Opinion ID: 177174
Heading Depth: 3
Heading Rank: 2

Heading: Finality of Class Arbitration Determination

Text: DCS concedes that the class determination award is an interim award, but argues that it is nonetheless subject to judicial review because it resolves a separate, discrete, independent, severable issue and therefore has sufficient finality. See Island Creek Coal Sales Co. v. City of Gainesville, FL, 729 F.2d 1046, 1049 (6th Cir.1984), abrogated on other grounds by Cortez Byrd Chips, Inc. v. Bill Harbert Constr. Co., 529 U.S. 193, 120 S.Ct. 1331, 146 L.Ed.2d 171 (2000). In Island Creek, the Sixth Circuit upheld the district court's authority to confirm an interim award that, far from merely deciding a procedural issue, granted injunctive relief to maintain the status quo during the pendency of arbitration proceedings. Specifically, the award finally and definitively resolved a separate independent claim, i.e., the self-contained issue whether a party was required to perform under the contract during the pendency of arbitration. Id., 729 F.2d at 1049. In other words, the interim award directly and profoundly affected the parties' substantive rights in their contractual relationship, even though it did not finally dispose of all the claims submitted to arbitration. Id. Here, in contrast, the interim class arbitration determination, albeit a significant procedural step in the arbitration proceedings, has no impact on the parties' substantive rights or the merits of any claim. The denial of class arbitration proceedings arguably disposes of a discrete, independent, severable issue, but it is a procedural issuehardly the sort of final decision that warrants immediate judicial review in disruption of ongoing arbitration proceedings. Island Creek is thus distinguishable. [2] This very distinction is among the reasons why, in litigation (as opposed to arbitration), class certification decisions by the district courts were traditionally not deemed to have the requisite finality to warrant immediate appellate review. See Coopers & Lybrand v. Livesay, 437 U.S. 463, 469-70, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978). In 1998, however, Rule 23(f) of the Federal Rules of Civil Procedure was adopted, expressly providing the circuit courts of appeals with discretion to permit an appeal from an order granting or denying class certification. This change was designed to allow the circuit courts to develop standards for granting review that reflect the changing areas of uncertainty in class litigation. Fed.R.Civ.P. 23, Advisory Committee Notes, 1998 Amendments, Subdivision (f). In developing such standards, the Sixth Circuit has eschewed any hard-and-fast test, but has recognized that discretionary review should be rarely granted, in recognition of the unfortunately lengthy period necessary to complete an appeal. In re Delta Air Lines, 310 F.3d 953, 959-60 (6th Cir.2002). Further, among those factors identified by the court as potentially relevant to the exercise of discretion is the death-knell factor, i.e., recognition that the costs of continuing litigation for either a plaintiff or defendant may present such a barrier that later review is hampered. Id. at 960. In other words, to the extent immediate review of a class certification ruling may now be permitted under Rule 23(f), it is not because of the ruling's finality, but because of hardship that may otherwise result to one side or the other. Hence, insofar as case law applying Rule 23(f) is relevant, by analogy, to assessment of the district court's jurisdiction to confirm the arbitration panel's denial of class arbitration in this case, it does not counsel in favor of a per se rule of appealability because the denial is sufficiently final. Rather, it counsels in favor of requiring consideration of the very sort of ripeness factors that the district court did consider in accordance with our recent direction in DCS-I, 547 F.3d at 560-63. DCS insists the DCS-I ruling expressly contemplated the immediate reviewability of the arbitration panel's class arbitration determination. DCS relies on the following language from our opinion: The stay procedures set forth in [AAA Commercial Arbitration Supplementary] Rule 5(d) enable a party to contest an unfavorable decision on class certification in court before commencement of class arbitration and resolution of the merits by the arbitration panel. Thus, if the arbitrators in this case ultimately decide to certify Dealers' class, which is no certainty, Rule 5(d) would nonetheless provide DCS ample opportunity to obtain judicial review of any arguments it may have against class arbitration, including those challenging the soundness of the arbitration panel's prior Clause Construction Award. Given this prospective opportunity for judicial review, it does not appear DCS will suffer any material hardship if review is withheld at this preliminary stage of arbitration. Id. at 562-63 (bold-emphasis added). DCS construes this language more broadly than warranted. DCS reads the language as reflecting our determination that the motion to vacate the clause construction award was not ripe because DCS would necessarily i.e., irrespective of outcomehave another opportunity to obtain interlocutory judicial review of the class determination award. As indicated by the highlighted language, however, the contemplated judicial review of the class determination award is clearly contingent on the eventuality of an unfavorable award. Indeed, whether the arbitration panel ultimately decided to certify the class or not, the decision would be interlocutory. An interlocutory award, we made clear, is ripe for judicial review only if the three ripeness factorsi.e., likelihood of harm, hardship, and factual developmentare met. In most cases, an unfavorable class certification decision would ordinarily be expected to create circumstances that would justify the aggrieved side, whether claimants or respondent, in seeking and obtaining judicial review under these ripeness factors. Hence, the court's discussion of the hardship posed to DCS is couched in terms of an award unfavorable to DCS. Naturally, the hardship posed to a party by a favorable class determination award would not be readily apparent. The cited language does not therefore support the inference urged by DCS that either side would be entitled to judicial review of the interlocutory class determination irrespective of any showing of hardship. It is because of the importance of the hardship element to the ripeness assessment that this favorable/unfavorable distinction is not merely one of semantics. And it is the hardship requirement that undermines DCS's argument that because motions to confirm and to vacate are two sides of the same coin, both forms of judicial review should be mutually available. Yes, if Dub Herring Ford and the other dealers had moved the district court to vacate the class determination award under 9 U.S.C. § 10, they may very well have been able to establish the requisite hardship (e.g., in the form of the death-knell factor) to justify the exercise of jurisdiction notwithstanding the non-final nature of the award. In that case, yes, the district court would presumably be able to exercise supplemental jurisdiction over the flip side of the coin, DCS's anticipated reciprocal motion to confirm the award. Yet, because the dealers have not moved to vacate the award, DCS, as the winning party, is handicapped in its efforts to obtain judicial review. Pursuant to DCS-I, which has newly been confirmed in material part by the Supreme Court in Stolt-Nielsen, DCS must meet the requirements of ripeness to trigger federal court jurisdiction. [3] This result, requiring either a final award or a sufficiently ripe interlocutory award, is consistent with the national policy favoring arbitration. Hall Street, 552 U.S. at 588, 128 S.Ct. 1396. It maintain[s] arbitration's essential virtue of resolving disputes straightaway and avoids open[ing] the door to the full-bore legal and evidentiary appeals that can `render informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process,' ... and bring arbitration theory to grief in post-arbitration process. Id. (citation omitted). See also Quixtar, Inc. v. Brady, 328 Fed.Appx. 317, 320-21 (6th Cir.2009) (A district court should not hold itself out as an appellate tribunal during an ongoing arbitration proceeding, since applications for interlocutory relief result only in a waste of time, the interruption of the arbitration proceeding, and ... delaying tactics in a proceeding that is supposed to produce a speedy decision. (quoting Michaels v. Mariforum Shipping, S.A., 624 F.2d 411, 414 (2d Cir. 1980))). Accordingly, because the instant class determination award is undeniably an interim award, DCS has the burden of showing ripeness to establish jurisdiction for judicial review.