Court Opinion

ID: 2657205
Source: CourtListenerOpinion
Date Created: 2014-03-19 17:00:36.813093+00
Date Added: 2024-06-11T09:12:40.940156
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                  __________

                                      No. 09-3167
                                      __________

              VIRGIN ISLANDS WATER AND POWER AUTHORITY

                                            v.

                   GENERAL ELECTRIC INTERNATIONAL INC.,

                                                                Appellant
                                      __________

                    On Appeal from the District of the Virgin Islands
                                (D.C. No. 3-06-cv-00131)
                      District Judge: Honorable Curtis V. Gomez

                      Submitted Under Third Circuit LAR 34.1(a)
                                 December 12, 2013

           BEFORE: FISHER, SHWARTZ, and NYGAARD, Circuit Judges

                                (Filed: March 19, 2014)

                                      __________

                              OPINION OF THE COURT
                                    __________

NYGAARD, Circuit Judge.

                                            I.

      In 2006, the Virgin Islands Water and Power Authority (WAPA) sued Appellant

General Electric (GE) for an alleged breach of contract. The contract in question
involved the inspection and repair of industrial power production equipment. The parties

engaged in discovery and mediation. However, in May of 2008, GE moved to compel

arbitration and to stay the proceedings during that process.

       The Magistrate Judge denied GE’s motion, finding it “mooted by the agreement of

the parties to engage in production and to mediate . . . .” Approximately ten months

later, GE asked the District Court Judge for a hearing on its motion to compel arbitration

and to stay the proceedings. The District Court denied GE’s motion to compel. First, the

Court noted that the Magistrate Judge was not authorized to rule on GE’s motion to

compel because such decisions are not within the purview of 28 U.S.C. § 636, the Federal

Magistrates Act. Then, after engaging in de novo review of the contract and other

relevant documents, the District Court held that the contract did not contain an arbitration

agreement. GE has appealed that decision. WAPA, however, maintains that GE’s failure

to follow the procedures for challenging a Magistrate Judge’s decision, as set out in the

Federal Rules, deprived the District Court, and this Court by extension, of jurisdiction.

                                             II.

       The Federal Arbitration Act gives us jurisdiction to review a district court’s denial

of a motion to compel arbitration. 9 U.S.C. § 16(a)(1)(B). WAPA argues that we lack

jurisdiction because GE failed to object to the Magistrate Judge’s ruling that its motion to

compel arbitration was mooted by GE’s agreement to proceed with discovery and

                                             2
mediation. Indeed, the record reflects no objection filed by GE within the 10-day time

period allotted by the Federal Rules. See FED.R.CIV.P. 72(a).1

       GE maintains that the Magistrate Judge’s mootness determination merely deferred

or postponed a ruling on its motion to compel arbitration. The District Court agreed,2

despite its own acknowledgement that the motion had been “administratively

terminated.” Not only did the District Court believe GE’s motion to compel remained

pending, it also held that the Magistrate Judge lacked the authority to rule on such matters

in the first place. The District Court gave no reasoning for this determination beyond the

fact that 28 U.S.C. § 636 does not list “motions to compel arbitration” among the type of

motions a magistrate judge is authorized to rule on.

       The Local Rules of the District Court for the Virgin Islands refer all pretrial

motions in civil cases to federal Magistrate Judges, so long as permitted by 28 U.S.C. §

636. See LRCi 72.1. That statute provides that a magistrate judge may hear and

determine any pretrial matter pending before the court, with the following exceptions: 1)

a motion for injunctive relief; 2) a motion for a judgment on the pleadings; 3) a motion

for summary judgment; 4) a motion to dismiss or quash an indictment or information; 5)

a motion to suppress evidence in a criminal case; 6) a motion to dismiss or permit

1
 Rule 72(a) was amended in 2009 to provide a 14-day period to object to a Magistrate
Judge’s Report and Recommendation.
2
 Judge Shwartz would agree that the Magistrate Judge’s Order finding the motion was
moot was a case management order and not a ruling on the merits of the motion to
compel arbitration. As a result, she would find it unnecessary to address whether the
Magistrate Judge had the authority to rule on the merits of such a motion. Nonetheless,
Judge Shwartz joins in Part III of this Opinion and agrees that the District Court should
be affirmed.
                                              3
maintenance of a class action; 7) a motion to dismiss for failure to state a claim; and 8) a

motion to involuntarily dismiss an action. 28 U.S.C. § 636(b)(1)(A). This list of

dispositive motions is not an exhaustive one, but instead merely “informs the

classification of other motions as dispositive or nondispositive.” PowerShare, Inc., v.

Syntel, Inc., 597 F.3d 10, 13 (1st Cir 2010) (internal quotation marks and citation

omitted). The Federal Rules of Civil Procedure are consistent with these classifications.

Rule 72 sets out procedures and standards of review for district courts to follow when

reviewing dispositive and nondispositive rulings made by Magistrate Judges.

       As noted previously, the District Court concluded that Section 636(b)(1)(A) does

not authorize a Magistrate Judge to rule on a motion to compel arbitration. It offered no

reasoning for this conclusion beyond noting that § 636 did not mention such motions.

The fact that the statute does not specifically mention motions to compel arbitration is

irrelevant, however. The appropriate inquiry is whether such a motion is dispositive and

motions to compel arbitration and stay the proceedings are not. Such motions, to begin

with, are not among those listed in § 636(b)(1)(A) and are therefore not specifically

excluded. Nor, as the Court of Appeals for the First Circuit has noted, are they the same

type of motion as those delineated in the statute. Powershare, 597 F.3d at 14. We agree

with the First Circuit. A ruling on a motion to compel arbitration does not dispose of the

case, or any claim or defense found therein. Instead, orders granting this type of motion

merely suspend the litigation while orders denying it continue the underlying litigation.

See id. And, even where motions to compel arbitration are granted, federal courts

continue to retain the authority to dissolve any stay or make any orders effectuating

                                              4
arbitration awards. See id. (citing 9 U.S.C. § 9 (permitting parties to apply to the court

for an order confirming an arbitration award); id. at § 10 (providing the district courts

with authority to vacate an arbitration award); id. at § 11 (providing district courts with

authority to modify an arbitration award)). Given this, we see no exercise of Article III

power when a Magistrate Judge rules on a motion to compel arbitration. Therefore, the

District Court incorrectly concluded that Magistrate Judges lack the authority to rule on

such requests.

       Given that the motion to compel arbitration was properly before the Magistrate

Judge, GE was obligated to seek review of that order in the District Court within fourteen

days of its issuance. See Washington v. Hovensa LLC, 652 F.3d 340, 348 (3d Cir. 2011);

United Steelworkers of Amer. v. New Jersey Zinc Co., Inc., 828 F.3d 1001, 1007-08 (3d

Cir. 1987) (“[P]arties who wish to preserve their objections to a magistrate[] [judge’s]

order entered pursuant to 28 U.S.C. § 636(b)(1)(A) must file their objections in the

district court.”). GE did not seek review of the Magistrate Judge’s mootness order.3 See

FED.R.CIV.P. 72(a); LRCi 72.1. This failure deprived the District Court of the

opportunity to remedy any error on the question of mootness. However, while GE’s

failure to seek review is not a jurisdictional defect, see United States v. Polishan, 336
F.3d 234, 239-40 (3d Cir. 2003) (citation omitted), a waiver rule does apply. See

3
 GE argued and the District Court apparently agreed that the Magistrate Judge’s order
finding the motion to compel arbitration moot had no effect. We disagree. A ruling on
mootness, while not dispositive, is a determination nonetheless. By finding the motion
moot, the Magistrate Judge, in effect, denied it.

                                              5
Steelworkers, 828 F.2d at 1007-08. Accordingly, GE’s challenge to the propriety of the

Magistrate Judge’s order is waived because GE failed to object and we will not review it.

                                              III.

       Even were we not to find waiver here, we are satisfied that the contract in question

lacks a valid agreement to arbitrate and, on that point, the District Court did not err.4

Arbitration “is a matter of consent, not coercion.” Volt Info. Scis., Inc. v. Bd. of Trs. of

Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989). “[A] party may not be

compelled under the [Federal Arbitration Act] to submit to . . . arbitration unless there is

a contractual basis for concluding that the party agreed to do so.” Stolt–Nielsen S.A. v.

AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010) (discussing class arbitration). To

determine whether the parties agreed to arbitrate a dispute, we employ state principles of

contract law. See Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584
F.3d 513, 532 (3d Cir. 2009).5

       Because the actual contract between the parties does not contain an arbitration

agreement, GE calls our attention to a document referenced in that contract entitled

4
  Our review of the District Court’s order denying the motion to compel arbitration is
plenary. Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 159 (3d Cir. 2009)
(citations omitted). That means we apply the same standard as the District Court, and we
will compel arbitration only where there is “no genuine issue of fact concerning the
formation of the agreement” to arbitrate. Id. (citing Par–Knit Mills, Inc. v. Stockbridge
Fabrics Co., 636 F.2d 51, 54 (3d Cir.1980)).
5
 Virgin Islands law upholds contracts where there is “mutual assent” between the parties.
See Morales v. Sun Constructors, Inc., 541 F.3d 218, 221 (3d Cir. 2008) (citations
omitted).

                                               6
“General Terms and Conditions,” as the location for such an agreement. The section GE

relies on is entitled “Dispute Resolution” and provides:

               The Arbitration will be conducted by three (3) arbitrators in
               accordance with the American Arbitration Rules in effect at
               the time of the controversy. Each side will appoint one
               arbitrator, and the two arbitrators so appointed will appoint
               the third arbitrator. The arbitrators shall render any decision
               or award based solely on “baseball” or “winner-take-all” type
               of arbitration and they will only have the authority to select
               either the amount or remedy proposed by Buyer or by Seller,
               and none other. The decision of the arbitrators shall be final
               and binding upon both parties, and neither party shall seek
               recourse to a law court or other authorities to appeal for
               revisions of such decision. The reasonable costs of
               arbitration as well as reasonable legal fees and expenses of
               any dispute conducted pursuant to this Article, shall be borne
               solely by the loser at arbitration.

As the District Court correctly noted, there simply is no express or implied clause in this

passage evincing the parties’ agreement to arbitrate. Further, there is no language from

which we could ascertain what type of disputes the parties are subjecting to arbitration.

Instead, this clause merely relates procedures for selecting arbitrators, and sets out how

those arbitrators will make their decisions and which party will pay the costs of any such

proceedings.

                                             IV.

       In sum, by failing to appeal the decision of the Magistrate Judge, GE waived any

challenge to the propriety of his order. And, even were we to excuse such a waiver, the

contract in question does not contain an agreement to arbitrate and, therefore, we see no

error in the District Court’s decision to deny GE’s motion to compel arbitration.

Accordingly, we will affirm.

                                              7