Opinion ID: 480421
Heading Depth: 1
Heading Rank: 4

Heading: Propriety of Stay on RICO Proceedings Pending Arbitration of the Section 10(b) Count

Text: 16 Appellants make two central arguments on this issue. First, they assert that the only reason for a stay of litigation pending arbitration is that such arbitration will have a preclusive or collateral estoppel effect on the federal court proceedings. Accordingly, because the Supreme Court in Dean Witter Reynolds, Inc. v. Byrd, supra, at 1243-1244, expressed reservations regarding the preclusive effect of arbitration on certain federal claims, appellants suggest that we cannot be influenced by collateral estoppel considerations in deciding the propriety of the stay below. Second, appellants cite the concurring opinion of Justice White in Dean Witter Reynolds, Inc. v. Byrd, supra, where he stated as follows: 17 ... [O]nce it is decided that the two proceedings are to go forward independently, the concern for speedy resolution suggests that neither should be delayed. While the impossibility of the lawyers being in two places at once may require some accommodation in scheduling, it seems to me that the heavy presumption should be that the arbitration and the lawsuit will each proceed in its normal course. And while the matter remains to be determined by the District Court, I see nothing in the record before us to indicate that arbitration in the present case should be stayed. 18 Id. at 1245. 19 We believe that appellants misread Byrd, as well as Justice White's concern for speedy resolution of the case. In Byrd, the Supreme Court had before it a stay of arbitration, not a stay of federal court proceedings, and the Court addressed the propriety of only the former in light of the mandatory language of the Federal Arbitration Act. Id. at 1241. More importantly, contrary to appellants' suggestion, we do not believe that any member of the Byrd Court has required us to ignore the potential preclusive, evidentiary or issue-narrowing effect of arbitration, as well as considerations of expediency and conservation of judicial economy in deciding the propriety of a stay. In contrast to Byrd, there is no federal statute mandating that district court action on the RICO claim proceed. Given this lack of statutory compulsion, the district court's decision to stay RICO proceedings can only be overturned for an abuse of discretion. See Moses H. Cone Hospital v. Mercury Construction Corp., supra, at 939 n. 23. 20 In determining whether the district court has abused its discretion, we consider it relevant that the RICO claim is based on predicate Rule 10b-5 violations, that such alleged violations are the subject of arbitration, and that, depending on how the collateral estoppel issue is resolved, an arbitral decision in favor of defendants could, although we do not decide the question, preclude the need for further district court action on the RICO count. Even assuming no preclusive effect, the arbitration either could be accorded evidentiary weight in a subsequent district court action, see McDonald v. City of West Branch, 466 U.S. 284, 292-293 n. 13, 104 S.Ct. 1799, 1804 n. 13, 80 L.Ed.2d 302 (1984), or could serve to clarify and perhaps even simplify the remaining issues which must be litigated. Home Life Insurance Co. v. Kaufman, 547 F.Supp. 833, 836 (S.D.N.Y.1982) (citing cases). Thus, because there exists no statutory command that the RICO action proceed, and because the outcome of the RICO claim could, under certain circumstances, either be governed or streamlined by the Rule 10b-5 arbitration, we believe the district court could properly believe it was in the interest of both efficiency and judicial economy that the civil RICO proceedings be stayed pending arbitration of plaintiffs' Rule 10b-5 counts. This is similar to the approach of the Second Circuit, see NPS Communications, Inc. v. Continental Group, Inc., 760 F.2d 463, 466 (2d Cir.1985) (staying district court proceedings on antitrust claim pending arbitration); S.A. Mineracao Da Trindade-Samitri v. Utah International, 45 F.2d 190, 196-197 (2d Cir.1984) (staying RICO claims pending arbitration of, inter alia, international dispute involving claims under Rule 10b-5), which, with the exception of any endorsement in those opinions of prior case law allowing for stays of arbitration, we largely adopt today. Accordingly, we reject appellants' assertion that the district court abused its discretion in ordering the stay. 21 Affirmed. No costs.