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                 United States Court of Appeals
                     For the First Circuit





No. 97-1694

               SEACOAST MOTORS OF SALISBURY, INC.,

                     Plaintiff, Appellant,
                                
                               v.
                                
                     CHRYSLER CORPORATION,
                                
                      Defendant, Appellee.
                                


          APPEAL FROM THE UNITED STATES DISTRICT COURT
                                
               FOR THE DISTRICT OF MASSACHUSETTS
                                
        [Hon. Robert B. Collings, U.S. Magistrate Judge]
                                


                             Before
                                
                      Stahl, Circuit Judge,
                   Cyr, Senior Circuit Judge,
                  and Shadur,* District Judge,
                                
                                


     Nicholas J. Decoulos, with whom Decoulos & Decoulos was on
brief, for appellant.
     George W. Mykulak, with whom Robert D. Cultice, Louis J.
Scerra, Jr., and Goldstein & Manello, P.C. were on brief, for
appellee.





May 13, 1998



                                
                                
_____________________
*Of the Northern District of Illinois, sitting by designation.�          STAHL, Circuit Judge.  Plaintiff-appellant Seacoast
Motors of Salisbury, Inc. ("Seacoast") appeals from a district
court order dismissing its complaint and compelling arbitration. 
We hold that we lack jurisdiction to review the propriety of the
district court's non-final, "embedded" order compelling
arbitration. 
                 I.  FACTS AND PRIOR PROCEEDINGS
          On October 21, 1991, Seacoast, an automobile dealership,
and Chrysler Corporation ("Chrysler") entered into five agreements
authorizing Seacoast to sell and service new Chrysler motor
vehicles in Salisbury, Massachusetts.  By the terms of the
agreements, all disputes had to be submitted to arbitration.       On
          February 6, 1996, Chrysler notified Seacoast that it intended to
          establish a new Chrysler dealership in nearby Haverhill,
          Massachusetts.  In response, on August 9, 1996, Seacoast filed a
          complaint in the Essex County Superior Court alleging that, by
          seeking to establish a dealership in Seacoast's market area,
          Chrysler had engaged in unfair or deceptive acts or practices in
          violation of Mass. Gen. Laws ch. 93B.  Seacoast sought to enjoin
          establishment of the new franchise and to recover damages, fees,
          and costs.  
                    On August 22, 1996, Chrysler removed the case to federal
          court based on diversity jurisdiction.  Shortly thereafter, relying
          on sections 3 and 4 of the Federal Arbitration Act ("FAA"), 9
          U.S.C. �� 1-16, Chrysler moved for "an order dismissing or,
          alternatively, staying the action and compelling the plaintiff
          . . . to proceed with arbitration."  Seacoast opposed the motion on
          the ground that arbitration in this case would contravene public
          policy.  Pursuant to an agreement between the parties, the case was
          transferred to a magistrate judge, who, on April 22, 1997,
          dismissed the case with costs and compelled arbitration.  Seacoast
          now appeals the dismissal.
                                 II.  DISCUSSION
                    Seacoast urges us to review the propriety of the lower
          court's order, which both dismissed the action and compelled
          arbitration.  The question that we must address initially is
          whether appellate jurisdiction attaches to the court's order
          compelling arbitration.  We conclude that the order was
          interlocutory, and that we therefore lack jurisdiction to review
          it.
                    Section 3 of the FAA provides that, when an action
          implicates an issue covered by an arbitration agreement between the
          parties, the district court, at the request of any party, "shall
          . . . stay the trial of the action until such arbitration has been
          had in accordance with the terms of the agreement."  9 U.S.C. � 3. 
          Section 4 provides that any party to an arbitration agreement may
          petition the district court for an order compelling arbitration,
          irrespective of any ongoing proceeding.  See id. � 4.  Appellate
          review of orders that favor arbitration -- that is, orders that
          stay an action pending arbitration pursuant to section 3 or compel
          arbitration under section 4 -- is proscribed, if those orders are
          "interlocutory."  See id. � 16(b)(1) & (2).  Under section
          16(a)(3), however, an appellate court may review the merits of
          orders that favor arbitration, if those orders are "final
          decision[s]."  Id. � 16(a)(3).  Thus, whether a particular order
          favoring arbitration is appealable depends on whether it is final
          or interlocutory.
                    The general rule governing what constitutes a final
          decision under section 16 is that an order compelling arbitration
          is not final, and therefore not immediately reviewable, if the
          arbitrability issue is "embedded" -- that is, "if issues other than
          the propriety of arbitration are raised or relief other than a
          determination as to the arbitrability of the dispute is sought." 
          Adair, 25 F.3d at 955.  By contrast, an order qualifies as a final
          order within the meaning of section 16 if the action is
          "independent," or brought solely for the purpose of obtaining such
          an order.  See Prudential Ins. Co. of America v. Lai, 42 F.3d 1299,
          1302 (9th Cir. 1994); Humphrey v. Prudential Secs., Inc., 4 F.3d
          313, 317 (4th Cir. 1993); S+L+H S.p.A. v. Miller-St. Nazianz, Inc.,
          988 F.2d 1518, 1522 (7th Cir. 1993); Filanto, S.P.A. v. Chilewich
          Int'l Corp., 984 F.2d 58, 60 (2d Cir. 1993).  We follow this rule
          of appealability, which is based on finality principles that were
          firmly established at the time of section 16's enactment in 1988. 
          See Stedor Enters., Ltd. v. Armtex, Inc., 947 F.2d 727, 729-32 (4th
          Cir. 1991).  
                    Chrysler's request for arbitration is embedded because
          the issue of arbitrability arises here in the context of a claim
          for relief (brought by Seacoast) that goes beyond a determination
          of the arbitrability of the dispute.  It does not matter that all
          of the substantive claims in the suit -- the "other relief sought"
          -- are would-be subjects of the arbitration.  See Gammaro v. Thorp
          Consumer Discount Co., 15 F.3d 93, 96 (8th Cir. 1994) (holding
          that, even when the pending suit is limited to arbitrable claims,
          the order compelling arbitration is embedded); Humphrey, 4 F.3d at
          318 (same).  
                    However, that arbitrability was an embedded issue does
          not by itself answer the jurisdictional question.  In most embedded
          proceedings in which the district court's decision favors
          arbitration, the district court, pursuant to section 3, stays the
          action pending arbitration.  Here, by contrast, although the
          district court granted Chrysler's motion to compel arbitration, it
          entered an order dismissing, rather than staying, the proceedings. 
          We must address, then, whether a dismissal without prejudice in
          deference to arbitration in the context of an embedded proceeding
          is an appealable (that is, final) decision.  
                    This circuit has not addressed this question before, and
          other circuits have been divided on the issue.  As the Seventh
          Circuit outlined recently in Napleton v. General Motors Corp., 1998
          WL 117893, __ F.3d __, __ (7th Cir. 1998), some circuits have
          determined that an order of dismissal accompanying an order
          favoring arbitration is appealable as a final decision, even if the
          proceeding is embedded, see Armijo v. Prudential Ins. Co. of Am.,
          72 F.3d 793, 797 (10th Cir. 1995) (finding jurisdiction when, in an
          embedded proceeding, the district court had ordered arbitration and
          dismissed action, on the basis that the moving party had requested
          that the action be dismissed, not stayed, pending arbitration);
          Nationwide Ins. Co. of Columbus, Ohio v. Patterson, 953 F.2d 44, 46
          (3d Cir. 1991) (finding jurisdiction to review an arbitration order
          on the basis that "the district court's dismissal of [the] action
          plainly signifies that th[e] arbitration is not a part of any
          ongoing proceeding"); see also Arnold v. Arnold Corp., 920 F.2d
          1269, 1276 (6th Cir. 1990) (discerning in the FAA's legislative
          history an intention to abrogate the distinction between embedded
          and independent proceedings and to "allow[] appeals from final
          decisions affecting arbitration whether or not they direct or
          refuse to direct arbitration," and, correspondingly, finding
          jurisdiction to review an arbitration order in which the
          proceedings had been dismissed), while other circuits have focused
          on the distinction between embedded and independent proceedings to
          determine whether jurisdiction exists over an appeal from a
          dismissal of an order favoring arbitration, see McCarthy v.
          Providential Corp., 122 F.3d 1242, 1244 (9th Cir. 1997); In re
          Pisgah Contractors, Inc., 117 F.3d 133, 136 (4th Cir. 1997); Altman
          Nursing, Inc. v. Clay Capital Corp., 84 F.3d 769, 771 (5th Cir.
          1996); Gammaro, 15 F.3d at 96.  
                    The Napleton panel followed the latter approach,
          concluding that "it is the nature of the underlying action, not the
          style of the district court's decision requiring arbitration, that
          determines whether we have jurisdiction over appeals from decisions
          granting arbitration."  1998 WL 117893, at *4, __ F.3d at __.  We
          do likewise and hold that we lack jurisdiction under the FAA to
          review whether the court's order compelling arbitration was proper. 
          Such a result avoids elevating form over substance and promotes
          both the pro-arbitration purposes of the FAA and the institutional
          goal of avoiding piecemeal appeals and systemic delays.  See id. at
          *4-*6, __ F.3d at __.  
                    Accordingly, Seacoast's appeal is dismissed for want of
          appellate jurisdiction.
          
                    Costs to appellee.
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