Corion Corporation v. Chen

• Court: Court of Appeals for the First Circuit
• Decided: May 12, 1992
• Docket: 92-1133
• Status: Published

Opinion

USCA1 Opinion

May 12, 1992             ____________________

No. 92-1133 

                                 CORION CORPORATION,

                                Plaintiff, Appellant,

                                          v.

                                   GIH-HORNG CHEN,

                                 Defendant, Appellee.

____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                     [Hon. William G. Young, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                                 Breyer, Chief Judge,
                                         ___________
                           Campbell, Senior Circuit Judge,
                                     ____________________
                               and Cyr, Circuit Judge.
                                        _____________

                                 ____________________

            Richard  L. Alfred,  Robert A.  Bertsche  and  Hill and  Barlow on
            __________________   ___________________       ________________
        Response  to  Order  to  Show Cause  and  Reply  Memorandum  Regarding
        Appellate Jurisdiction, for appellant.
            Ellen J.  Messing  and  Shilepsky, Messing  & Rudavsky,  P.C.,  on
            _________________       _____________________________________
        Memorandum in Opposition  to Appellant's Response to Show  Cause Order
        and Reply Regarding Appellate Jurisdiction, for appellee.

____________________

____________________

Per Curiam.  The question before  us is whether the
                      __________

            district court's  lengthy  memorandum and  order  determining

            that the parties' dispute is arbitrable is a final appealable

            order.   We  conclude  that  it  is  not.   We  turn  to  the

            background.

                                          I.
                                          _

                      Plaintiff  Corion Corporation  discharged defendant

            Gih-Horng  Chen.  Chen  then invoked a  provision in Corion's

            Personnel   Policies  Manual   which   provided  that   "[i]n

            situations involving . .  . termination . . .  , an aggrieved

            employee who is  dissatisfied with top  management's decision

            will  be permitted  to have  the grievance  arbitrated by  an

            impartial third party" and  demanded arbitration.  Corion did

            not agree to arbitration and instead filed the instant action

            seeking 1)  a  declaration  that  Chen was  not  entitled  to

            arbitrate  the   discharge  decision  (count  1)   and  2)  a

            declaration  that plaintiff  was  entitled to  discharge Chen

            (count 2).  Corion maintained that the personnel handbook had

            no  contractual force, but, even  if it did,  Chen had waived

            any right to  arbitrate by failing to attend  hearings Corion

            had scheduled to obtain Chen's input.

                      Chen responded  with two motions.   The first asked

            the  court  to dismiss  count  two  (Corion's request  for  a

            declaration that Corion was entitled to discharge Chen).  The

            second sought both a stay of all court proceedings (including

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filing an answer) pending arbitration and an order compelling

            arbitration.

                      After  briefing and  argument,  the district  court

            issued an opinion  concluding that the  arbitration provision

            in the  manual was  contractually enforceable and  applied to

            termination decisions.   As  for Corion's argument  that Chen

            had  waived any right to  arbitrate, the district court ruled

            that the arbitrator was  the one to decide  that issue.   The

            court's  twenty-one page memorandum  and order concluded with

            the following paragraph:

                           For  the  foregoing reasons,  Chen's
                      motion  to stay and compel arbitration is
                      ALLOWED.    For  the same  reasons,  this
                      Court has determined that  an enforceable
                      agreement  to  arbitrate exists.   Chen's
                      Motion  to   Dismiss  Count  II   of  the
                      Complaint  is  ALLOWED.    The   case  is
                      ordered  administratively  closed pending
                      the outcome of the arbitration.

            No separate document embodying the order has entered.

                                         II.
                                         __

                      Corion  has appealed from the memorandum and order.

            Corion  argues  that  the memorandum  and  order  is a  final

            decision appealable  under 28 U.S.C.    1291 because Corion's

            entire  lawsuit  has  been  adjudicated.    Count  2  (for  a

            declaration that plaintiff  was entitled  to discharge  Chen)

            has  been dismissed, and count 1 (for a declaration that Chen

            is not entitled to arbitrate the discharge decision) has been

            effectively resolved against plaintiff by granting the motion

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to compel arbitration, Corion contends.  We disagree that the

            order is final.

                                          A
                                          _

                      First,   the  district  court  has  not  entered  a

            judgment on  a piece  of paper  separate from  the underlying

            opinion as required by Fed. R.  Civ. P. 58.  Were the absence

            of  a separate document a  mere formality, the omission might

            be  overlooked.   See  Fiore v.  Washington County  Community
                              ___  _____     ____________________________

            Mental Health Center, Nos. 91-1027, 91-1842, slip op. 21 (1st
            ____________________

            Cir. March 30, 1992)  (appellant waives the separate document

            rule by  appealing).   But  cf.  Wang Laboratories,  Inc.  v.
                                   ___  __   ________________________

            Applied Computer  Sciences, Inc., 926  F.2d 92, 96  (1st Cir.
            ________________________________

            1991)  (case  remanded  to  district  court  for  entry  of a

            separate document  where appellee  refused to  waive separate

            document requirement).

                                          B
                                          _

                      Here, however,  we think more  than informality  is

            involved.    The  court did  not  enter  a  separate document

            labelled final judgment, which  would have signalled its view

            that the case had concluded.   Nor did it dismiss the  entire

            action.    Rather,  it  granted defendant's  motion  to  stay

            proceedings  pending  arbitration.   This  suggests  that the

            district court itself did not intend to terminate its role or

            to enter  a final judgment, but  rather acted in  a manner to

            retain jurisdiction  pending the outcome of  arbitration.  To

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be  sure,  the  district  court  directed that  the  case  be

            "administratively  closed"  pending  arbitration.     In  the

            circumstances  of this case, however, we do not think this is

            equivalent  to a final judgment  of dismissal.   See Quinn v.
                                                             ___ _____

            CGR, 828 F.2d  1463 (10th Cir. 1987)  (dismissing appeal from
            ___

            order compelling  arbitration and ordering the  case "closed,

            to  be reopened upon  a showing of  good cause" entered  in a

            breach of contract action);  Campbell v. Dominick & Dominick,
                                         ________    ____________________

            Inc.,   872 F.2d 358 (11th Cir. 1989) (dismissing appeal from
            ____

            order  directing  arbitration, staying  judicial proceedings,

            and closing the  case for statistical purposes entered  in an

            action  seeking damages  under  the securities  act); 15B  C.

            Wright,  A.  Miller,  &   E.  Cooper,  Federal  Practice  and
                                                   ______________________

            Procedure   3914.17 at p. 13 n.11 (1992) (concluding that the
            _________

            result in  the Campbell case  "implies that an  order closing
                           ________

            the  case  for statistical  purposes  does not  make  a final

            judgment").  Rather, it is a reflection  of the fact that the

            case is likely to be dormant until arbitration concludes.  In

            short,  we  conclude that  the  district  court has  retained

            jurisdiction.

                      In  previous  cases  where  a  district  court  has

            retained jurisdiction pending the outcome  of arbitration, we

            have concluded  that  an order  staying  proceedings  pending

            arbitration  or   directing  arbitration  is   not  final  or

            immediately appealable.    De  Fuertes  v.  Drexel,  Burnham,
                                       ___________      _________________

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Lambert, Inc., 855 F.2d  10 (1st Cir. 1988),  is instructive.
            _____________

            There, the  plaintiff sought  to compel defendant  to deliver

            securities.   Defendant  moved  to refer  the controversy  to

            arbitration.    Plaintiffs opposed  arbitration,  arguing the

            agreement to arbitrate was not  valid but forged.  Plaintiffs

            lost  on  that point  in the  district  court, and  the court

            ordered arbitration, but  specifically retained  jurisdiction

            pending  the  outcome of  arbitration.   Plaintiffs appealed.

            This  court concluded that  the order  compelling arbitration

            and  retaining jurisdiction  was  not appealable  as a  final

            decision because

                      no   judgment   determining  the   entire
                      controversy   between  the   parties  has
                      entered.      Contrary   to   appellant's
                      assertion, the litigation has  not ended.
                      Rather, it  has  moved to  another  forum
                      with  the expectation that it will return
                      to the [district  court] for  entry of  a
                      final judgment.

            Id.  at  11.   The  opinion  then went  on  to  say that  the
            ___

            arbitration order  was not  immediately appealable  under any

            exception  to  the  final  judgment rule  and  dismissed  the

            appeal.

                      Corion contends that De Fuertes is not  controlling
                                           __________

            and  relies on a  different line of  cases for appealability.

            It  points out that most  courts have accepted  that an order

            adjudicating an action which seeks nothing more than an order

            to  compel arbitration  is a  final  appealable order.   See,
                                                                     ___

            e.g., Abernathy v. Southern  California Edison, 885 F.2d 525,
            ____  _________    ___________________________

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530 n.18 (9th Cir.  1989) ("[A]n order compelling arbitration

            may  be immediately appealed if it is the full relief sought.

            However, when the order  staying the proceeding or compelling

            arbitration is only one step in the judicial proceedings  and

            the case can be expected to return to the district court, the

            order  is nonfinal  and  not subject  to immediate  appeal.")

            (citations  omitted); 15C C. Wright,  A. Miller, & E. Cooper,

            Federal Practice and Procedure,    3914.17 at pp. 10  n.7 and
            ______________________________

            15-19 (1992) ("an order granting or denying arbitration in an

            action that  seeks only  to compel arbitration  ordinarily is

            appealable  as a final judgment; if the same order is entered

            in  an action  seeking  other relief,  ordinarily  it is  not

            appealable  as a  final  judgment").    It then  argues  that

            because  the district  court dismissed  count two  (the count

            seeking a  declaration that Corion was  entitled to discharge

            Chen)  and  effectively  disposed  of count  one  (seeking  a

            declaration  of  non-arbitrability)  by  deciding   that  the

            dispute was  arbitrable, Corion's action is  now analogous to

            one in which  the sole  issue is arbitrability  and the  same

            finality  rules  should apply.   In  other  words, just  as a

            litigant  desiring arbitration  obtains a  final judgment  by

            structuring  a  lawsuit  to  seek  no  more  than  an   order

            compelling arbitration, so too should a litigant who believes

            a dispute  is  not  arbitrable  obtain a  final  judgment  by

            phrasing his action to  seek no more than a  declaration that

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the dispute is not  arbitrable.  Now that,  through dismissal

            of  count two,  Corion  is in  the  position of  the  latter,

            finality  should  not be  defeated  by  the district  court's

            reaching  out prematurely  to assert jurisdiction  over post-

            arbitration proceedings, or so the argument would run.

                      We leave for another  day the question whether, had

            Corion's  action been limited to the request in count one for

            a declaration  that the dispute was  not arbitrable, finality

            could be defeated by the district court's purported retention

            of  jurisdiction  pending  the  outcome  of  arbitration, see
                                                                      ___

            University  Life Ins. Co. v. Unimarc Ltd., 699 F.2d 846, 848-
            _________________________    ____________

            50 (7th  Cir. 1983) (finality of  order directing arbitration

            in an  independent action  seeking only an  arbitration order

            was  not defeated  by  court's retention  of jurisdiction  to

            resolve any future disputes or to enforce any  future award);

            Cincinnati Gas &  Elec. Co. v. Benjamin F. Shaw Co., 706 F.2d
            ___________________________    ____________________

            155, 157-58  (6th Cir. 1983)  (order compelling  arbitration,

            but   retaining   jurisdiction   pending   the   outcome   of

            arbitration, entered  in an  action seeking a  declaration of

            non-arbitrability  treated as  final), for  that is  not this

            case.     Corion  did  not  ask  the  court  to  decide  only

            arbitrability;  it also  asked  the court  to determine  that

            Corion was entitled to discharge Chen.  To be sure, the court

            has  dismissed the second count in  view of its determination

            that   the   personnel  manual   arbitration   provision  was

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enforceable.    But it  has not  purported  to enter  a final

            order,   and  it  may   well  contemplate  re-examining  that

            dismissal  depending upon  the outcome  of arbitration.   For

            example,  the court  declined to  determine whether  Chen had

            waived  his right  to arbitrate,  as it  concluded that  that

            issue  was  for  the  arbitrator.    Should  the  arbitrator,

            however,  agree  with  Corion's  position  that  Chen  waived

            arbitration, then, presumably, the court  may reinstate count

            two.    Until a  final judgment  enters,  the court  is free,

            subject  to  law of  the case  principles, to  re-examine its

            orders.   In short, we do  not think that the  district court

            has   impermissibly   reached   out  to   assert   or  retain

            jurisdiction over the lawsuit.

                      Corion  points to  several  cases  which, it  says,

            support its position that the district court's memorandum and

            order  is final  and appealable.   We  address two  which are

            representative  of Corion's  position.   First  is County  of
                                                               __________

            Middlesex  v. Gevyn  Constr.  Corp., 450  F.2d  53 (1st  Cir.
            _________     _____________________

            1971),  cert. denied, 405 U.S. 955 (1972).  There, the county
                    ____________

            sought a declaration  that it was not obligated  to arbitrate

            various construction disputes.   The defendant responded with

            a  motion to compel arbitration and to enjoin the county from

            spending the unpaid construction balance.  The district court

            did  not grant the injunction, but  did order arbitration and

            stayed further judicial proceedings.  The county appealed the

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arbitration order, and this  court decided the merits  of the

            appeal without discussing appealability.   Subsequently, this

            court  in Langley v. Colonial Leasing Co. of New England, 707
                      _______    ___________________________________

            F.2d 1 (1st Cir. 1983), in an effort to explain the basis for

            appellate  jurisdiction in  the Middlesex  case,  stated that
                                            _________

            "Middlesex  was a  declaratory judgment  action in  which the
             _________

            district   court's  'order  compelling  arbitration'  was  in

            reality  a full  final judgment."   Langley,  707 F.2d  at 3.
                                                _______

            Corion  argues the same principles apply to it.  The district

            court's determination that the dispute is arbitrable  coupled

            with its  dismissal of count two  is in reality a  full final

            judgment.

                      Middlesex is  distinguishable.   The county  in the
                      _________

            Middlesex case did not ask the  court to decide the merits of
            _________

            the parties' underlying dispute as did Corion in  the present

            case  by requesting  a declaration  that it  was  entitled to

            discharge Chen.   Hence,  the arbitration order  in Middlesex
                                                                _________

            did dispose of the one substantive dispute -- arbitrability -

            -  submitted  to the  court  (albeit  leaving unresolved  the

            matter  of ancillary injunctive relief).  In contrast, in the

            present  case,  Corion  has   asked  the  district  court  to

            adjudicate the  parties' dispute, and the  district court, by

            declining  to enter a final  judgment on a  separate piece of

            paper,  has left open the possibility  that it may, depending

            upon the results of arbitration, do just that.

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Second,  Corion  points  to  Robbins v.  George  W.
                               ______              _______     __________

            Prescott Pub.  Co., 614 F.2d 3  (1st Cir. 1980).   There, the
            __________________

            plaintiff  sued  his employer  for  breach  of an  employment

            contract.    The  district  court ordered  the  defendant  to

            arbitrate the  dispute even  though, under  the terms  of the

            applicable collective bargaining agreement,  the union -- not

            the employee --  had the power  to initiate arbitration,  but

            the union  (not a party to  the suit) had declined  to do so.

            In  according appellate  review,  this court  noted that  the

            order might be appealable as a final judgment under 28 U.S.C.

              1291 because, arbitration having been ordered, "it could be

            thought that nothing was left for the court but supervision."

            Ultimately, however,  this court  did not definitely  so hold

            because  it  concluded  that  even   if  the  order  was  not

            appealable under   1291, mandamus was appropriate in  view of

            the importance of guarding against federal court interference

            with the collective bargaining process.  We are not presented

            here with such policy concerns.  Furthermore, we do not think

            the district court was  necessarily left with "nothing .  . .

            but  supervision."   Rather, if  the arbitrator  decides that

            Chen  waived his right to  arbitration, the court  may end up

            adjudicating exactly what Corion asked the court to decide --

            whether  Corion was  entitled to  discharge Chen.   On  these

            grounds Robbins is not controlling.
                    _______

                                          C
                                          _

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In addition  to the absence of  a separate document

            and the  wording  of  the  final  paragraph  of  the  21-page

            memorandum  and order,  policy  considerations influence  our

            conclusion that no final judgment has entered in the  present

            action and our disinclination to analogize the present action

            to  one  seeking  no  more than  a  determination  concerning

            arbitrability.

                      It  is  true that  an order  compelling arbitration

            entered in  an action seeking  only an arbitration  order has

            been considered final and immediately appealable by the party

            resisting arbitration.    See, e.g.,  Graphic  Communications
                                      ___  ____   _______________________

            Union, Local 2  v. Chicago  Tribune Co., 779  F.2d 13,  14-16
            ______________     ____________________

            (7th Cir.  1985).   That is  not because it  is desirable  or

            efficient to  bifurcate a  controversy over  termination into

            two  separate lawsuits -- the first  concerning the forum and

            the  second  either   the  merits  (if  the  dispute  is  not

            arbitrable) or  challenges to the  arbitrator's decision  (if

            the dispute is  arbitrable).  It is not.   See Abernathy, 885
                                                       ___ _________

            F.2d at 528 n.13  (9th Cir. 1989) ("We recognize that under  

            1291  an  order  compelling arbitration  may  be  immediately

            appealed if  it is the complete relief sought.  . . . We also

            recognize that  permitting direct  appeals of such  orders is

            inconsistent with  the  policies underlying  the  arbitration

            process.   Nevertheless, until the Supreme  Court or Congress

            acts, the  final judgment  cases require such  an outcome.");

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Zosky  v.  Boyer, 856  F.2d 554,  560  (3d Cir.  1988), cert.
            _____      _____                                        _____

            denied,  488 U.S. 1042  (1989) (same); Graphic Communications
            ______                                 ______________________

            Union, 779 F.2d at  15 ("it is rather a fluke in the law that
            _____

            allows  an order  to  arbitrate  to  be appealed  before  the

            arbitration is completed").  Immediate appellate review of an

            order   compelling   arbitration  "frustrate[s]   the  policy

            favoring   speedy  resolution   of  labor   disputes  through

            arbitration."   United Food & Commercial Workers Local 197 v.
                            __________________________________________

            Alpha Beta Co., 736  F.2d 1371, 1373-74 n.3 (9th  Cir. 1984).
            ______________

            The  delay  in  arbitration  wrought  by  immediate appellate

            review  of the  forum decision  plus  the inefficiency  of an

            appellate court  having to hear  two appeals (first  from the

            arbitration  order and  second from  the order  enforcing (or

            setting aside)  the arbitrator's decision), rather  than one,

            make for lengthier and  more expensive dispute resolution, at

            least in circumstances where the dispute was arbitrable.  But

            immediate appealability of an  arbitration order in a lawsuit

            which seeks  no more than  an order directing  arbitration is

            the price or consequence of the final judgment rule, for once

            the  order to arbitrate enters, the court has disposed of the

            entire controversy then before it.  But see 15C C. Wright, A.
                                                ___ ___

            Miller,  &  E.  Cooper,  Federal Practice  and  Procedure,   
                                     ________________________________

            3914.17 at  p. 26 (1992)  (suggesting a revision  of finality

            concepts  under  which an  arbitration  order  entered in  an

            independent action brought solely to compel arbitration would

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not be immediately appealable,  the theory being that  "it is

            always  better to keep a case open after ordering arbitration

            as the  most efficient  vehicle for reviewing  any subsequent

            challenges and ordering enforcement").

                      The  systemic  delay  and  inefficiency  caused  by

            immediate  appeals   of  arbitration  orders  will   tend  to

            predispose us,  whenever possible  consistent with  the final

            judgment  rule,  to  view  an  arbitration  order as  but  an

            interlocutory order  entered in  an ongoing lawsuit  (and not

            immediately appealable), rather than as a final resolution of

            a  discrete  controversy.    Here, for  the  reasons  earlier

            explained, we think  that the district court  has not finally

            resolved  the entire  controversy before  it, but  rather has

            specifically  left open  the  possibility  of revisiting  the

            decision  to  dismiss count  two  and  that consequently  the

            district  court's order  allowing Chen's  motion to  stay and

            compel arbitration is not a final appealable order.

                      Appeal dismissed.
                      ________________

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