Opinion ID: 788225
Heading Depth: 2
Heading Rank: 2

Heading: The District Court's Jurisdiction Pending Appeal

Text: 55 Defendants next argue that their filing of a notice of appeal from the District Court's order denying their motion to compel arbitration deprived the District Court of jurisdiction to proceed. The District Court refused to stay the proceedings, finding that defendants' appeal was frivolous. We hold that, although defendants' appeal was not frivolous, the District Court did have jurisdiction to continue with the case in the absence of a stay from this Court. 56 The Supreme Court has stated that [t]he filing of a notice of appeal is an event of jurisdictional significance—it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal. Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982); see also New York State Nat'l Org. for Women v. Terry, 886 F.2d 1339, 1350 (2d Cir.1989) ([T]he filing of a notice of appeal only divests the district court of jurisdiction respecting the questions raised and decided in the order that is on appeal.). The issue, therefore, is whether the trial of a case on the merits is involved in an appeal of an order denying arbitration. 57 The only authority in this Circuit strongly suggests that it is not. In In re Salomon Inc. Shareholders' Derivative Litigation, 68 F.3d 554, 556 (2d Cir.1995), deciding an appeal from the denial of a motion to compel arbitration, we refused to stay the proceedings below, and we affirm[ed] the decision [of the district court] to proceed to trial. In re Salomon involved a shareholders' derivative suit brought on behalf of Salomon Brothers against several former employees, arising from a Treasury Bill auction scandal. See id. at 555. The defendant employees sought to compel arbitration under the FAA, based on agreements they had signed with Salomon Brothers providing for arbitration of any disputes arising out of their employment. See id. The district court initially granted the motion and referred the matter to the New York Stock Exchange (NYSE), the arbitral forum designated in the arbitration agreements. See id. The NYSE, however, declined to arbitrate the dispute, and the defendants went back to the district court, seeking an order compelling arbitration, staying trial pending arbitration, and appointing substitute arbitrators under Section 5 of the FAA. See id. at 555-56. The district court denied that motion, and the defendants appealed. 58 We ultimately affirmed the district court's order denying arbitration, holding that [b]ecause the parties had contractually agreed that only the NYSE could arbitrate any disputes between them, Judge Patterson properly declined to appoint substitute arbitrators and compel arbitration in another forum. Id. at 559. Prior to our decision, however, the defendants on two occasions asked this Court for a stay of the trial pending appeal, and each time we refused. Id. at 557. We concluded that we would not disturb Judge Patterson's decision to proceed to trial. Id. at 561. 59 Our decision in In re Salomon plainly contemplated that a district court has jurisdiction to proceed with a case despite the pendency of an appeal from an order denying a motion to compel arbitration. We approved Judge Patterson's decision to deny the defendants a stay pending appeal, and we twice denied the same relief to defendants when they moved in this Court for a stay. 60 Other circuits are divided on this question. The Ninth Circuit has held that an appeal from an order denying a motion to compel arbitration does not deprive the district court of jurisdiction over other proceedings in the case. See Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir.1990). The Court observed that either the district court or the court of appeals may—but is not required to—stay the proceedings upon determining that the appeal presents a substantial question. Id. at 1412 & n. 8. In contrast, the Seventh and Eleventh Circuits have held that a district court may not proceed after the filing of a nonfrivolous appeal from an order denying arbitration. See Blinco v. Green Tree Servicing, LLC, 366 F.3d 1249, 1251 (11th Cir.2004) (Upon motion, proceedings in the district court ... should be stayed pending resolution of a non-frivolous appeal from the denial of a motion to compel arbitration.); Bradford-Scott Data Corp. v. Physician Computer Network, Inc., 128 F.3d 504, 507 (7th Cir.1997). Notably, in both Blinco and Bradford-Scott the Courts of Appeals granted a stay of the district court proceedings pending appeal. In no case has a Court of Appeals granted the relief that defendants now seek—undoing a trial because the district court lacked jurisdiction to proceed after an appeal from an order denying arbitration. 61 We now follow In re Salomon Brothers and explicitly adopt the Ninth Circuit's position that further district court proceedings in a case are not involved in the appeal of an order refusing arbitration, and that a district court therefore has jurisdiction to proceed with a case absent a stay from this Court. 12