Source: https://bulk.resource.org/courts.gov/c/US/460/460.US.1.81-1203.html
Timestamp: 2014-04-23 15:13:59
Document Index: 654875333

Matched Legal Cases: ['§ 4', '§ 1291', '§ 1291', '§ 4', '§ 4', '§ 4', '§ 4', '§ 1291', '§ 1291', '§ 1291', '§ 1651', '§ 1291', '§ 1292', '§ 1291', '§ 1291', '§ 666', '§ 1345', '§ 1345', '§ 1651', '§ 4', '§ 4', '§ 4', '§ 3', '§ 4', '§ 2', '§ 3', '§ 4', '§ 3', '§ 4', '§ 4247', '§ 2106', '§ 4', '§ 1292', '§ 4', '§ 1291', '§ 1291', '§ 1292', '§ 1291', '§ 1291', '§ 2106', '§ 1651', '§ 1292', '§ 6', '§ 6', '§ 4', '§ 3', '§ 3', '§ 1', '§ 1', '§ 1331', '§ 2283']

460 U.S. 1
103 S.Ct. 927
74 L.Ed.2d 765
MOSES H. CONE MEMORIAL HOSPITAL, Petitionerv.MERCURY CONSTRUCTION CORPORATION.
Decided Feb. 23, 1983.
Petitioner, a hospital located in North Carolina, entered into a contract with respondent contractor, an Alabama corporation, for construction of additions to the hospital building. Contract disputes were to be initially referred to the architect who was hired to design and oversee the construction project. Disputes decided by the architect or not decided within a specified time could be submitted to binding arbitration under an arbitration clause in the contract. Subsequently, during construction, respondent submitted claims to the architect for extended overhead or increase in construction costs due to petitioner's delay or inaction. But the claims were not resolved, and petitioner refused to pay them. Petitioner then filed an action in a North Carolina state court against respondent and the architect, seeking a declaratory judgment that there was no right to arbitration, that petitioner was not liable to respondent, and that if it was liable it would be entitled to indemnity from the architect. A few days later petitioner obtained an ex parte injunction from the state court forbidding respondent to take any steps toward arbitration, but when respondent objected the stay was dissolved. Respondent then filed a diversity-of-citizenship action in Federal District Court, seeking an order compelling arbitration under § 4 of the United States Arbitration Act. The District Court stayed the action pending resolution of the state-court suit because the two suits involved the identical issue of the arbitrability of respondent's claims. The Court of Appeals, holding that it had jurisdiction under 28 U.S.C. § 1291, reversed the District Court's stay order and remanded the case with instructions to enter an order to arbitrate.
1. The District Court's stay order was appealable as a "final decision" to the Court of Appeals under 28 U.S.C. § 1291. Since the order was based on the conclusion that the federal and state actions involved the identical issue of arbitrability, and this issue was the only substantive issue present in the federal action, a stay of the federal action pending resolution of the state action meant that there would be no further litigation in the federal court. Thus, respondent was "effectively out of court" so that the stay order amounted to a dismissal of the federal action. Moreover, even if the stay order was not final for appealability purposes, it was nevertheless appealable within the finality rule exception that applies where an order conclusively determines the disputed question, resolves an important issue completely separate from the merits, and is effectively unreviewable on appeal from a final judgment. Cohen v. Beneficial Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528. Pp. 8-13.
(c) There was no showing of the requisite exceptional circumstances to justify the District Court's stay order. Concededly, there was no assumption by either court of jurisdiction over any res or property or any contention that the federal court was any less convenient to the parties than the state court. The other factors—avoidance of piecemeal litigation and the order in which the current forums obtained jurisdiction rather than supporting the stay, counsel against it. The fact that if respondent obtains an arbitration order, petitioner will be forced to resolve the dispute with respondent and the related dispute with the architect in different forums is not the result of any choice between federal and state courts but occurs because the relevant federal law, the Arbitration Act, requires piecemeal resolution when necessary to give effect to an arbitration agreement. Hence, the decision to allow the issue of arbitrability to be decided in the state rather than in the federal court does not cause piecemeal resolution of the parties' underlying disputes. And the fact that the state-court suit was filed before the federal suit is not sufficient reason to justify the stay order, where because petitioner's refusal to arbitrate did not occur until less than a day before it filed its state suit, respondent had no reasonable opportunity to file its federal suit first. Moreover, priority should not be measured exclusively by which complaint was filed first, but rather in terms of how much progress has been made in the two actions. Here, no substantial proceedings had taken place in the state suit at the time of the District Court's stay order, whereas in the federal suit the parties had taken most of the steps necessary to a resolution of the arbitrability issue. The stay order thus frustrated the Arbitration Act's policy of rapid and unobstructed enforcement of arbitration agreements. Pp. 19-23.
This case, commenced as a petition for an order to compel arbitration under § 4 of the United States Arbitration Act of 1925 (Arbitration Act or Act), 9 U.S.C. § 4, presents the question whether, in light of the policies of the Act and of our decisions in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and Will v. Calvert Fire Insurance Co., 437 U.S. 655, 98 S.Ct. 2552, 57 L.Ed.2d 504 (1978), the District Court for the Middle District of North Carolina properly stayed this diversity action pending resolution of a concurrent state-court suit. The Court of Appeals for the Fourth Circuit reversed the stay. 656 F.2d 933, rehearing denied, 664 F.2d 936 (CA4 1981). We granted certiorari. 455 U.S. 937, 102 S.Ct. 1426, 71 L.Ed.2d 647 (1982). We affirm.
* Petitioner Moses H. Cone Memorial Hospital ("Hospital") is located in Greensboro, North Carolina. Respondent Mercury Construction Corp. ("Mercury"), a construction contractor, has its principal place of business in Alabama. In July 1975, Mercury and the Hospital entered into a contract for the construction of additions to the Hospital building. The contract, drafted by representatives of the Hospital, included provisions for resolving disputes arising out of the contract or its breach. All disputes involving interpretation of the contract or performance of the construction work were to be referred in the first instance to J.N. Pease Associates ("Architect"), an independent architectural firm hired by the Hospital to design and oversee the construction project. With certain stated exceptions,1 any dispute decided by the Architect (or not decided by it within a stated time) could be submitted by either party to binding arbitration under a broad arbitration clause in the contract:
The contract also specified the time limits for arbitration demands.2
Construction on the project began in July 1975. Performance was to be completed by October 1979.3 In fact, construction was substantially completed in February 1979, and final inspections were made that June.
In January 1980, Mercury submitted to the Architect its claims for delay and impact costs. Mercury and the Architect discussed the claims over several months, substantially reducing the amount of the claims. According to the Hospital, it first learned of the existence of Mercury's claims in April 1980; its lawyers assumed active participation in the claim procedure in May. The parties differ in their characterizations of the events of the next few months—whether there were "ongoing negotiations," or merely an "investigation" by the Hospital. In any event, it appears from the record that lawyers for the Hospital requested additional information concerning Mercury's claims. As a result, on August 12, 1980, Mercury gave a detailed presentation of its claims at a meeting attended by Mercury's representatives and lawyers, the Hospital's representatives and lawyers, and representatives of the Architect. Mercury agreed to send copies of its files to an expert hired by the Hospital, and the parties agreed to meet again on October 13.
On October 15, without notice to Mercury, the Hospital obtained an ex parte injunction from the state court forbidding Mercury to take any steps directed toward arbitration. Mercury objected, and the stay was dissolved on October 27. As soon as the stay was lifted, Mercury filed the present action in the District Court, seeking an order compelling arbitration under § 4 of the Arbitration Act, 9 U.S.C. § 4.4 Jurisdiction was based on diversity of citizenship. On the Hospital's motion, the District Court stayed Mercury's federal-court suit pending resolution of the state-court suit because the two suits involved the identical issue of the arbitrability of Mercury's claims. App. to Pet. for Cert. A-38.
Mercury sought review of the District Court's stay by both a notice of appeal and a petition for mandamus. A panel of the Court of Appeals for the Fourth Circuit heard argument in the case, but before the panel issued any decision, the Court informed the parties that it would consider the case en banc. After reargument, the en banc Court held that it had appellate jurisdiction over the case under 28 U.S.C. § 1291. It reversed the District Court's stay order and remanded the case to the District Court with instructions for entry of an order to arbitrate.
Before we address the propriety of the District Judge's stay order, we must first decide whether that order was appealable to the Court of Appeals under 28 U.S.C. § 1291.5
Mercury sought appellate review through two alternative routes—a notice of appeal under § 1291, and a petition for mandamus under the All Writs Act, 28 U.S.C. § 1651.6 Mercury expressly stated that its appeal was based only on § 1291, and not on 18 U.S.C. § 1292 (relating to interlocutory appeals). The Hospital contends that the order appealed from was not a "final decision" within § 1291. We disagree and hold that the stay order was final for purposes of appellate jurisdiction.
Idlewild Liquor Corp. v. Epstein, 370 U.S. 713, 82 S.Ct. 1294, 8 L.Ed.2d 794 (1962), is instructive in this regard. There the plaintiff brought a federal suit challenging the constitutionality of a state statute. The District Judge declined to convene a three-judge court and stayed the federal suit under the Pullman abstention doctrine.7 We held that the District Court's action was final and therefore reviewable by the Court of Appeals, stating:
"The Court of Appeals properly rejected the argument that the order of the District Court 'was not final and hence unappealable under 28 U.S.C. §§ 1291, 1292,' pointing out that '[a]ppellant was effectively out of court.' " Id., at 715, n. 2, 82 S.Ct., at 1296, n. 2.8
Here, the argument for finality of the District Court's order is even clearer. A district court stay pursuant to Pullman abstention is entered with the expectation that the federal litigation will resume in the event that the plaintiff does not obtain relief in state court on state-law grounds.9 Here, by contrast, the District Court predicated its stay order on its conclusion that the federal and state actions involved "the identical issue of arbitrability of the claims of Mercury Construction Corp. against the Moses H. Cone Memorial Hospital." App. to Pet. for Cert. A-38. That issue of arbitrability was the only substantive issue present in the federal suit. Hence, a stay of the federal suit pending resolution of the state suit meant that there would be no further litigation in the federal forum; the state court's judgment on the issue would be res judicata.10 Thus, here, even more surely than in Idlewild, Mercury was "effectively out of court." Hence, as the Court of Appeals held, this stay order amounts to a dismissal of the suit.11
"To come within the 'small class' of decisions excepted from the final-judgment rule by Cohen, the order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment." Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351 (1978) (footnote omitted).12
There can be no dispute that this order meets the second and third of these criteria. An order that amounts to a refusal to adjudicate the merits plainly presents an important issue separate from the merits.13 For the same reason, this order would be entirely unreviewable if not appealed now. Once the state court decided the issue of arbitrability, the federal court would be bound to honor that determination as res judicata.
The Hospital contends nevertheless that the District Court's stay order did not meet the first of the criteria, namely that it "conclusively determine the disputed question." But this is true only in the technical sense that every order short of a final decree is subject to reopening at the discretion of the district judge.14 In this case, however, there is no basis to suppose that the District Judge contemplated any reconsideration of his decision to defer to the parallel state-court suit. He surely would not have made that decision in the first instance unless he had expected the state court to resolve all relevant issues adequately. See infra, at Part IV E. It is not clear why the Judge chose to stay the case rather than to dismiss it outright; for all that the record shows, there was no reason other than the form of the Hospital's motion. Whatever the reason, however, the practical effect of his order was entirely the same for present purposes, and the order was appealable.
Colorado River involved the effect of the McCarran Amendment, 66 Stat. 560, 43 U.S.C. § 666, on the existence and exercise of federal-court jurisdiction to adjudicate federal water rights, 28 U.S.C. § 1345. The Amendment waives the Government's sovereign immunity to permit the joinder of the United States in some state-court suits for the adjudication of water rights. In Colorado River, however, the Government proceeded in Federal District Court, bringing suit against some 1,000 nonfederal water users, seeking a declaration of the water rights of certain federal entities and Indian tribes. Shortly thereafter, a defendant in that suit sought to join the United States in a state-court proceeding for the comprehensive adjudication and administration of all water rights within the river system that was the subject of the federal-court suit. The District Court dismissed the federal suit, holding that the abstention doctrine required deference to the state-court proceedings. The Court of Appeals for the Tenth Circuit reversed, holding that the suit of the United States was within the District Court's jurisdiction under 28 U.S.C. § 1345 and that abstention was inappropriate. We reversed the judgment of the Court of Appeals and affirmed the judgment of the District Court dismissing the complaint.
"Abstention from the exercise of federal jurisdiction is the exception, not the rule. 'The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest.' "15
After canvassing the three categories of abstention, we conclude that none of them applied to the case at hand. 424 U.S., at 813-817, 96 S.Ct., at 1244-46.16
Nevertheless, we held that the District Court's dismissal was proper on another ground—one resting not on considerations of state-federal comity or on avoidance of constitutional decisions, as does abstention, but on "considerations of '[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.' "17 We noted that " 'the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction,' " and that the federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them."18 We continued:
As this passage makes clear, the decision whether to dismiss a federal action because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction. The weight to be given to any one factor may vary greatly from case to case, depending on the particular setting of the case. Colorado River itself illustrates this principle in operation. By far the most important factor in our decision to approve the dismissal there was the "clear federal policy . . . [of] avoidance of piecemeal adjudication of water rights in a river system," id., at 819, 96 S.Ct., at 1247, as evinced in the McCarran Amendment. We recognized that the Amendment represents Congress's judgment that the field of water rights is one peculiarly appropriate for comprehensive treatment in the forums having the greatest experience and expertise, assisted by state administrative officers acting under the state courts. Id., at 819-820, 96 S.Ct., at 1247-48. In addition, we noted that other factors in the case tended to support dismissal—the absence of any substantial progress in the federal-court litigation; the presence in the suit of extensive rights governed by state law; the geographical inconvenience of the federal forum; and the Government's previous willingness to litigate similar suits in state court. Id., at 820, 96 S.Ct., at 1247.
The Hospital relies on the opinion of Justice REHNQUIST, announcing the judgment of the Court. The Hospital argues that Justice REHNQUIST's opinion, if not expressly overruling Colorado River, at least modifies its holding substantially. But it is clear that a majority of the Court reaffirmed the Colorado River test in Calvert. Justice REHNQUIST's opinion commanded only four votes. It was opposed by the dissenting opinion, in which four Justices concluded that the Calvert District Court's stay was impermissible under Colorado River. 437 U.S., at 668-669, 672-674, 98 S.Ct., at 2560, 2562-63 (BRENNAN, J., dissenting). Justice BLACKMUN, although concurring in the judgment, agreed with the dissent that Colorado River § exceptional-circumstances test was controlling; he voted to remand to permit the District Court to apply the Colorado River factors in the first instance.19 Id., at 667-668, 98 S.Ct., at 2559-60. On remand, the Court of Appeals correctly recognized that the four dissenting Justices and Justice BLACKMUN formed a majority to require application of the Colorado River test. Calvert Fire Insurance Co. v. Will, 586 F.2d 12 (CA7 1978).20 Even on the basis of Justice REHNQUIST's opinion, however, there is an obvious distinction between Calvert and this case. The key to Calvert was the standard for issuance of a writ of mandamus under 28 U.S.C. § 1651.21 As Justice REHNQUIST stressed, such extraordinary writs are used in aid of appellate jurisdiction only to confine an inferior court to a lawful exercise of its prescribed authority, or to compel it to exercise its authority when it is its duty to do so. The movant must show that his right to the writ is clear and indisputable. 437 U.S., at 661-662, 664, 665-666, 98 S.Ct., at 2556-57, 2558, 2559 (opinion of REHNQUIST, J.). Justice REHNQUIST concluded that the movant in Calvert had failed to meet this burden. At the same time, he noted that the movant might have succeeded on a proper appeal. Id., at 665, 98 S.Ct., at 2558. In this case we have held that the Court of Appeals did have appellate jurisdiction; it properly exercised that jurisdiction to find that the District Court's stay was impermissible under Colorado River.
The Hospital concedes that the first two factors mentioned in Colorado River are not present here. There was no assumption by either court of jurisdiction over any res or property, nor is there any contention that the federal forum was any less convenient to the parties than the state forum. The remaining factors—avoidance of piecemeal litigation, and the order in which jurisdiction was obtained by the concurrent forums—far from supporting the stay, actually counsel against it.
There is no force here to the consideration that was paramount in Colorado River itself—the danger of piecemeal litigation.
The Hospital points out that it has two substantive disputes here—one with Mercury, concerning Mercury's claim for delay and impact costs, and the other with the Architect, concerning the Hospital's claim for indemnity for any liability it may have to Mercury. The latter dispute cannot be sent to arbitration without the Architect's consent, since there is no arbitration agreement between the Hospital and the Architect. It is true, therefore, that if Mercury obtains an arbitration order for its dispute, the Hospital will be forced to resolve these related disputes in different forums. That misfortune, however, is not the result of any choice between the federal and state courts; it occurs because the relevant federal law requires piecemeal resolution when necessary to give effect to an arbitration agreement.22 Under the Arbitration Act, an arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute but not to the arbitration agreement.23 If the dispute between Mercury and the Hospital is arbitrable under the Act, then the Hospital's two disputes will be resolved separately—one in arbitration, and the other (if at all) in state-court litigation. Conversely, if the dispute between Mercury and the Hospital is not arbitrable, then both disputes will be resolved in state court. But neither of those two outcomes depends at all on which court decides the question of arbitrability. Hence, a decision to allow that issue to be decided in federal rather than state court does not cause piecemeal resolution of the parties' underlying disputes. Although the Hospital will have to litigate the arbitrability issue in federal rather than state court, that dispute is easily severable from the merits of the underlying disputes.
The order in which the concurrent tribunals obtained and exercised jurisdiction cuts against, not for, the District Court's stay in this case. The Hospital argues that the stay was proper because the state-court suit was filed some 19 days before the federal suit. In the first place, this argument disregards the obvious reason for the Hospital's priority in filing. An indispensable element of Mercury's cause of action under § 4 for an arbitration order is the Hospital's refusal to arbitrate. See n. 27, infra. That refusal did not occur until less than a day before the Hospital filed its state suit. Hence, Mercury simply had no reasonable opportunity to file its § 4 petition first. Moreover, the Hospital succeeded in obtaining an ex parte injunction from the state court forbidding Mercury from taking any steps to secure arbitration.24 Mercury filed its § 4 petition the same day that the injunction was dissolved.25
That aside, the Hospital's priority argument gives too mechanical a reading to the "priority" element of the Colorado River balance. This factor, as with the other Colorado River factors, is to be applied in a pragmatic, flexible manner with a view to the realities of the case at hand. Thus, priority should not be measured exclusively by which complaint was filed first, but rather in terms of how much progress has been made in the two actions. Colorado River illustrates this point well. There, the federal suit was actually filed first. Nevertheless, we pointed out as a factor favoring dismissal "the apparent absence of any proceedings in the District Court, other than the filing of the complaint, prior to the motion to dismiss." 424 U.S., at 820, 96 S.Ct., at 1248. Here, the opposite was true. It was the state-court suit in which no substantial proceedings (excepting only the abortive temporary injunction) had taken place at the time of the decision to stay. In the federal suit, by contrast, the parties had taken most of the steps necessary to a resolution of the arbitrability issue.26 In realistic terms, the federal suit was running well ahead of the state suit at the very time that the District Court decided to refuse to adjudicate the case.
This refusal to proceed was plainly erroneous in view of Congress's clear intent, in the Arbitration Act, to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible. The Act provides two parallel devices for enforcing an arbitration agreement: a stay of litigation in any case raising a dispute referable to arbitration, 9 U.S.C. § 3, and an affirmative order to engage in arbitration, § 4. Both of these sections call for an expeditious and summary hearing, with only restricted inquiry into factual issues.27 Assuming that the state court would have granted prompt relief to Mercury under the Act,28 there still would have been an inevitable delay as a result of the District Court's stay. The stay thus frustrated the statutory policy of rapid and unobstructed enforcement of arbitration agreements.
Besides the four factors expressly discussed in Colorado River, there is another that emerges from Calvert —the fact that federal law provides the rule of decision on the merits. The state-versus-federal-law factor was of ambiguous relevance in Colorado River.29 In Calvert, however, both the four-vote dissenting opinion and Justice BLACKMUN's opinion concurring in the judgment pointed out that the case involved issues of federal law. 437 U.S., at 667, 98 S.Ct., at 2559 (BLACKMUN, J., concurring in the judgment); id., at 667-668, 98 S.Ct., at 2560-64 (BRENNAN, J., dissenting). See also Colorado River, 424 U.S., at 815, n. 21, 96 S.Ct., at 1245, n. 21. It is equally apparent that this case involves federal issues.
The basic issue presented in Mercury's federal suit was the arbitrability of the dispute between Mercury and the Hospital. Federal law in the terms of the Arbitration Act governs that issue in either state or federal court. Section 2 is the primary substantive provision of the Act, declaring that a written agreement to arbitrate "in any maritime transaction or a contract evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.30 Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act. In Prima Paint Corp. v. Flood & Conklin Mfg. Corp., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), for example, the parties had signed a contract containing an arbitration clause, but one party alleged that there had been fraud in the inducement of the entire contract (although the alleged fraud did not go to the arbitration clause in particular). The issue before us was whether the issue of fraud in the inducement was itself an arbitrable controversy. We held that the language and policies of the Act required the conclusion that the fraud issue was arbitrable. Id., at 402-404, 87 S.Ct., at 1805-06. Although our holding in Prima Paint extended only to the specific issue presented, the courts of appeals have since consistently concluded that questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration. We agree. The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.31
To be sure, the source-of-law factor has less significance here than in Calvert, since the federal courts' jurisdiction to enforce the Arbitration Act is concurrent with that of the state courts.32 But we emphasize that our task in cases such as this is not to find some substantial reason for the exercise of federal jurisdiction by the district court; rather, the task is to ascertain whether there exist "exceptional" circumstances, the "clearest of justifications," that can suffice under Colorado River to justify the surrender of that jurisdiction. Although in some rare circumstances the presence of state-law issues may weigh in favor of that surrender, see n. 29, supra, the presence of federal-law issues must always be a major consideration weighing against surrender.33
Finally, in this case an important reason against allowing a stay is the probable inadequacy of the state-court proceeding to protect Mercury's rights. We are not to be understood to impeach the competence or procedures of the North Carolina courts. Moreover, state courts, as much as federal courts, are obliged to grant stays of litigation under § 3 of the Arbitration Act.34 It is less clear, however, whether the same is true of an order to compel arbitration under § 4 of the Act.35 We need not resolve that question here; it suffices to say that there was, at a minimum, substantial room for doubt that Mercury could obtain from the state court an order compelling the Hospital to arbitrate.36 In many cases, no doubt, a § 3 stay is quite adequate to protect the right to arbitration. But in a case such as this, where the party opposing arbitration is the one from whom payment or performance is sought, a stay of litigation alone is not enough. It leaves the recalcitrant party free to sit and do nothing—neither to litigate nor to arbitrate. If the state court stayed litigation pending arbitration but declined to compel the Hospital to arbitrate, Mercury would have no sure way to proceed with its claims except to return to federal court to obtain a § 4 order—a pointless and wasteful burden on the supposedly summary and speedy procedures prescribed by the Arbitration Act.
We have no occasion in this case to decide whether a dismissal or a stay should ordinarily be the preferred course of action when a district court properly finds that Colorado River counsels in favor of deferring to a parallel state-court suit.37 We can say, however, that a stay is as much a refusal to exercise federal jurisdiction as a dismissal. When a district court decides to dismiss or stay under Colorado River, it presumably concludes that the parallel state-court litigation will be an adequate vehicle for the complete and prompt resolution of the issues between the parties. If there is any substantial doubt as to this, it would be a serious abuse of discretion to grant the stay or dismissal at all. See supra, at Part IV D; McNeese v. Board of Education, 373 U.S. 668, 674-676, 83 S.Ct. 1433, 1437-38, 10 L.Ed.2d 622 (1963). Thus, the decision to invoke Colorado River necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the case, whether it stays or dismisses. See 17 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4247, at 517-519 (1978).
In this Court, the Hospital does not contest the substantive correctness of the Court of Appeals's holding on arbitrability. It does raise several objections to the procedures the Court of Appeals used in considering and deciding this case. In particular, it points out that the only issue formally appealed to the Court of Appeals was the propriety of the District Court's stay order. Ordinarily, we would not expect the Court of Appeals to pass on issues not decided in the District Court. In the present case, however, we are not disposed to disturb the Court's discretion in its handling of the case in view of the special interests at stake and the apparent lack of any prejudice to the parties. 28 U.S.C. § 2106 gives a court of appeals some latitude in entering an order to achieve justice in the circumstances. The Arbitration Act calls for a summary and speedy disposition of motions or petitions to enforce arbitration clauses. The Court of Appeals had in the record full briefs and evidentiary submissions from both parties on the merits of arbitrability, and held that there were no disputed issues of fact requiring a jury trial before a § 4 order could issue. Under these circumstances, the Court acted within its authority in deciding the legal issues presented in order to facilitate the prompt arbitration that Congress envisaged.
If the District Court had not stayed the proceeding, but had set a trial date two months away, there would be no doubt that its order was interlocutory, subject to review only by mandamus or pursuant to 28 U.S.C. § 1292(b). This would be true even though § 4 of the Arbitration Act provides that "the court shall proceed summarily" to trial, because an order setting a trial date only guides the course of litigation, and does not, of its own force, dispose of it on the merits. Such an order is tentative; that is, it is subject to change at any time on the motion of a party or by the court, sua sponte.
The Court has acknowledged the importance of the rule of finality as recently as Coopers & Lybrand v. Livesay, 437 U.S. 463, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978), which rejected the so called "death-knell" exception to § 1291. In Coopers, a putative representative plaintiff whose motion for class certification had been denied by the district court sought to appeal under § 1291. We accepted his argument that this order effectively put him out of court, id., at 470, 98 S.Ct., at 2458, but held that this circumstance did not justify an exception to the statute. "[A]llowing appeals of right from non-final orders that turn on the facts of a particular case thrusts appellate courts indiscriminately into the trial process and thus defeats one vital purpose of the final-judgment rule—'that of maintaining the appropriate relationship between the respective courts. . . . This goal, in the absence of most compelling reasons to the contrary, is very much worth preserving.' " Id., at 476, 98 S.Ct., at 2462 (quoting Parkinson v. April Industries, Inc., 520 F.2d 650, 654 (CA2 1975) (concurring opinion) ).
More importantly, however, the decision in Idlewild cannot be good law after Coopers, supra. The Court describes Coopers as holding only that the collateral-order doctrine of Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), does not apply to a class decertification order under Fed.R.Civ.P. 23(c)(1). Ante, at 12-13, n. 14. We did hold that "the collateral-order doctrine is not applicable to" a decertification order. 437 U.S., at 468-469, 98 S.Ct., at 2458. We then went on to reject the argument that the decertification order was final under the so-called "death-knell" doctrine, holding that an order does not become final simply because the plaintiff will be unable to pursue his claim if the order stands. Id., at 469-477, 98 S.Ct., at 2458-62. We declined to attach any importance to the fact that the plaintiff in Coopers was just as "effectively out of court" as Idlewild or Mercury. We noted that "if the 'death knell' doctrine has merit, it would apply equally to the many interlocutory orders in ordinary litigation . . . that may have such tactical economic significance that a defeat is tantamount to a 'death knell' for the entire case." Id., at 470, 98 S.Ct., at 2459. We also noted that 28 U.S.C. § 1292(b) provides for review of certain nonfinal orders, and that the "death knell" doctrine circumvents its restrictions. Id., at 474-475, 98 S.Ct., at 2460-61. By ignoring this discussion and holding from Coopers, the Court has created an unjustified exception to § 1291.
"[T]he order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment." 437 U.S., at 468, 98 S.Ct., at 2458, quoted, ante, at 11-12.
The District Court's order did not "conclusively determine the disputed question" for the reasons stated above. The Court's assertion to the contrary, ante, at 12-13, is nothing short of sheer speculation about the state of mind of the District Judge. Such speculation is hardly the "practical rather than . . . technical construction"* of § 1291 contemplated by Cohen, supra, 337 U.S., at 546, 69 S.Ct., at 1225. In Cohen itself, the District Court denied the defendant's motion to require the plaintiff to post a bond on the ground that the statute requiring the bond did not apply. That order "conclusively determined" the question whether a bond was required because no conceivable change of circumstances could affect the basis of the District Court's decision. In this case, any number of plausible events might have convinced the District Court that a necessary basis of its decision—that the state court would proceed promptly and fairly to adjudicate the issue of the existence of an agreement to arbitrate no longer applied.
The Court relies on 28 U.S.C. § 2106, which provides that a court of appeals:
The Hospital argues that because Mercury's filing in the Court of Appeals was styled a petition for mandamus first and a notice of appeal only "in the alternative," the Hospital was somehow entitled to have the Court of Appeals apply the stricter standards of review that obtain under the mandamus procedure before considering any appeal. Brief for Petitioner 30-31. We do not understand why this order of proceeding would be of any benefit to the Hospital; but in any event the contention is frivolous. In the first place, Mercury also filed a proper notice of appeal in the District Court, see Fed.Rule App.Proc. 3(a). More fundamentally, a court of appeals has no occasion to engage in extraordinary review by mandamus "in aid of [its] jurisdictio[n]," 28 U.S.C. § 1651, when it can exercise the same review by a contemporaneous ordinary appeal. See, e.g., Hines v. D'Artois, 531 F.2d 726, 732, and n. 10 (CA5 1976).
The plaintiff in Idlewild had requested injunctive relief against enforcement of the state statute. Nevertheless, it is clear that neither the Court of Appeals nor this Court based the holding of appealability on the argument that the District Court had effectively denied injunctive relief. See generally 28 U.S.C. § 1292(a)(1); Carson v. American Brands, Inc., 450 U.S. 79, 101 S.Ct. 993, 67 L.Ed.2d 59 (1981). Section 1292 in terms applies only to interlocutory orders, and therefore could hardly have been the basis for a holding that the orders were "final."
There is no basis for the dissent's attempt, post, at 33, to distinguish Idlewild on the basis that in that case there was no pending state-court action when the District Court's stay issued. Neither the Court of Appeals nor this Court suggested in Idlewild that the state court's doors were anything but wide open to the plaintiff. "[E]ffectively out of court" means effectively out of federal court—in keeping with the fact that the decision under appeal is the refusal to exercise federal jurisdiction.
The reasoning of the Courts of Appeals in this case and in Calvert —that the vexatious or reactive nature of either the federal or the state litigation may influence the decision whether to defer to a parallel state litigation under Colorado River —has considerable merit. We need not rely on such reasoning here, however, for we conclude infra that even if the Hospital acted in complete good faith there were no exceptional circumstances warranting the District Court's stay.
This provides a sharp contrast with the key statute at issue in Colorado River —the McCarran Amendment. There, as we stressed, the primary policy of the statute was the avoidance of piecemeal litigation. 424 U.S., at 819-820, 96 S.Ct., at 1247.
Under § 6 of the Arbitration Act, 9 U.S.C. § 6, Mercury's application for a § 4 order was properly treated procedurally as a motion. Mercury submitted affidavits, legal briefs, and documentary evidence in support of the order sought. The Hospital responded with full briefing and extensive evidentiary submissions on the arbitrability issue, and it requested oral argument and a jury trial. At the same time, it made its successful motion for a stay. It is readily apparent that if the District Court had denied the stay, it doubtless could and should have gone on to decide the arbitrability point in very short order.
"the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration." 9 U.S.C. § 3.
Moreover, the policy of the Arbitration Act requires a liberal reading of arbitration agreements, see infra, at 24-25. As a result, some issues that might be thought relevant to arbitrability are themselves arbitrable—further speeding the procedure under §§ 3 and 4. See, e.g., Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967).
Although the dissenting Justices in Colorado River relied on this point, see 424 U.S., at 825-826, 96 S.Ct., at 1250, the majority concluded that the federal/state law point was not controlling for two reasons. First, there was an affirmative policy in federal law expressly approving litigation of federal water rights in state court—the McCarran Amendment. Second, although the water rights of the United States and the Indian tribes were governed in part by federal law, the bulk of the litigation would necessarily revolve around the state-law water rights of the thousand nonfederal parties in the case—a factor on which we expressly relied in approving the District Court's stay. 424 U.S., at 820, 96 S.Ct., at 1247.
"Maritime transaction" and "commerce" are defined in § 1 of the Arbitration Act, 9 U.S.C. § 1.
The Arbitration Act is something of an anomaly in the field of federal-court jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 (1976 ed., Supp. IV) or otherwise. Section 4 provides for an order compelling arbitration only when the federal district court would have jurisdiction over a suit on the underlying dispute; hence, there must be diversity of citizenship or some other independent basis for federal jurisdiction before the order can issue. E.g., Commercial Metals Co. v. Balfour, Guthrie, & Co., 577 F.2d 264, 268-269 (CA5 1978), and cases cited. Section 3 likewise limits the federal courts to the extent that a federal court cannot stay a suit pending before it unless there is such a suit in existence. Nevertheless, although enforcement of the Act is left in large part to the state courts, it nevertheless represents federal policy to be vindicated by the federal courts where otherwise appropriate.
We need not address whether a federal court might stay a state-court suit pending arbitration under 28 U.S.C. § 2283.