Court Opinion

ID: 6965084
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:52:25.608841+00
Date Added: 2024-06-11T16:08:34.643761
License: Public Domain

DIANE P. WOOD, Circuit Judge,
dissenting.
Procedural rules should not be matters of Byzantine complexity, known and accessible *1215only to initiates who are privy to knowledge that is kept secret from the rest of the world. But that is the kind of rule I fear the majority has created in its decision to make our appellate jurisdiction turn on the distinction between “independent” and “embedded” proceedings, even when a party is seeking to appeal under 28 U.S.C. § 1291 from a final judgment dismissing an action. Because I believe that there is a crucial difference between an order staying an arbitration proceeding, and an order directing the entry of a final judgment dismissing an action so that arbitration may proceed, I respectfully dissent from the majority’s conclusion that we have no jurisdiction over Katherine Naple-ton’s appeal.
As the majority recounts, this action began as a claim for declaratory and injunctive relief in the Circuit Court of Cook County, brought by Katherine Napleton to determine whether the lease of her property to General Motors had properly been renewed for the term beginning January 1, 1996. General Motors removed the case to federal court and then argued that an arbitration clause in the lease governed the dispute. It moved to dismiss or stay the action pending arbitration. The district court agreed that the arbitration clause applied and on July 29, 1996, issued an order “grant[ing] the motion to dismiss without prejudice to allow for arbitration.” Katherine filed a motion for reconsideration, which the court denied on August 22,1996. She then filed this appeal.
The first question, in my view, is whether the district court’s order of July 29, 1996, amounted to a “final judgment,” as that term is used in 28 U.S.C. § 1291: that is, is there a judgment that finally disposed of all claims of all the parties? Although there is ordinarily a difference between an order dismissing a complaint without prejudice, and a final judgment entered pursuant to Fed.R.Civ.P. 58, there are times when we must look beyond the surface to see which of those actions the district court has actually taken. We had occasion to consider this very problem, in a context implicating arbitration, in Farrand v. Lutheran Brotherhood, 993 F.2d 1253 (7th Cir.1993). There the district court entered an order dismissing an action without prejudice and specifically noted that nothing in its order was intended to prevent arbitration of the plaintiffs claims. Id. at 1254. On the subject of the order’s finality, we had this to say:
An order dismissing a complaint “without prejudice” usually is not appealable,, because the plaintiff may file an amended complaint. The judgment and accompanying opinion show, however, that no amendment is possible, which makes the order final and appealable.
Id. Thus, the mere fact that the dismissal was “without prejudice” does not alone deprive the judgment of its finality. See United States v. Wallace & Tiernan Co., 336 U.S. 793, 794-95 n. 1, 69 S.Ct. 824, 825-26 n. 1, 93 L.Ed. 1042 (1949); Trippe Mfg. Co. v. American Power Conversion Corp., 46 F.3d 624, 626 (7th Cir.1995) (distinction for appealability purposes is not whether dismissal was with or without prejudice, but rather whether dismissal was of complaint or entire action); Farrand, 993 F.2d at 1254; See generally 15A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3914.6, at . 533 & n. 18 (2d ed.1992). Nor is the lack of a judgment formally entered pursuant to Fed R. Civ. P. 58 fatal to our ability to find a final judgment over which we may assume jurisdiction, provided that (1) the district court clearly intended its order to represent the final decision in the case, (2) the judgment of dismissal was entered in the clerk’s docket, and (3) the prevailing party did not object to the taking of an appeal in the absence of a separate judgment. See generally Bankers Trust Co. v. Mallis, 435 U.S. 381, 98 S.Ct. 1117, 55 L.Ed.2d 357 (1978) (stating that the “sole purpose” of the separate entry of judgment requirement in Fed.R.Civ.P. 58 is to clarify when the time for appeal begins to run); Otis v. City of Chicago, 29 F.3d 1159 (7th Cir. 1994) (en bane).
In the present case, neither the fact that the order was “without prejudice” nor the absence of a formal entry of judgment under Fed R. Civ. P. 58 deprives the order of its appealability. The district court’s (docketed) order makes clear that no amendment of Napleton’s complaint would change the outcome and that the dismissal was for the entire action, not just the complaint. (The *1216finality of the district court’s decision is further underscored by its order of August 22, 1996, denying Napleton’s motion for reconsideration.) And although General Motors challenges our jurisdiction on appeal, the company’s argument is not based on the lack of a separate entry of judgment under Fed. R.Civ.P. 58 per se, but rather on the intervention of the Federal Arbitration Act (FAA). The case might be different if, for example, General Motors complained that the missing entry of judgment somehow caused it prejudice. But that is not the case before us, and thus the lack of a formal entry of judgment under Fed.R.Civ.P. 58 is not determinative. Following Farrand, because the district court’s order plainly dismissed the entire action without prejudice, we have here an order that is final and appealable — unless something in the FAA supersedes § 1291.
The relevant part of the FAA is found, as we all agree, at 9 Ú.S.C. § 16. I set forth its language again in full, for ease of reference:
(a) An appeal may be taken from—
(1) an order—
(A) refusing a stay of any action under section 3 of this title,
(B) denying a petition under section 4 of this title to order arbitration to proceed,
(C) denying an application under section 206 of this title to compel arbitration,
(D) confirming or denying confirmation of an award or partial award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to this title; or
(3) a final decision with respect to an arbitration that is subject to this title.
(b) Except as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order—
(1) granting a stay of any action under section 3 of this title;
(2) directing arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4)refusing to enjoin an arbitration that is subject to this title.
This language on its face identifies two broad classes of cases in which an appeal is possible, and one in which it is not. Subsection (a) allows appeals (1) from orders that somehow prevent arbitration from going forward, and (2) from final decisions with respect to an arbitration subject to the FAA while subsection (b) prohibits an appeal from interlocutory orders that in one way or another allow the arbitration to proceed..
The issue that divides me from the majority is whether the fact that the request for arbitration was included (or “embedded”) in a broader lawsuit, in which the parties were also litigating other issues, prevents an otherwise final judgment from being “a final decision with respect to an arbitration” as that term is used in § 16(a)(3). Under the majority’s approach, when we are dealing with arbitration, only a subset of final judgments that satisfy § 1291 are cognizable in the courts of appeals: judgments that are “final” as § 1291 uses the term and that are issued in an “independent” proceeding rather than an “embedded” proceeding. Like my colleagues in the Tenth and Sixth Circuits, however, and like the dissenting judge in the Ninth Circuit decision on which the majority relies so heavily, I see nothing in § 16(a)(3) that justifies such a reading. See Armijo v. Prudential Ins. Co., 72 F.3d 793, 797 (10th Cir.1995) (relying on Farrand), Arnold v. Arnold Corp. Printed Communications for Business, 920 F.2d 1269, 1274-76 (6th Cir. 1990); McCarthy v. Providential Corp., 122 F.3d 1242, 1246-49 (9th Cir.1997) (Pregerson, J., dissenting). See also Filanto, S.p.A. v. Chilewich Int’l Corp., 984 F.2d 58, 61 n. 3 (2d Cir.1993) (dictum stating that “[h]ad the complaint been dismissed [instead of stayed], it is arguable that an appeal would be immediately available”). Furthermore, the language of FAA § 16(b) clearly distinguishes between interlocutory orders, from which appeals are strictly limited, and final orders, for which the FAA does not modify the normal rule of appealability.
I therefore regard the language of the FAA itself as reason enough to reject the majority’s view of our jurisdiction. The ma*1217jority says that it is relying on Perera v. Siegel Trading Co., 951 F.2d 780 (7th Cir. 1992). In my view, however, its approach is in serious tension with Perera, which held that the term “final decision” in § 16(a)(3) is “a legal term of art traditionally used to distinguish appealable and nonappealable lower -court decisions under 28 U.S.C. § 1291 — the general provision governing appellate jurisdiction.” Id. at 783. Because the FAA contains no alternative definition of the term “final decision,” this court ruled in Perera that “by using a term of art Congress intended to retain its preexisting meaning.” Id. (I do not find the court’s next comment, to the effect that judicial decisions have elaborated on the meaning of the term “finality,” to be as “critical” as the majority does. See ante, note 4. The decisions under § 1291 distinguishing between something that resolves all claims of all parties, and other dispositions, are too legion to cite. The majority cannot escape the fact that it is construing the FAA as creating an implied exception to § 1291, in the face of language in the FAA that expressly disclaims such a result.)
Under the established preexisting meaning of § 1291, we would have to be able to conclude that a dismissal of an action without prejudice is somehow non-final or interlocutory before we would even reach the question whether the arbitration request initially arose in an “embedded” proceeding or an independent one. Judge Pregerson put the point well in his McCarthy dissent when he said:
While orders compelling arbitration in all independent arbitrability proceedings are necessarily final decisions, it does not logically follow that orders in all embedded arbitrability proceedings are necessarily interlocutory.
122 F.3d at 1247. If the district court (rightly or wrongly) throws out the entire case, the fact that the parties will go forward with their arbitration does not mean that there is something left pending on the district court’s docket. There is not, and this makes the difference between an order staying proceedings (which is certainly not appealable, see 9 U.S.C. § 16(b)(1)) and an order dismissing the action, far more important than the majority allows. We should not ignore the “final decision” language of § 16(a)(3) in favor of what the majority concedes has sometimes been this court’s “myopic” and - “talismanie” adherence to the independent/embedded distinction. Cf. Majority Op. at 1211-12, 1212.
To do so disregards the Supreme Court’s admonition in Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202, 108 S.Ct. 1717, 1721-22, 100 L.Ed.2d 178 (1988), to preserve “operational consistency and predictability in the overall application of § 1291.” It also ignores the history of FAA § 16, which was enacted after the Supreme Court overruled the Enelow-Ettelson doctrine, under which orders staying “legal” proceedings (i.e., the action in district court) on “equitable” grounds (e.g., the special defense setting up the arbitration agreement as taking precedence) had been treated as injunction orders appealable under 28 U.S.C. § 1292(a)(1). See Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 287, 108 S.Ct. 1133, 1142-43, 99 L.Ed.2d 296 (1988), overruling the line of cases based upon Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440 (1935), and Ettelson v. Metropolitan Life Ins. Co., 317 U.S. 188, 63 S.Ct. 163, 87 L.Ed. 176 (1942). After Gulfstream Aerospace overruled the Enelow-Ettelson avenue for appealing orders staying or refusing to stay arbitration proceedings, some confusion continued because it was still possible that the collateral order doctrine might sometimes permit an immediate appeal from such an order. Section 16 was enacted as part of the Judicial Improvements and Access to Justice Act of 1988, Pub.L. No. 100-702, in order to furnish a clear rule for appealability .of orders relating to arbitration proceedings. Without any warrant in the statute, the majority’s decision to qualify § 16 with the “imbedded” or “independent” distinction has muddied the waters considerably.
Furthermore, the majority's rule will yield strange results. For example, suppose that a Seller and a Buyer enter a contract for the sale of raw materials and that the contract includes an arbitration clause. After the Seller fails to deliver as promised, the Buyer covers on the open market and sues to recover damages. In its answer, the Seller: (1) moves to dismiss the Buyer’s lawsuit on the *1218basis of the arbitration clause; (2) permissively counterclaims for an outstanding, unrelated credit debt from several years earlier; and (3) argues in the alternative that either it did not breach the contract, or that any damages it owes should be offset by the Buyer’s outstanding debt. Then suppose that the district court dismisses the Seller’s counterclaim as time-barred, and also dismisses the Buyer’s action for damages “without prejudice to allow for arbitration.” Although on these facts the Seller would be entitled to appeal immediately on its counterclaim, as I understand the majority’s opinion, the Buyer’s claim would not be treated similarly — even though the district court has dismissed the entire action from its docket. To treat the two claims differently for purposes of appealability strikes me as incongruous. I find it equally unsatisfactory to impose upon the district courts the need to enter orders under Fed.R.Civ.P. 54(b) designating part of a final and comprehensive judgment that disposes of all claims of all of the parties as somehow a separate “judgment” for purposes of appeal, which is the solution the majority has been forced to adopt to respond to this concern. See ante at 1214, note 8. Such an approach deprives the Rule 58 final judgment of its principal virtues: clarity and definiteness, signaling the end of everything in the district court.
The majority frankly admits that it is concerned about the district court’s ability, as it puts it, to determine whether or not the court of appeals will have jurisdiction' over an appeal from an order requiring the parties to arbitrate. If the district court styles its order as a stay, it can then insulate itself from appellate review, while if the district court styles its order as a dismissal of the action without prejudice then appellate jurisdiction is secure. I do not disagree that the district courts have this power, nor was it any secret to the Congress that enacted FAA § 16. Congress specifically permitted different consequences for appellate jurisdiction in the statute. Whether or not we think the statutory lines make sense is somewhat beside the point. This is not a common law rale that we would be free to reshape as we wish. It is a statute, which we are obliged to respect.
The district courts enjoy similar powers in a variety of contexts, yet this does not justify our refusal to accept appeals. For example, the district court has discretion to decide whether or not to direct the entry of a partial final judgment under Fed.R.Civ.P. 54(b), or to begin the process of certification under 28 U.S.C. § 1292(b), but we do not condemn either of those two situations as an impermissible exercise of the district court’s power to manipulate our own jurisdiction. Furthermore, from the standpoint of the parties, the difference between a stay and a dismissal of an action without prejudice is significant. A dismissal without prejudice requires the party who wants to invoke the aid of the court to return with a newly filed action. At the most mundane level, this step entails additional filing fees that must be paid to the court. More seriously, in having to re-file to pursue “embedded” claims, a party could conceivably encounter problems with statutes of limitations, obtaining service of process, or other procedural barriers to the new case. See, e.g., McCarthy, 122 F.3d at 1249 (Pregerson, J., dissenting). In short, even though the consequences of the district court’s decision to dismiss rather than to stay may appear to be similar from the standpoint of the arbitration proceeding, they can differ in significant ways. Neither the parties nor the district courts are likely to choose casually between the two options, when important rights are at stake that at least one party will normally wish to protect.
Because I would find that we have jurisdiction over the appeal, I add a brief word about the merits. The lease between Katherine and General Motors indisputably contained a mandatory arbitration clause, which read as follows:
Section 8.01. In case any differences arise between the Lessor and the Lessee regarding the true meaning and intent of any of the terms and provisions of this lease or if any dispute should arise between them regarding the performance or nonperformance by either of them of any of the terms, covenants and conditions hereof, or if any claim is made by either of them that the other is in default by reason of the non-performance of any act provided for hereunder, then, and in any of such events, the matter in dispute, whether the same be the performance of an act, the *1219forbearance of an act, or the payment of money, shall be submitted to arbitra-tion____
Section 10.08 of the lease specified the way in which notices were to be transmitted, and section 1.02 set forth the procedure for lease renewals. Without belaboring the point, in light of the fact that “questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration and any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,” Nielsen v. Piper, Jaffray & Hopwood, Inc., 66 F.3d 145, 148 (7th Cir.1995) (internal brackets and ellipsis omitted), I have no trouble concluding that the dispute between Katherine and GM fell within the scope of this broad arbitration clause. Katherine’s arguments to the contrary border on the frivolous: she claims GM has already admitted “nonperformance” because it acknowledges that it sent the renewal notice to her husband (who lived at the same address), and thus the lack of proper notice to the record owner made the lease, along with the arbitration clause, lapse according to its own terms. These are arguments on the merits, which the arbitrator will be free to consider; they in no way negate the fact that there is a dispute between the parties about the way in which GM performed its act of renewing the lease pursuant to section 1.02, and its compliance with the notice requirements of section 10.08.
I would therefore find that we have appellate jurisdiction over this ease and I would affirm the judgment of the district court.