC and Convera, and so Section 3

does not apply in this case. District courts may certainly

consider stays in circumstances such as these as a matter of

discretionary control of their docket. See Moses H. Cone

Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n.23

(1983); IDS Life, 103 F.3d at 530. We simply conclude that

the mandatory stay provision of Section 3 does not apply to

litigation involving parties not subject to a written arbitration

agreement, and therefore hold that this court lacks jurisdiction under Section 16(a)(1)(A) to hear NGTL’s appeal.

III. Conclusion

We dismiss the appeals for lack of jurisdiction.

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