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

Heading: Ripeness of DCS's Motion to Confirm

Text: The district court granted Dub Herring Ford's motion to dismiss DCS's motion to confirm the class arbitration award for lack of ripeness. The court considered the ripeness factors set forth in DCS-I : (1) the likelihood that the harm alleged by the party will ever come to pass; (2) the hardship to the parties if judicial relief is denied at this stage of the proceedings; and (3) whether the factual record is sufficiently developed to produce a fair adjudication of the merits. R. 43, Order, p. 3-4 (quoting DCS-I, 547 F.3d at 560). The district court's determination that the factual record is sufficiently developed to permit judicial review is not challenged. As to the other two factors, however, the court found that DCS could not establish that it would suffer harm or a hardship if judicial review is denied at this stage of the proceedings. Id. at 4. The court reasoned that because Dub Herring Ford failed to obtain class certification, the potential harm to DCS involved in defending against class arbitration would never occur. Id. at 5. The district court's analysis is faithful to the direction provided in DCS-I, where we observed, in holding that DCS's motion to vacate the clause construction award was unripe, that the absence of hardship for DCS at this juncture renders DCS's motion to vacate the sort of premature adjudication the ripeness doctrine seeks to avoid. DCS-I, 547 F.3d at 563. The district court even parroted our reiteration of Judge Posner's colorful admonition that courts should remain reluctant to invite a judicial proceeding every time the arbitrator sneezes. Id. (quoting Smart v. Int'l Bhd. of Elec. Workers, Local 702, 315 F.3d 721, 725 (7th Cir.2002)). DCS contends the district court should not have applied this ripeness test, noting that other circuits apply a less rigid standard and that the Supreme Court itself has applied a two-part ripeness test, sans the likelihood-of-harm factor. The three-factor test set forth in DCS-I is essentially the law of the case and DCS has not presented any persuasive reason to abandon it in favor of any other circuit's standard. We acknowledge, however, that the Supreme Court, in Stolt-Nielsen, applied a two-factor ripeness test in a context practically identical to the situation faced in DCS-I. Is the two-factor test materially different? If it were applied here, would it produce a different result? In Stolt-Nielsen, the Court reversed a Second Circuit decision. The Second Circuit had ordered that the district court's order vacating an arbitration panel's clause construction award be vacated. The Supreme Court ultimately held that the arbitration panel exceeded its powers by imposing class arbitration on parties whose contractual arbitration agreement was silent on the issue. Stolt-Nielsen, 130 S.Ct. at 1768-70. This substantive holding is not relevant to the present appeal. However, the Court had the occasion to consider the ripeness of the motion to vacate the clause construction award. Responding to objection by the dissent, the Stolt-Nielsen majority summarily held the matter was ripe based on two ripeness factors: the fitness of the issues for judicial decision, and the hardship of withholding judicial consideration. Id. at 1767 n. 2 (quoting National Park Hospitality Assn. v. Dep't of Interior, 538 U.S. 803, 808, 123 S.Ct. 2026, 155 L.Ed.2d 1017 (2003)). This test is nominally different from the three-factor standard we employed in DCS-I, but in practical effect, the distinction is one without a difference. In Stolt-Nielsen, the Court focused on the hardship element. The Court observed that [t]he arbitration panel's award means that petitioners must now submit to class determination proceedings before arbitrators who, if petitioners are correct, have no authority to require class arbitration absent the parties' agreement to resolve their dispute in that way. Id. (emphasis added). The Court went on to hold that it was clear on these facts that petitioners have demonstrated sufficient hardship. Id. In other words, the Court found sufficient hardship in the imminent reality that, as a result of the arbitration panel's ultra vires clause construction award, the petitioners would have to participate in class determination proceedings. Although the Court did not explicitly mention the likelihood that the identified hardship would come to pass, the imminence of the hardship was manifestly critical to the Court's holding, distinguishing the majority's view of the issue from the dissent's, which viewed the arbitrator's partial award as the most preliminary decision the Supreme Court had ever approved for immediate judicial review. Id. at 1779 (Ginsburg, J., dissenting). The facts and procedural posture of the case presented in Stolt-Nielsen are materially indistinguishable from those presented in DCS-I. Yet, what Stolt-Nielsen found to be ripe, we found not to be ripe. In this respect (i.e., the merits of the ripeness determination), the two decisions may be deemed in conflict. [4] What is important for present purposes, however, is that the two decisions are substantially consistent in their determinations: (1) that an interim arbitration award is subject to judicial review under the FAA, 9 U.S.C. §§ 9 and 10, only if jurisdictional requisites, including ripeness, are otherwise satisfied; and (2) that the ripeness inquiry necessitates evaluation of the hardship posed to the movant in the event immediate judicial review were to be denied. It is therefore DCS's burden to identify cognizable hardshipunder either standardto establish its entitlement to immediate judicial review of the class determination award.
In challenging the correctness of the district court's ripeness determination, DCS asserts a different form of harm or hardship than the district court considered. The district court held that the potential harm to DCS involved in defending against class arbitration would never occur and that therefore, DCS had failed to demonstrate that withholding judicial review would pose any hardship. On appeal, DCS acknowledges that it won the class determination battle and is no longer threatened, in this case, by the specter of class arbitration expenses and liability. Adopting a new approach, DCS now contends that the hardship posed by denial of immediate confirmation of the class determination award resides in the (a) postponement of judicial confirmation until after the arbitration panel renders its final award(s); and (b) the denial of repose and certainty of preclusive effect that would accompany a confirmed award. DCS did not assert this argument in the district court. The issue is therefore forfeited. See In re Hood, 319 F.3d 755, 760 (6th Cir.2003) (It is well-settled that this court will not consider arguments raised for the first time on appeal unless our failure to consider the issue will result in a plain miscarriage of justice.). A defect in the federal court's original jurisdiction is an issue that cannot be waived and must be raised sua sponte when noticed. See Ku v. State of Tenn., 322 F.3d 431, 433 (6th Cir.2003). Here, however, DCS failed to carry its burden of establishing that the district court had jurisdiction to consider its motion to confirm the interim award and now seeks to rehabilitate its failed effort based on arguments never made to the district court. To address the merits of DCS's new appellate arguments would be to permit an undeserved second bite at the apple under circumstances that do not implicate a miscarriage of justice. Yet, even if we consider the merits of the forfeited arguments, the outcome is unchanged. DCS's new arguments are only weakly supported. First, DCS argues that its opportunity to obtain judicial review and confirmation of the class determination award may be entirely foreclosed if the one-year period of limitation prescribed by 9 U.S.C. § 9 has run before the arbitration panel issues its final award. Yet, no court could legitimately consider the one-year period to have begun running from the date of the interim class determination award after having denied judicial review for lack of ripeness. If the district court's dismissal of the motion for lack of ripeness is affirmed, then DCS's recourse is to seek judicial review after entry of the final award. DCS has neither argued nor cited any authority for the proposition that judicial review of the final award would not afford opportunity for review of earlier issued interim awards integral to the final award. DCS has thus failed to show that withholding of judicial review of the arbitration panel's favorable class determination award at this stage poses any imminent risk of cognizable harm in this case. Absent immediate confirmation of the class determination award, DCS further contends, the award lacks the preclusive effect DCS needs to protect it from other claimants' potential efforts to obtain class arbitration of similar breach of contract claims in other arbitration proceedings. In particular, DCS refers to another pending putative class arbitration proceeding involving similar claims and commenced just four months after the instant arbitration, Fox Valley Ford, et al. v. DCS, in which the claimants are represented by the same counsel as the claimants in this case. DCS contends that counsel for the Fox Valley Ford claimants have made clear their intentions to pursue class arbitration proceedings in that case if the class determination award in this case is not confirmed. In response, Dub Herring Ford contends that Fox Valley Ford involves dissimilar breach of contract claims. Yet, in any event, we remain unpersuaded that such collateral hardship (i.e., potentially incurring expenses in another case) is cognizable in evaluating the ripeness of DCS's motion for confirmation of an interim arbitration award in this case. In evaluating ripeness, the Supreme Court has recognized that the disadvantages of premature review ordinarily outweigh the burden created by the additional costs ofeven repetitivelitigation. See Ohio Forestry Ass'n, Inc. v. Sierra Club, 523 U.S. 726, 735, 118 S.Ct. 1665, 140 L.Ed.2d 921 (1998). The Ohio Forestry Court thus held that the possibility of potential litigation costs in other cases was not sufficient hardship by itself to justify immediate review of an otherwise unripe matter. Id. at 734-35, 118 S.Ct. 1665. The Court observed that a case-by-case approach, albeit potentially frustrating and inefficient, is the traditional and normal mode of operation of the courts. Id. at 735, 118 S.Ct. 1665. Further, even if such collateral consequences could be considered hardship, DCS's showing of the likelihood of this harm coming to pass is sketchy and hardly compelling. We note that the Fox Valley Ford case does appear to be on a parallel track. When the arbitration panel issued a clause construction award permitting the Fox Valley Ford claimants to pursue class arbitration, DCS's motion to vacate the award was assigned to and denied by the same district judge who denied both DCS's motion to vacate and motion to confirm in this case. See Dealer Computer Services v. Fox Valley Ford, 2008 WL 1837229 (E.D.Mich.2008). DCS's appeal of that ruling was treated in conformity with our ruling in DCS-I. See Dealer Computer Services v. Fox Valley Ford, 310 Fed. Appx. 749 (6th Cir.2009) (vacating the order of the district court and remanding for dismissal for lack of ripeness). Since then, it appears further proceedings in the Fox Valley Ford case have been held in abeyance pending final resolution of the class certification question in this case. Considering this parallel history and the consistency with which the federal courts have treated both cases, DCS's suggestion that it is exposed to imminent hardship is not persuasive. The alleged hardship posed by the possibility of unnecessary, duplicative expenses has not been shown to be substantial in amount or likelihood. Nor has DCS shown that there is any substantial likelihood of an inconsistent class determination award in Fox Valley Ford. In short, the new appellate arguments made by DCS in attempting to carry its burden of showing ripenessif they are considered at allare no better than the old arguments the district court rejected. The district court's order dismissing the motion to confirm for lack of ripeness must therefore be upheld.