1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Jacob Benson, et al., No. CV-18-00006-PHX-DWL
10 Plaintiffs, ORDER
11 v.
12 Casa De Capri Enterprises LLC, et al.,
13 Defendants. 14 15 Pending before the Court is CCRRG’s motion for a stay pending its appeal of the 16 November 4, 2022 order denying its renewed motion to compel arbitration. (Doc. 141.) 17 For the following reasons, the stay request is denied. 18 RELEVANT BACKGROUND 19 This case has involved an unusual volume of litigation related to the issue of 20 arbitrability. 21 In December 2017, Plaintiffs initiated this action by filing a writ of garnishment in 22 state court. (Doc. 1-2 at 233-35.) Shortly afterward, CCRRG removed the action to federal 23 court (Doc. 1) and filed a motion to compel arbitration (Doc. 13). 24 In August 2018, the then-assigned judge denied CCRRG’s arbitration request. 25 (Doc. 27.) 26 In April 2019, after the case had been reassigned to the undersigned judge (Doc. 27 35), CCRRG filed a renewed motion to compel arbitration. (Doc. 63.) In an order issued 28 in July 2019, the Court granted this motion. (Doc. 88.) 1 Plaintiffs appealed the order compelling arbitration. (Doc. 93.) In November 2020, 2 after full briefing and oral argument, the Ninth Circuit certified a question of law to the 3 Arizona Supreme Court. Benson v. Casa de Capri Enterprises, LLC, 980 F.3d 1328 (9th 4 Cir. 2020). 5 In January 2022, the Arizona Supreme Court resolved that question in Plaintiffs’ 6 favor, holding that “the doctrine of direct benefits estoppel can[not] be applied in an 7 Arizona garnishment proceeding.” Benson v. Casa de Capri Enterprises, LLC, 502 P.3d 8 461, 465 (Ariz. 2022). Based on that ruling, the Ninth Circuit issued an amended 9 memorandum decision in March 2022 concluding that “the district court erred in granting 10 CCRRG’s motion to compel arbitration under the doctrine of direct benefits estoppel.” 11 Benson v. Casa de Capri Enterprises, LLC, 2022 WL 822126, *1 (9th Cir. 2022). In a 12 footnote, the Ninth Circuit also stated the following: “CCRRG alternatively argues that the 13 Liability Risk Retention Act of 1986 ([LRRA]) preempts state law governing the operation 14 of risk retention groups, and apparently by extension precludes Arizona from limiting 15 arbitration provisions in insurance policies provided by a risk retention group. The district 16 court did not address this argument and [Plaintiffs] argue that CCRRG did not adequately 17 raise it below. We leave these matters to the district court in the first instance, with the 18 benefit of the Arizona Supreme Court’s new guidance.” Id. at *2 n.1. 19 In June and July 2023, after the mandate issued, the parties filed supplemental briefs 20 regarding LRRA preemption. (Docs. 119, 120, 123.) 21 On November 4, 2022, the Court issued an order denying CCRRG’s request to 22 compel arbitration, holding that (1) “the question of whether CCRRG has forfeited its 23 ability to seek to compel arbitration based on LRRA preemption is closer than the Court 24 perceived it to be in earlier orders”; and (2) at any rate, “because CCRRG’s preemption 25 arguments fail on the merits . . . there is no need to resolve the question of forfeiture as to 26 that argument.” (Doc. 138 at 10-11.) In the same order, the Court observed that the parties’ 27 cross-motions for summary judgment were fully briefed and would be resolved in due 28 course. (Id. at 19.) 1 On December 15, 2022, CCRRG filed the pending motion for stay. (Doc. 141.)1 2 On December 27, 2022, Plaintiffs filed a response. (Doc. 142.) 3 On January 3, 2023, CCRRG filed a reply. (Doc. 143.) 4 DISCUSSION 5 Although some circuits hold that a district court must always stay the merits of a 6 case pending a non-frivolous appeal from the denial of a motion to compel arbitration, the 7 rule in the Ninth Circuit—at least for now—is that the issuance of such a stay is 8 discretionary. Britton v. Co-op Banking Group, 916 F.2d 1405, 1411-12 (9th Cir. 1990).2 9 Britton suggests that such a stay may be warranted “if, for instance, the court finds that the 10 motion presents a substantial question.” Id. at 1412. Britton also suggests that district 11 courts should apply the traditional four-part test set forth in Nken v. Holder, 556 U.S. 418 12 (2009)—that is, (1) whether the stay applicant has made a strong showing that he is likely 13 to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; 14 (3) whether issuance of the stay will substantially injure the other parties interested in the 15 proceeding; and (4) where the public interest lies—when deciding whether to issue such a 16 stay. Bradberry v. T-Mobile USA Inc., 2007 WL 2221076, *1 (N.D. Cal. 2007) (explaining 17 why this inference arises from the citations in Britton). 18 Under either formulation,3 CCRRG’s request for a stay is denied. First, although
19 1 CCRRG’s request for oral argument is denied because the issues are fully briefed and argument would not aid the decisional process. See LRCiv 7.2(f). 20 2 The Ninth Circuit recently noted that “the United States Supreme Court granted the 21 petition for a writ of certiorari in” a case presenting the question whether “a non-frivolous appeal of the denial of a motion to compel arbitration oust[s] a district court’s jurisdiction 22 to proceed with litigation pending appeal, as the Third, Fourth, Seventh, Tenth, Eleventh and D.C. Circuits have held, or does the district court retain discretion to proceed with 23 litigation while the appeal is pending, as the Second, Fifth, and Ninth Circuits have held” but clarified that “[u]nless the Supreme Court holds otherwise, we are bound to our 24 precedent in Britton on this issue.” Matter of Giga Watt, Inc., 2022 WL 17883793, *1 n.1 (9th Cir. 2022). 25 3 Some courts have concluded that, under Britton, a substantial question on the issue of arbitrability is alone insufficient to justify a stay pending appeal. Monsanto v. DWW 26 Partners, LLLP, 2010 WL 1904274, *1 (D. Ariz. 2010) (“Relying on language in Britton suggesting that a substantial question on appeal is necessary for a stay pending appeal, 27 defendant contends that a substantial question is sufficient for a stay. Plaintiff contends that a stay pending an appeal on the issue of arbitrability is presumptively inappropriate 28 after Britton. Neither contention is persuasive. Britton does not hold that the general standard for a stay pending appeal is inapplicable in the context of arbitration, and it cites 1 the arbitrability dispute that was previously before the Ninth Circuit (which necessitated 2 certification of a state-law question to the Arizona Supreme Court) undoubtedly presented 3 a substantial question, the current dispute (which is limited to the question of preemption 4 under the LRRA) does not. CCRRG characterizes its LRRA preemption claim as “an issue 5 of first impression” (Doc. 141 at 4), but even if this characterization is accurate, this does 6 not mean the claim presents a substantial question. Cf. United States v. Handy, 761 F.2d 7 1279, 1283 (9th Cir. 1985) (“[A] ‘substantial question’ is one that is ‘fairly debatable’ or 8 ‘fairly doubtful.’ In short, a ‘substantial question’ is one of more substance than would be 9 necessary to a finding that it was not frivolous.”) (citations and internal quotation marks 10 omitted). In the November 4, 2022 order, the Court not only noted that CCRRG may have 11 forfeited its request to compel arbitration based on principles of LRRA preemption (Doc.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Jacob Benson, et al., No. CV-18-00006-PHX-DWL
10 Plaintiffs, ORDER
11 v.
12 Casa De Capri Enterprises LLC, et al.,
13 Defendants. 14 15 Pending before the Court is CCRRG’s motion for a stay pending its appeal of the 16 November 4, 2022 order denying its renewed motion to compel arbitration. (Doc. 141.) 17 For the following reasons, the stay request is denied. 18 RELEVANT BACKGROUND 19 This case has involved an unusual volume of litigation related to the issue of 20 arbitrability. 21 In December 2017, Plaintiffs initiated this action by filing a writ of garnishment in 22 state court. (Doc. 1-2 at 233-35.) Shortly afterward, CCRRG removed the action to federal 23 court (Doc. 1) and filed a motion to compel arbitration (Doc. 13). 24 In August 2018, the then-assigned judge denied CCRRG’s arbitration request. 25 (Doc. 27.) 26 In April 2019, after the case had been reassigned to the undersigned judge (Doc. 27 35), CCRRG filed a renewed motion to compel arbitration. (Doc. 63.) In an order issued 28 in July 2019, the Court granted this motion. (Doc. 88.) 1 Plaintiffs appealed the order compelling arbitration. (Doc. 93.) In November 2020, 2 after full briefing and oral argument, the Ninth Circuit certified a question of law to the 3 Arizona Supreme Court. Benson v. Casa de Capri Enterprises, LLC, 980 F.3d 1328 (9th 4 Cir. 2020). 5 In January 2022, the Arizona Supreme Court resolved that question in Plaintiffs’ 6 favor, holding that “the doctrine of direct benefits estoppel can[not] be applied in an 7 Arizona garnishment proceeding.” Benson v. Casa de Capri Enterprises, LLC, 502 P.3d 8 461, 465 (Ariz. 2022). Based on that ruling, the Ninth Circuit issued an amended 9 memorandum decision in March 2022 concluding that “the district court erred in granting 10 CCRRG’s motion to compel arbitration under the doctrine of direct benefits estoppel.” 11 Benson v. Casa de Capri Enterprises, LLC, 2022 WL 822126, *1 (9th Cir. 2022). In a 12 footnote, the Ninth Circuit also stated the following: “CCRRG alternatively argues that the 13 Liability Risk Retention Act of 1986 ([LRRA]) preempts state law governing the operation 14 of risk retention groups, and apparently by extension precludes Arizona from limiting 15 arbitration provisions in insurance policies provided by a risk retention group. The district 16 court did not address this argument and [Plaintiffs] argue that CCRRG did not adequately 17 raise it below. We leave these matters to the district court in the first instance, with the 18 benefit of the Arizona Supreme Court’s new guidance.” Id. at *2 n.1. 19 In June and July 2023, after the mandate issued, the parties filed supplemental briefs 20 regarding LRRA preemption. (Docs. 119, 120, 123.) 21 On November 4, 2022, the Court issued an order denying CCRRG’s request to 22 compel arbitration, holding that (1) “the question of whether CCRRG has forfeited its 23 ability to seek to compel arbitration based on LRRA preemption is closer than the Court 24 perceived it to be in earlier orders”; and (2) at any rate, “because CCRRG’s preemption 25 arguments fail on the merits . . . there is no need to resolve the question of forfeiture as to 26 that argument.” (Doc. 138 at 10-11.) In the same order, the Court observed that the parties’ 27 cross-motions for summary judgment were fully briefed and would be resolved in due 28 course. (Id. at 19.) 1 On December 15, 2022, CCRRG filed the pending motion for stay. (Doc. 141.)1 2 On December 27, 2022, Plaintiffs filed a response. (Doc. 142.) 3 On January 3, 2023, CCRRG filed a reply. (Doc. 143.) 4 DISCUSSION 5 Although some circuits hold that a district court must always stay the merits of a 6 case pending a non-frivolous appeal from the denial of a motion to compel arbitration, the 7 rule in the Ninth Circuit—at least for now—is that the issuance of such a stay is 8 discretionary. Britton v. Co-op Banking Group, 916 F.2d 1405, 1411-12 (9th Cir. 1990).2 9 Britton suggests that such a stay may be warranted “if, for instance, the court finds that the 10 motion presents a substantial question.” Id. at 1412. Britton also suggests that district 11 courts should apply the traditional four-part test set forth in Nken v. Holder, 556 U.S. 418 12 (2009)—that is, (1) whether the stay applicant has made a strong showing that he is likely 13 to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; 14 (3) whether issuance of the stay will substantially injure the other parties interested in the 15 proceeding; and (4) where the public interest lies—when deciding whether to issue such a 16 stay. Bradberry v. T-Mobile USA Inc., 2007 WL 2221076, *1 (N.D. Cal. 2007) (explaining 17 why this inference arises from the citations in Britton). 18 Under either formulation,3 CCRRG’s request for a stay is denied. First, although
19 1 CCRRG’s request for oral argument is denied because the issues are fully briefed and argument would not aid the decisional process. See LRCiv 7.2(f). 20 2 The Ninth Circuit recently noted that “the United States Supreme Court granted the 21 petition for a writ of certiorari in” a case presenting the question whether “a non-frivolous appeal of the denial of a motion to compel arbitration oust[s] a district court’s jurisdiction 22 to proceed with litigation pending appeal, as the Third, Fourth, Seventh, Tenth, Eleventh and D.C. Circuits have held, or does the district court retain discretion to proceed with 23 litigation while the appeal is pending, as the Second, Fifth, and Ninth Circuits have held” but clarified that “[u]nless the Supreme Court holds otherwise, we are bound to our 24 precedent in Britton on this issue.” Matter of Giga Watt, Inc., 2022 WL 17883793, *1 n.1 (9th Cir. 2022). 25 3 Some courts have concluded that, under Britton, a substantial question on the issue of arbitrability is alone insufficient to justify a stay pending appeal. Monsanto v. DWW 26 Partners, LLLP, 2010 WL 1904274, *1 (D. Ariz. 2010) (“Relying on language in Britton suggesting that a substantial question on appeal is necessary for a stay pending appeal, 27 defendant contends that a substantial question is sufficient for a stay. Plaintiff contends that a stay pending an appeal on the issue of arbitrability is presumptively inappropriate 28 after Britton. Neither contention is persuasive. Britton does not hold that the general standard for a stay pending appeal is inapplicable in the context of arbitration, and it cites 1 the arbitrability dispute that was previously before the Ninth Circuit (which necessitated 2 certification of a state-law question to the Arizona Supreme Court) undoubtedly presented 3 a substantial question, the current dispute (which is limited to the question of preemption 4 under the LRRA) does not. CCRRG characterizes its LRRA preemption claim as “an issue 5 of first impression” (Doc. 141 at 4), but even if this characterization is accurate, this does 6 not mean the claim presents a substantial question. Cf. United States v. Handy, 761 F.2d 7 1279, 1283 (9th Cir. 1985) (“[A] ‘substantial question’ is one that is ‘fairly debatable’ or 8 ‘fairly doubtful.’ In short, a ‘substantial question’ is one of more substance than would be 9 necessary to a finding that it was not frivolous.”) (citations and internal quotation marks 10 omitted). In the November 4, 2022 order, the Court not only noted that CCRRG may have 11 forfeited its request to compel arbitration based on principles of LRRA preemption (Doc. 12 138 at 10) but easily concluded that the claim failed on the merits: “The statutory text is 13 the best indicator of what Congress intended with respect to preemption. The text here is 14 clear. Congress intended to preempt certain state insurance regulations while leaving intact 15 generally applicable state laws, even when they have the indirect effect of regulating RRGs. 16 Arizona’s garnishment scheme is generally applicable to persons and corporations within 17 the meaning of [15 U.S.C.] § 3902(a)(4), as is Arizona’s doctrine of direct benefits 18 estoppel. Therefore, LRRA preemption does not apply here.” (Doc. 138 at 19.) 19 Second, the other factors bearing on the issuance of a stay strongly cut against 20 CCRRG’s request. This case has been pending for more than five years and has already 21 made one trip to the Ninth Circuit, with a detour to the Arizona Supreme Court, to address 22 the issue of arbitrability. Additionally, discovery is already complete and a draft of the 23 order resolving the parties’ cross-motions for summary judgment is in the process of being 24 finalized. Under these circumstances, indefinitely staying the proceedings so CCRRG may 25 pursue an appeal of the latest order denying its request to compel arbitration would 26 substantially injure the other parties interested in the proceeding and undermine the public 27 a case applying it with approval.”). CCRRG seems to concede the same in its reply. (Doc. 28 143 at 2-3 [“CCRRG and the Bensons agree that this Court has the discretion to stay its Order, pending appeal, upon a balancing of [the four traditional stay factors].”). 1 || interest, as expressed in Federal Rule of Civil Procedure 1, in the just, speedy, and || inexpensive determination of civil actions. 3 Accordingly, 4 IT IS ORDERED that CCRRG’s motion to stay (Doc. 141) is denied. 5 Dated this 9th day of January, 2023. 6 7 Lm ee” g f t _o——— Dominic W. Lanza 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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