UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Chambers of

Michael A. Hammer

United States Magistrate Judge

Martin Luther King Federal Building

& U.S. Courthouse

50 Walnut Street, Room 2042

Newark, NJ 07101

(973) 776-7858

October 10, 2019

To: All counsel of record

Via ECF

LETTER OPINION AND ORDER

Re: Thompson v. Real Estate Mortgage Network

Civ. No. 11-1494 (KM) 

Dear Counsel:

This matter comes before the Court on the motion of Defendants, Real Estate Mortgage 

Network, Security Atlantic Mortgage Company Inc., Noel Chapman, and Samuel Lamparello, to 

stay all proceedings, including a ruling on Plaintiff's motion for conditional certification. 

Motion to Stay All Proceedings, Aug. 30, 2019, D.E. 244. The Court has considered the parties' 

submissions. Pursuant to Federal Rule of Civil Procedure 78, the Court considered this matter 

without oral argument. For the reasons set forth in this Letter Opinion and Order, the Court 

grants the motion and stays this proceeding pending the Third Circuit's disposition of the 

Defendants' appeal. 

On June 26, 2019, the District Court issued an Opinion and Order that (1) denied 

Defendants' motion for partial summary judgment; (2) denied Defendants' motion to compel 

arbitration; and (3) granted in part Plaintiffs' motion to equitably toll the statutes of limitations 

for current opt-ins. See Opinion, June 26, 2019, D.E. 235; Order, June 26, 2019, D.E. 236. On 

July 25, 2019, Defendants appealed the District Court's denial of their motion to compel 

arbitration. Notice of Appeal, July 25, 2019, D.E. 239. Defendants now move to stay all 

proceedings, including the fully briefed motion for conditional certification, until the Third 

Circuit adjudicates their appeal. Plaintiffs oppose the motion.

The Federal Arbitration Act ("FAA") allows a party to appeal an order denying a motion 

to compel arbitration. 9 U.S.C. § 16(a)(1)(B); see also Virtu KCG Holdings LLC v. Min Li, Civ. 
No. 17-8296, 2018 WL 1627439, *1 (D.N.J. Apr. 3, 2018). In Ehleiter v. Grapetree Shores Inc., 

482 F.3d 207, 215 n.6 (3d Cir. 2007), the Third Circuit held that an appeal under Section 16(a) 

that was neither frivolous nor forfeited deprives the district court of jurisdiction over the matter. 

The Third Circuit thereby sided with the majority of circuits holding that a stay operates as "an 

automatic divestiture where the Section 16(a) appeal is neither frivolous nor forfeited." Id. The 

Third Circuit repeated this instruction in Kim v. Dongbu Tour & Travel Inc., 529 F. App’x. 229 

(3d Cir. 2013), stating that 

ordinarily an appeal from an order denying a motion for arbitration divests a district court 

of jurisdiction over the action that a party seeks to have submitted to arbitration, and thus 

the appeal automatically stays proceedings in the district court. . . . But the appeal will 

not stay the district court proceedings if it is "frivolous or forfeited."

Kim, 529 Fed. Appx. at 233 (citing Ehleiter, 482 F.3d at 215 n.6). 

The Third Circuit did not address whether the district court or the appellate court 

determines whether the appeal is frivolous. Id. However, courts within this Circuit have made 

that determination when confronted with a motion to stay. See, e.g., Virtu KCG Holdings, Inc., 

2018 WL 1627439, at *1 (ordering stay pending appeal after finding that appeal was neither 

frivolous nor forfeited); Bucher v. American Health and Life Ins. Co., Civ. No. 14-659, 2014 WL 

5464857, *2 (W.D. Pa. Oct. 28, 2014) (denying motion to stay after finding that appeal was 

frivolous); Guidotti v. Legal Helpers Debt Resolution LLC, Civ. No. 11-1219, 2012 WL 

3262461, *3 (D.N.J. Aug. 7, 2012) (observing that the Third Circuit "'has been reluctant to 

classify appeals as frivolous'" and granting stay application after finding that appeal was not 

frivolous).

The standard for finding that an appeal under § 16(a) is frivolous is a high one. As the 

District Court observed in Guidotti, the Third Circuit "'has been reluctant to classify appeals as 

frivolous, so that novel theories will not be chilled and litigants advancing any claim or defense 

which has colorable support under existing law or reasonable extensions thereof will not be 

deterred.'" Guidotti, 2012 WL 3262461, at *3 (quoting Hilmon Co. (V.I.) v. Hyatt Int'l, 899 F.2d 

250, 253 (3d Cir. 1990)). The standard is not whether the appeal will ultimately succeed. 

Instead, to qualify as frivolous, the appeal must be "'wholly without merit'" or "lack[] 'colorable 

support[.]'" Id. at *2 (quoting Nagle v. Alspach, 8 F.3d 141, 145 (3d Cir. 1993)). 

This Court cannot determine that Defendants' appeal is frivolous or forfeited. It is true, 

as Plaintiffs argue, that the stay will have the effect of prolonging this already protracted 

litigation. But as Plaintiffs concede, the briefing on the appeal has not been submitted, and 

"[t]hus, neither plaintiff nor this Court can assess whether the appeal is frivolous." Pltf.'s Opp'n 

Brief, Sept. 23, 2019, D.E. 249, at 6. Moreover, the District Court found that several of the 

Hoxworth1 factors weighed only mildly against Defendants. See Opinion, June 26, 2019, D.E. 

235, at 15 (finding that significance of timeliness factor "is substantially reduced in light of the 

fact that they could not have brought a motion to compel until more recently"); id. at18 (finding 

 1 Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d 212 (3d Cir. 1992).
that "extent of non-merits motion practice" factor "weighs somewhat against Defendants, 

although I would not find it dispositive in isolation"); id. at 19 (finding that "acquiescence to 

pre-trial orders" factor "is mildly adverse to Defendants"). Accordingly, this Court cannot 

conclude that Defendants' appeal is "utterly without merit." Plaintiff does not contend that 

Defendants forfeited the appeal. 

For the foregoing reasons, the Court will grant Defendants' motion to stay this litigation 

pending Defendants' appeal to the Third Circuit. The parties shall inform the Court of any 

decision by the Third Circuit within seven days of its issuance.

SO ORDERED.

s/ Michael A. Hammer 

Hon. Michael A. Hammer

United States Magistrate Judge