Court Opinion

ID: 5131437
Source: CourtListenerOpinion
Date Created: 2021-12-03 21:00:40.673383+00
Date Added: 2024-06-11T08:23:24.014331
License: Public Domain

RECOMMENDED FOR PUBLICATION
                                 Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                        File Name: 21a0278p.06

                     UNITED STATES COURT OF APPEALS
                                    FOR THE SIXTH CIRCUIT

                                                              ┐
 ARABIAN MOTORS GROUP W.L.L.,
                                                              │
                Plaintiff-Appellant/Cross-Appellee,           │
                                                               >        Nos. 20-2112/2152
                                                              │
        v.                                                    │
                                                              │
 FORD MOTOR COMPANY,                                          │
              Defendant-Appellee/Cross-Appellant.             │
                                                              ┘

  Appeal from the United States District Court for the Eastern District of Michigan at Detroit.
                  No. 2:16-cv-13655—Matthew F. Leitman, District Judge.

                              Decided and Filed: December 3, 2021

             Before: SUTTON, Chief Judge; SILER and READLER, Circuit Judges.
                                   _________________

                                             COUNSEL

ON BRIEF: John B. Alfs, Cynthia M. Filipovich, CLARK HILL, Detroit, Michigan, for
Appellant/Cross-Appellee. Jessica L. Ellsworth, Jo-Ann Tamila Sagar, HOGAN LOVELLS US
LLP, Washington, D.C., for Appellee/Cross-Appellant.
                                       _________________

                                              OPINION
                                       _________________

       SUTTON, Chief Judge. Arabian Motors Group and Ford Motor Company have been in
and out of arbitration and federal court for nearly six years with respect to the same dispute.
At issue at this stage of the case is whether the district court should have stayed or dismissed this
federal court action to permit the remaining claims to be arbitrated under the Federal Arbitration
Act. On this record, the court should have stayed the action. We reverse the district court’s
contrary decision.
 Nos. 20-2112/2152        Arabian Motors Group W.L.L. v. Ford Motor Co.                   Page 2

                                                I.

       Beginning in 1986, Arabian Motors was the sole dealer authorized to sell and service
Ford brands in Kuwait. In 2005, through a Resale Agreement, the companies set forth the new
terms of their business relationship. In doing so, they agreed to use “binding arbitration” as the
“exclusive recourse” for “any . . . dispute, claim or controversy” about the Agreement. R.5-1 at
22. Arabian and Ford agreed that the American Arbitration Association would handle any
arbitration in Michigan and that it would conduct the hearing using the “Procedures for Cases
under the UNCITRAL Arbitration Rules,” a reference to the rules that the United Nations
Commission on International Trade Law has created. Id. at 22–23.

       Roughly a decade later, the relationship between the companies soured, prompting Ford
to end the Resale Agreement in 2016. That same year, Ford went to the American Arbitration
Association, seeking a declaration that it permissibly ended the Agreement and owed nothing to
Arabian under it. Arabian Motors took measures of its own. It sued Ford in federal court,
seeking an injunction and declaration prohibiting Ford from proceeding with the arbitration and
raising common law claims for breach of contract and fraud. Arabian Motors moved for a
preliminary injunction, arguing it could not be forced to arbitrate its claims because the Motor
Vehicle Franchise Contract Arbitration Fairness Act, 15 U.S.C. § 1226, requires that an
arbitration between dealers and car manufacturers proceed only if the parties consent to it after
the dispute arises. The district court denied Arabian Motors’ motion, deciding that the arbitrator
must resolve this gateway issue.

       The arbitral tribunal decided that the Fairness Act did not deprive it of authority to
arbitrate the dispute and held that Ford permissibly terminated the Resale Agreement. On top of
that, it taxed Arabian Motors $1.35 million for Ford’s legal fees and the cost of the arbitral
proceedings. During the proceedings, Arabian Motors brought counterclaims for breach of
contract and fraud, but it withdrew them before the tribunal issued its award. In allowing
Arabian Motors to withdraw these claims, the arbitrator noted that “it made no determination of
the effect of the withdrawal on an attempt by [Arabian Motors] to re-assert the counterclaims in a
future proceeding.” R.32-2 at 13 (quotation omitted). Returning to federal court, Arabian
Motors moved to vacate the cost-shifting award, and Ford opposed the motion and cross-moved
 Nos. 20-2112/2152         Arabian Motors Group W.L.L. v. Ford Motor Co.                    Page 3

to confirm the award. The district court granted Ford’s cross-motion and confirmed the award.
A panel of our court upheld the decision. Arabian Motors Grp., W.L.L. v. Ford Motor Co.,
775 F. App’x 216, 219–20 (6th Cir. 2019). Among other holdings, the panel reasoned that the
arbitration tribunal did not manifestly disregard the law in holding that the Fairness Act did not
foreclose arbitration. Id. at 219.

       On remand, Ford moved to stay the federal action to allow the arbitration panel to resolve
Arabian Motors’ common law claims. The district court determined that the remaining claims
were subject to arbitration. At that point, the court opted to dismiss the federal case without
prejudice rather than to stay it. Arabian Motors appealed on the grounds that the district court
erred in determining that its common law claims were arbitrable. Ford cross-appealed on the
grounds that the district court should have stayed rather than dismissed this federal action.

                                                 II.

       Before entering the thicket of questions this case presents, we must make sure that the
journey is a legitimate one. A decision in a moot case does not help anyone and is not ours to
give anyway. See Arizonans for Off. Eng. v. Arizona, 520 U.S. 43, 73 (1997). Federal courts
lack the “authority to give opinions upon moot questions or abstract propositions,” and we must
dismiss the appeal where an intervening event “makes it impossible for the court to grant any
effectual relief whatever to a prevailing party.” Church of Scientology of Cal. v. United States,
506 U.S. 9, 12 (1992) (quotation omitted).

       How, one might ask, could a live controversy exist over a dispute that has been arbitrated
and in which our court has already confirmed the arbitration award? It is a fair question, one of
several oddities of this long-running dispute. The lingering complication arises from the reality
that Arabian Motors withdrew some of its claims—the contract and fraud claims—from the
arbitration. One possibility is that those claims were withdrawn with prejudice, confirming that
this dispute is indeed over—and moot through and through. Another possibility is that the rules
of the arbitration tribunal allow a party to remove claims from the dispute resolution without
prejudice—and renew them later. Because the latter possibility remains a realistic possibility, a
live question remains about whether Arabian Motors’ common law claims will go to arbitration.
 Nos. 20-2112/2152         Arabian Motors Group W.L.L. v. Ford Motor Co.                     Page 4

Recall that Arabian Motors brought breach of contract and fraud claims in its federal court
complaint. In the last trip to our circuit, we held that the district court had not yet ruled on these
claims but that we could review them when it did. Arabian Motors Grp., 775 F. App’x at 217
n.1. That confirms that the arbitration award did not resolve whether these counterclaims must
be arbitrated.

       Pushing back, Ford leans on the fact that the confirmed arbitration award means that
Arabian Motors can no longer succeed in the first cause of action in its complaint (seeking to
enjoin arbitration) because the arbitration that Ford initiated has already occurred. That may be
so. But Ford continues to argue that Arabian Motors’ third, fourth, and fifth causes of action
remain subject to arbitration, either because the first arbitration decision effectively decided them
or because Arabian Motors still may raise them in front of the tribunal. All of this leaves us with
a dispute that may be on life support but one that is not moot.

                                                 III.

       We begin with Ford’s cross-appeal, because it potentially pretermits the issues raised in
Arabian Motors’ appeal. The cross-appeal raises the question whether the district court should
have stayed the federal court action pending arbitration of the remaining claims, as Ford asked,
or dismissed it on the ground that all of the claims were arbitrable, as the court opted to do on its
own initiative. The court should have granted Ford’s request for a stay.

       Section 3 of the Federal Arbitration Act shows that Ford had every right to ask for a stay,
and on this record the court should have granted it. When a federal court faces an arbitrable
issue, the Act says that the court, “upon being satisfied that the issue involved in such suit or
proceeding is referable to arbitration under such an agreement, shall on application of one of the
parties stay the trial of the action until such arbitration has been had in accordance with the terms
of the agreement.” 9 U.S.C. § 3. The Act’s command that a district court “shall on application
of one of the parties stay the trial of the action” conveys a mandatory obligation. The common
meaning of “shall” when used in concert with another verb is “[a]m (is, are, etc.) obliged; must.”
Shall, Webster’s International Dictionary 2300 (2d ed. 1942).                 Consistent with this
 Nos. 20-2112/2152         Arabian Motors Group W.L.L. v. Ford Motor Co.                    Page 5

understanding, case law indicates that “[t]he word shall is ordinarily [t]he language of
command.” Anderson v. Yungkau, 329 U.S. 482, 485 (1947) (quotation omitted).

        Other provisions of the Act reinforce this interpretation. The Act contains a number of
provisions that enable a district court to facilitate an arbitration. One provision allows parties to
enlist district courts to appoint arbitrators. 9 U.S.C. § 5. Another provision allows parties to
enlist the court to summon witnesses to the arbitration. Id. § 7. Still other provisions say that,
after the arbitration ends, the court may confirm, vacate, or modify an award. Id. §§ 9–11.
When a district court stays a case and retains jurisdiction over it, that permits the parties to use
these mechanisms promptly and efficiently. By contrast, a dismissal would require the parties to
file a new action, possibly in front of a different judge. See Lloyd v. Hovensa, LLC, 369 F.3d
263, 270 (3d Cir. 2004).

        Because a dismissal, unlike a stay, permits an objecting party to file an immediate appeal,
a district court dismissal order undercuts the pro-arbitration appellate-review provisions of the
Act. Section 16 of the Act allows immediate appeals of court orders that deny arbitration (such
as the refusal of a stay under § 3) but defers appellate review of decisions in favor of arbitration
(such as the grant of a stay or a refusal to enjoin arbitration). 9 U.S.C. § 16. If a district court
could freely dismiss cases in this setting, it would upend this approach. It would allow a party
normally required to bring an appeal at the end of the action to sidestep the clear policy
preference of the Act—that pro-arbitration decisions are not appealable until the confirmation
stage of the case—and continue to litigate the issues in federal court and thus disrupt the
arbitration.

        As this statutory landscape reveals, a district court should enter a stay in the normal
course in this setting. But does that mean it always must do so? We need not decide. There
may be situations in which a dismissal remains permissible—say a situation in which the dispute
is moot or suffers from some other pleading or procedural defect. Or a situation in which both
parties request a dismissal. Or a situation in which neither party asks for a stay. For now, it
suffices to lay out the conventional rules, all of which show that the district court erred in
denying Ford’s request for a stay.
 Nos. 20-2112/2152         Arabian Motors Group W.L.L. v. Ford Motor Co.                   Page 6

       Arabian Motors insists that dismissal represents the more efficient disposition of this case
because all claims before the district court are arbitrable. But that approach jumps over a
pertinent consideration. Some gateway arbitrability decisions are for the arbitration panel to
decide, not the district court. See Anderson v. Charter Commc’ns, Inc., 860 F. App’x 374, 380
(6th Cir. 2021). The district court, to its credit, acknowledged that it could not be certain what
the arbitral tribunal would do and noted that its best guess was that there is “no reasonable
possibility” that the counterclaims will come back before it. R.64 at 30 n.9. But that guess about
efficiency remains contingent and contestable in this setting and many others. More to the point,
Congress told district courts to grant a stay when a party moves for one in this context and did so
in a way that admits of few, if any, exceptions.

       Arabian Motors claims that dicta in some of our decisions or the disposition of some
unpublished opinions support the district court’s approach. See, e.g., Green v. Ameritech Corp.,
200 F.3d 967, 973 (6th Cir. 2000); Ozormoor v. T-Mobile USA, Inc., 354 F. App’x 972, 975 (6th
Cir. 2009). But these opinions merely upheld district court decisions dismissing arbitrable
claims while focusing their attention on different legal issues, some without analyzing the
language of § 3, others without analyzing what the statute normally requires, and still others
without explaining the extent to which the parties asked for a stay.

       It is true that some circuits have construed the Act to “afford[] a district court no
discretion to dismiss a case where one of the parties applies for a stay.” Lloyd, 369 F.3d at 269;
see also Katz v. Cellco P’ship, 794 F.3d 341, 345 (2d Cir. 2015) (“It is axiomatic that the
mandatory term ‘shall’ typically ‘creates an obligation impervious to judicial discretion.’”
(quoting Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998))). In
one sense, we agree with these decisions, each of which respects the language of the Act. In
another sense, we see no need to adopt an absolute rule. These decisions had no occasion to
consider whether a stay is mandated in other scenarios, including the ones mentioned above, and
we think it prudent to leave that question for later cases.

       What of circuits that Arabian Motors claims go the other way? The company overstates
the nature of these other rulings, most of which offer little analysis on the point. See, e.g.,
Bercovitch v. Baldwin Sch., Inc., 133 F.3d 141, 156 n.21 (1st Cir. 1998); Sparling v. Hoffman
 Nos. 20-2112/2152          Arabian Motors Group W.L.L. v. Ford Motor Co.                    Page 7

Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988). At least one opinion did not even involve a
motion for a stay. See Martin Marietta Aluminum, Inc. v. Gen. Elec. Co., 586 F.2d 143, 147 (9th
Cir. 1978). One opinion, it is true, suggests an efficiency rationale that, where “all issues raised
in this action are arbitrable and must be submitted to arbitration, retaining jurisdiction and
staying the action will serve no purpose.” Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161,
1164 (5th Cir. 1992) (quotation omitted). But the Federal Arbitration Act is not a docket-
management statute. It is a statute that lays out a textual preference for arbitration, not cleaning
out district court dockets. See Katz, 794 F.3d at 346–47.

       Pushing back on the statutory imperative that the district court “shall” stay the trial on
application of one of the parties, the district court made a textual point of its own. It pointed to
§ 3’s instruction that the court shall “stay the trial of the action” in these circumstances. 9 U.S.C.
§ 3. The court thought that the words “trial of the action” signify that the section applies only
where the case includes non-arbitrable claims, because otherwise there would be no trial to stay
while the arbitrator decided the claims delegated to him. But we do not read the statute that way.
The reference to “trial of the action” more naturally signifies that the district court is to stay the
trial that would otherwise occur if the party did not move for a stay or insist on arbitrating the
claims. The court’s interpretation also runs into a knowledge problem: The only way a district
court could know that the trial of the action will not occur is to prejudge the arbitrability decision
that is the arbitrator’s decision to make.

       The district court added that trial courts could authorize an interlocutory appeal under
28 U.S.C. § 1292(b), meaning that a stay would not necessarily protect the party seeking
arbitration from having to go through an appeal.          Two responses.      One is that § 16(b)’s
authorization of such an interlocutory appeal undercuts the argument that district courts should
be able to dismiss cases like this one on efficiency grounds. The availability of this option shows
that the parties and district court may certify a pressing, non-arbitrable, and efficiency-enhancing
issue. The other answer is that the mechanics of § 1292(b) do not leave this option to the district
court’s discretion alone. It permits such an interlocutory appeal only where the underlying order
“involves a controlling question of law” for which an immediate appeal “may materially advance
the ultimate termination of the litigation.” 28 U.S.C. § 1292(b). Even then, the court of appeals
 Nos. 20-2112/2152          Arabian Motors Group W.L.L. v. Ford Motor Co.                    Page 8

may choose to exercise its discretion not to permit the appeal. Id. In short, there is a world of
difference between an appeal as of right and an appeal involving the exercise of channeled
discretion of two different courts.

        We reverse the district court’s dismissal, grant the stay, and allow the parties to bring this
dispute to a close in front of the arbitration tribunal.