Œ On January 11, 2008, this court issued an order dismissing the appeal for want of appellate jurisdiction and indicated that an opinion would follow. This opinion explains why that disposition was required. 

## In the



# United States Court of Appeals
For the Seventh Circuit

____________

No. 07-2475

C ONTINENTAL C ASUALTY C O ., A MERICAN C ASUALTY C O

. OF R EADING , T RANSPORTATION I NSURANCE C O ., et al.
, Plaintiffs-Appellants
, v.

S TAFFING C ONCEPTS , I NC ., S TAFFING C ONCEPTS I NT ’ L , I NC ., S TAFFING C ONCEPTS N AT ’ L , I NC ., and V ENTURE RESOURCES G ROUP , LLC, Defendants-Appellees.

____________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 06 C 5473— Ronald A. Guzmán
, Judge.

____________ A RGUED J ANUARY 7, 2008—D ECIDED J ANUARY 11, 2008 Œ
O PINION I SSUED A UGUST 6, 2008

____________

Before P OSNER, R OVNER, and W OOD , Circuit Judges.

W OOD , Circuit Judge. This complex appeal arises from an order issued by the district court striking a motion to2 No. 07-2475

compel arbitration. The district court had pending before it questions relating to personal jurisdiction and venue. Itdecided to strike without prejudice the motion to compel arbitration pending resoluti on of those questions, but it indicated at the same time that it would welcome a refiling after the questions were sorted out. We find that this constitutes a “delay incident to an orderly process, ” Middleby Corp. v. Hussman Corp. , 962 F.2d 614, 616 (7th Cir. 1992), and that we therefore do not have appellate jurisdiction to hear aninterlocutory appeal. Continental Casualty, Americ an Casualty, Transportation Insurance, and National Fire are all in the insurance business, affiliated as CNA. (When referring to them collectively, we will call them “CNA”; otherwise we will use the name of the partic ular corporation.) Continental also has two subsidiaries that figure prominently in this litigation: CNA ClaimP lus and RSKCo Services, Inc. RSKCo was the initial claims servicer for the agreements at stake here; ClaimPlus is, arguably, the successor claims servicer. Staffing Conc epts and its similarly named affiliates are “professional employer organizations,” which take clients, employ their client’s employees, and lease the employees back to th e clients. In effect, Staffing Concepts and its affiliates take care of the human resources paperwork for the client. We w ill refer to them collectively as “Staffing Concepts.” Sta ffing Concepts purchased workers’ compensation insurance policies from CNA. This litigation revolves arou nd two sets of agreements. The “Financing Agreements” deal with the financial side of the arrangements between CNA and Staffing Concepts, including the deductibles of the insurance plans. For the years relevant to this litigation (2001-03), Financing Agreements were struck between a subset of the CNANo. 07-2475 3

affiliates that changed each year and Staffing Concepts International (only). There is no arbitration clause in any of the Financing Agreements.

The “Claim Services Agreem ents” are the second set of agreements between the two sides; they focus on how claims are to be dealt with by each party. Unlike the Financing Agreements, the Claim Services Agreements have a consistent pair of signatories: RSKCo (a nonparty subsidiary of CNA) and Sta ffing Concepts International. The 2001 and 2002 Claim Services Agreements do contain broadly written arbitration clauses. The litigation was set in motion when various Staffing Concepts entities made claims against the insurance policies. Under the policies, Staffing Concepts was allegedly supposed to reimburs e CNA for the deductible portion of the claims it presented. CNA paid the claims Staffing Concepts pres ented, but Staffing Concepts did not reimburse CNA for the deductibles (which ran, CNA says, from $250,000 to $750,000 per claim). As a result, CNA asserts, it has incurred more than $44 million in losses. At some point, CNA replaced RSKCo with CNA ClaimPlus as the claims servicer.
On October 10, 2006, the four CNA insurers filed a complaint against the ten Staffing Concepts insureds for breach of the policies and Finance Agreements. At the same time, ClaimPlus (the claims servicer) filed an arbitration claim against Staffing Concep ts International, alleging a failure to pay claim handling fees. In theory, this had the effect of bifurcating the overall dispute into arbitrable claims that were sent to arbitration and nonarbitrable claims that went to the district court. On December 7, 2006, Staffing Concepts National filed a motion to transfer venue to the United States District4 No. 07-2475

Court for the Middle District of Florida, while all of the other Staffing Concepts affilia tes filed a motion to dismiss for lack of personal jurisd iction. Then on April 30, 2007, four of the Staffing Concep ts family (Staffing Concepts International, Staffing Conc epts, Inc., Sta ffing Concepts National, and Venture Resources Group) filed an answerto the complaint, containing both defenses and counterclaims against a shifting subset of the CNA insurers, as well as nonparty RSKCo. On May 21, 2007, the CNA insurers moved to stay the district court proceedings in fa vor of the arbitration already underway between ClaimPlus and Staffing Concepts International. See 9 U.S.C. §§ 3-4. Two days later, the district court issued the order that gave rise to this appeal, stating that the moti on “to dismiss or to stay Defendants’ Affirmative Defenses and Counterclaims in Favor of Prior Pending Arbitration . . . is stricken without prejudice and may be refiled after [the] court rules onpending motions to dismiss for lack of personal jurisdiction and to transfer venue.” This court immediately expr essed its concerns aboutappellate jurisdiction and requested briefing on the subject, eventually po stponing the issue for oral argument. Having heard both sides out on the matter, we ruled in an order issued January 11, 2008, that there is no proper appellate jurisdiction.

Under the Federal Arbitration Act, an appeal may be taken from a district court order “refusing a stay of any action . . . under this title,” or “denying a petition . . . to order arbitration to proceed.” 9 U.S.C. § 16. The districtcourt here did neither: it struck the motion without prejudice, and at the same time it expressly invited a later refiling of the same motion. CNA equates every post-No. 07-2475 5

ponement with denial, while Staffing Concepts argues that a more finely tuned analys is is required. This particular order, it says, should be characterized as a “delay incident to an orderly process,” Middleby , 962 F.2d at 616, that does not constitute an appealable denial or refusal of the petition.

Middleby suggests that the relevant question here issimilar to the question that arises when a court is considering an injunction: under what circumstances is a delay of a ruling equivalent to a denial. “The Supreme Court’s answer has been: when the passage of timecauses irreparable injury to the person claiming entitlement to relief.” Id. Only if the CNA insurers can show irreparable harm resulting from the district court’s decision to take up personal jurisdiction and venue first can it demonstrate that the district court effectively denied its petition to compel arbitration, and thus that appellate jurisdiction exists under 9 U.S.C. § 16.

This court extended Middleby to the very situation presented to us here in IDS Life Ins. Co. v. SunAmerica, Inc.
, 103 F.3d 524, 526-27 (7th Cir. 1996). In IDS , the district court left ambiguous whether it had granted or denied the stay on proceedings while itconsidered a preliminary injunction, but it invited a refiling after the preliminary injunction was straightened out. Applying Middleby, the court in IDS concluded that the district court’s deferral of consideration of the stay unt il after the preliminary injunction hearing did not give rise to an appealable order, explaining when justifiable delay is transformed into constructive denial of relief as follows:A showing of unjustifiable delay coupled with irreparable injury if an immediate appeal is not allowed is enough to make a constructive denial appealable, if6 No. 07-2475

a formal denial would be. . . . Maybe a showing of delay at once inordinate and unjustified, . . . —the kind of thing that would excuse a person challenging administrative action from having to exhaust hisadministrative remedies, . . . or an applicant for federal habeas corpus from having to exhaust his state remedies, . . . —is also enough. Otherwise the lowercourt or agency would have the judicial or administrative equivalent of a pocket veto.

Id. at 526-27 (citations omitted). Sharif v. Wellness Int’l Network, Ltd. , 376 F.3d 720 (7th Cir. 2004), illustrates the other side of this coin. In that case, the district court never set a schedule for dealing withthe motion to stay court proceedings in favor of arbitration and never even indicated when such a motion might be appropriate. Instead, the district court denied the motion, labeling it “superfluous” because of a pending venue motion. Id. at 726. Here, in contrast, the district court explicitly set its own affairs in order, indicating that it wanted to deal first with the venue and personal jurisdiction issues before tu rning to the motion to compel arbitration. In striking the motion with an invitation to refile, it signaled that it was not going to let the matter languish. The only harms to which CNA points are those related to a then-approaching discov ery deadline. This type of harm is easily averted, however, by a simple request to the district court for an order extending the deadline or limiting discovery to threshold issues of arbitrability. CNA did not do this; it chose to assume that all interim motions would be futile. More than that is necessary before we would jump to the conclusion that the district court was going to allow “inordinate an d unjustified” time to pass before it ruled on the moti on to compel arbitration.No. 07-2475 7

The “delay incident to an or derly process” that occurred in this case provides no gr ound for appellate jurisdiction unless irreparable damage could be shown. CNA has shown none, and so there is no basis for us to hear its appeal. This appeal is D ISMISSED for want of appellate jurisdiction.

USCA-02-C-0072—8-6-08