United States Court of Appeals

For the First Circuit

No. 12-2495

PIUS AWUAH, ET AL.,

and all others similarly situated,

Plaintiffs, Appellees,

v.

COVERALL NORTH AMERICA, INC.,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

Before

Howard, Selya and Thompson,

Circuit Judges.

Norman M. Leon, with whom Matthew Iverson, DLA Piper LLP (US),

Michael D. Vhay and Ferriter Scobbo & Rodophele, PC were on brief

for appellant.

Shannon Liss-Riordan with whom Hillary Schwab, Claret Vargas

and Lichten & Liss-Riordan, P.C. were on brief for appellees.

August 30, 2013
HOWARD, Circuit Judge. Coverall appeals the denial of

its motion to reconsider and to stay proceedings pending

arbitration. That motion sought relief from the district court's

decision to sanction Coverall by admitting to an ongoing class

action certain individuals who had been pursuing their claims

against Coverall in arbitration. The sanction issued upon the

court's determination that Coverall had violated an order

requiring it to obtain judicial permission before making any

motion to delay or prevent arbitration proceedings. We conclude

that this determination was an abuse of discretion. Without this

improper determination there was no basis for the sanction, which

interfered with the arbitration proceedings, and thus Coverall's

motion to stay should have been granted.1

I. Background

This appeal is the latest development in the litigation

between Coverall North America, Inc., a franchisor providing

cleaning services, and its franchisees, who do the cleaning.2 The

franchisees ("Plaintiffs") sued Coverall in the District of

Massachusetts, asserting multiple claims. The district court

1 We need not address the denial of the motion to reconsider

the sanction, because the grant of that motion would have produced

the same result as the grant of the motion to stay--namely, the

continued arbitration of certain claims.

2

 See Awuah v. Coverall N. Am., Inc., 703 F.3d 36, 38 n.1 (1st

Cir. 2012), for a collection of the opinions documenting this

case's history.

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certified a class, excluding those franchisees whose agreements

with Coverall contained clauses expressly requiring arbitration

under the rules of the American Arbitration Association ("AAA").

Those franchisees ("the AAA Claimants") pursued arbitration.

While arbitration proceedings were underway, the

district court issued a ruling that threatened to expand the

class. At the request of Coverall, which wanted to research its

options to appeal this ruling, the arbitrator imposed a sixty-day

stay of the arbitrations of ten of the AAA Claimants ("the Ten

Claimants"), who are Appellees in this case.

In July 2012, while this stay was in effect, the

district court issued a bench order ("the July Order"), ruling

that "[a]ny motion to delay, prevent the actual arbitration of

these matters must first be presented to the Court." The July

Order did not mention the existing sixty-day stay.

Plaintiffs emailed the arbitrator a copy of the July

Order. The email read:

I've attached a transcript of yesterday's

conference in federal court in which the

judge made some rulings pertinent to the

arbitration cases we have filed. Among other

things, the judge ruled that all cases that

we have filed, . . . must go forward without

any further delay; Claimants therefore

request that the AAA proceed with the cases

that it has stayed.

In response, Coverall sent the arbitrator the following email:

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That is not what the court said. . . . The

court said that the parties shall proceed in

accordance with the directions of the AAA

(which we have done) and that further motions

to delay or prevent the arbitrations must

first be presented to the court. Nowhere did

the court lift the temporary stay that the

AAA granted to allow Coverall to try [to]

resolve the various problems associated with

the court's prior . . . arbitration related

rulings.

After Coverall sent this email, Plaintiffs filed a "Notice to

Court Regarding Coverall's Ongoing Obstruction of AAA

Arbitrations." The notice characterized Coverall's email as a

"request for a delay" and argued that, pursuant to the July Order,

such a request should have first been presented to the court.

Though Plaintiffs' notice did not request any relief,

the district court--concluding that Coverall's email had violated

the July Order "by seeking to continue a stay of arbitration for

ten arbitration claimants"--sua sponte sanctioned Coverall by

admitting to the class the Ten Claimants, relieving them of their

obligations to arbitrate. Thereafter, Coverall filed a motion to

reconsider the sanction and, under section 3 of the Federal

Arbitration Act ("FAA"),3

 to stay the Ten Claimants' judicial

proceedings pending arbitration. The district court summarily

denied this motion, and Coverall appealed.

3

 9 U.S.C. §§ 1-16.

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II. Discussion

The FAA confers jurisdiction on this court to hear

Coverall's appeal from the denial of its section 3 motion to stay.

See 9 U.S.C. § 16(a)(1)(A).4 The motion was summarily denied, so

we review the determinations on which that denial was based. See,

e.g., Commercial Union Ins. Co. v. Gilbane Bldg. Co., 992 F.2d

386, 386-90 (1st Cir. 1993) (analyzing determinations that led

district court to summarily deny motion to stay). The denial was

based on the district court's determination that Coverall had

violated the July Order, for this determination led the court to

sanction Coverall by interfering with the Ten Claimants'

arbitration proceedings. The determination that Coverall had

violated the July Order is reviewed for abuse of discretion. See,

e.g., Santiago-Díaz v. Laboratorio Clínico Y De Referencia Del

Este And Sara López, M.D., 456 F.3d 272, 275 (1st Cir. 2006). Of

course, a material error of law is always an abuse of discretion. 

See United States v. Snyder, 136 F.3d 65, 67 (1st Cir. 1998).

By its terms, the July Order demanded that any motion to

delay or prevent arbitration be approved by the district court. 

The AAA rules, in all relevant respects, use the term "request"

4

 Appellees claim that we lack jurisdiction. They

characterize the sanction itself as, in effect, the denial of a

motion to stay, and argue that Coverall missed the thirty-day

window in which to appeal that denial. But Coverall could not have

appealed the sanction itself under the FAA, because it was not, in

fact, the denial of a motion to stay.

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instead of "motion." See generally Am. Arbitration Ass'n, Commercial

Arbitration Rules and Mediation Procedures (2009), available

athttp://www.adr.org/aaa/ShowProperty?nodeId=/UCM/ADRSTG_004103&revision=la

testreleased; Am. Arbitration Ass'n, Employment Arbitration Rules and

Mediation Procedures (2 009), available at

http://www.adr.org/aaa/ShowProperty?nodeId=/UCM/ADRSTG_004362&revision=late

streleased. Coverall's email to the arbitrator neither moved for nor

requested anything. Rather, it responded to Plaintiffs' claim

that the July Order required lifting the arbitrator's temporary

stay, when, in fact, the July Order did not mention that stay.

If the district court had intended to prohibit Coverall

from responding to assertions made by Plaintiffs, that prohibition

should have appeared in the July Order in unambiguous terms. Cf.

Project B.A.S.I.C. v. Kemp, 947 F.2d 11, 17 (1st Cir. 1991) ("For

a party to be held in contempt, it must have violated a clear and

unambiguous order that left no reasonable doubt as to what

behavior was expected . . . ."); see also Velázquez Linares v.

United States, 546 F.3d 710, 711 (1st Cir. 2008) ("'[L]itigants

have an unflagging duty to comply with clearly communicated

case-management orders' . . . ." (quoting Rosario-Díaz v.

González, 140 F.3d 312, 315 (1st Cir. 1998)). Since the July

Order did not prohibit Coverall's conduct, the district court's

determination that Coverall violated that order was an abuse of

discretion. Without this improper determination, there was no

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legitimate basis for the sanction interfering with the Ten

Claimants' arbitral proceedings, and thus Coverall's motion to

stay the Ten Claimants' judicial proceedings pending arbitration

should have been granted.5

III. Conclusion

The denial of Coverall's motion to stay is reversed and

the case is remanded for further proceedings consistent with this

opinion.

5 To conclude that the district court abused its discretion in

determining that Coverall had violated the July Order, we assume

the order's validity, and thus do not address Coverall's assertions

that (i) no class member had standing to pursue the order, and (ii)

the order violated the FAA. Nor need we reach Coverall's arguments

that (i) it received inadequate notice and opportunity to be heard

before being sanctioned, and (ii) the district court abused its

discretion in the severity of the sanction imposed.

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