Georgiou v. Mobil Exploration

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 29, 1999
• Docket: 98-20959
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT ____________________

No. 98-20959 Summary Calendar ____________________

ANTHONY NICHOLAS GEORGIOU; TILLER INTERNATIONAL LIMITED,

Plaintiffs-Appellants,

v.

MOBIL EXPLORATION AND PRODUCING SERVICES INC U.S., ETC; ET AL,

Defendants, MOBIL EXPLORATION AND PRODUCING SERVICES INC U.S., doing business as Mobil E&P Ventures CIS; MOBIL OIL CORPORATION; METROMEDIA INTERNATIONAL TELECOMMUNICATIONS INC,

Defendants-Appellees.

_________________________________________________________________

Appeal from the United States District Court for the Southern District of Texas (H-98-CV-98) _________________________________________________________________

July 27, 1999

Before KING, Chief Judge, and EMILIO M. GARZA and DeMOSS, Circuit Judges.

PER CURIAM:* Plaintiffs-appellants appeal from an order of the district

court staying litigation before the district court in favor of an

arbitration proceeding currently taking place in London. Because

we conclude that we do not have jurisdiction to entertain this

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

1 appeal, we dismiss. Furthermore, we deny plaintiffs-appellants’

alternative request for a writ of mandamus.

I. FACTUAL AND PROCEDURAL HISTORY

Plaintiff-appellant Tiller International Limited (Tiller)

and plaintiff-appellant Anthony Nicholas Georgiou (Georgiou)

(collectively, plaintiffs) brought this action in January 1998

seeking damages for breach of contract, fraud, civil conspiracy,

unfair business practices, and tortious interference with

contracts and prospective contracts. Georgiou is a director of Tiller. Among several defendants named in the complaint were

defendants-appellees Mobil Exploration and Producing Services,

Inc. U.S. (MEPS) and Mobil Oil Corporation (Mobil) (collectively,

defendants). MEPS is a wholly-owned subsidiary of Mobil.1

Plaintiffs’ claims stem from the deterioration of a

contractual relationship between Tiller and MEPS. In 1996, the

two entities entered into negotiations to form a joint venture

for purposes of developing oil and gas reserves in Siberia. In

August 1996, MEPS and Tiller entered into a confidentiality

agreement. In September 1996, they entered into a cooperation agreement, and in February 1997 they entered into a participation

agreement. All three agreements contain a broadly-worded

arbitration clause or a reference to one. Specifically, the

confidentiality agreement provides that “[a]ny dispute arising

1 Also named as defendant was Metromedia International Telecommunications Inc. (Metromedia). Metromedia did not file an appellate brief and has indicated that it adopts the position of MEPS and Mobile.

2 out of or relating to this Agreement, including any question

regarding its existence, validity or termination, which cannot be

amicably resolved by the Parties, shall be referred to and

finally resolved by arbitration under the rules of the London

Court of International Arbitration in London, England.” The

cooperation agreement contains the same clause, and the

participation agreement incorporates the clause by reference.

The relationship between MEPS and Tiller deteriorated in

July 1997 when MEPS terminated its agreements with Tiller and instituted arbitration proceedings against Tiller before the

London Court of International Arbitration. In the arbitration

proceedings, MEPS sought an accounting of amounts paid and owing

to Tiller, the repayment of amounts MEPS paid to Tiller to which

MEPS claims Tiller was not entitled by reason of Tiller’s alleged

noncompliance with the agreements, and a declaration that no

further sums are owed by MEPS to Tiller. MEPS also brought a

claim for the tort of deceit based on alleged false

representations by Tiller. Six months after MEPS instituted the

arbitration proceedings, Tiller and Georgiou filed the above- described complaint in the district court.

Thereafter, in March 1998, defendants filed a motion in the

district court to stay the case in favor of the London

arbitration proceedings. On May 5, 1998, plaintiffs filed an

amended complaint in which they alleged that MEPS had

“fraudulently created and used said . . . agreements and

specifically included arbitration clauses so as to minimize its

3 exposure to damage.” They further alleged that MEPS

“deliberately and specifically procured the insertion of the

arbitration clause in both the cooperation agreement and the

participation agreement for the purpose[] [of minimizing its

exposure to damage upon repudiation of the agreements] and thus

plaintiffs allege the said arbitration clauses were fraudulently

induced.”2

On August 27, 1998, the district court granted defendants’

motion for a stay pending the completion of the arbitration proceedings in London and directed plaintiffs to advise the court

in writing within sixty days of the completion of arbitration

should the case need to be reinstated. In its order, the

district court found that “[p]laintiffs’ allegations that they

were fraudulently induced to enter into the agreements are . . .

arbitrable,” and stayed the claims against all defendants, not

just the claims against MEPS, even though the agreements run

between MEPS and Tiller only, because “the arbitration will

resolve a number of issues relating to claims against [d]efendant

Mobil Oil Corporation and . . . a complete stay will avoid litigation of this matter on a piecemeal basis.”

On September 11, 1998, plaintiffs filed a motion for

reconsideration before the district court, arguing that the

district court had ignored their allegations that the arbitration

clauses were induced by fraud and had failed to consider that

2 Interestingly, plaintiffs have not raised their claims that the arbitration clauses were fraudulently induced in the arbitration proceedings currently underway in London.

4 several parties to the lawsuit were not parties to the

arbitration agreements. By order dated October 8, 1998, the

district court denied the motion for reconsideration, reasoning

that it had in fact previously addressed plaintiffs’ allegations

that the arbitration clauses were induced by fraud when it

concluded that plaintiffs’ allegations of fraud were themselves

arbitrable, and that it had granted the motion to stay against

all parties to avoid piecemeal litigation. Plaintiffs filed

their notice of appeal on October 19, 1998. II. DISCUSSION

On appeal, plaintiffs argue that the district court erred in

granting the motion to stay litigation pending arbitration

because several defendants are not parties to the arbitration and

because the district court placed no time limitation on the stay.

Plaintiffs further argue that the district court erred in failing

to address the issue of whether there is a valid agreement to

arbitrate and whether the contracts as a whole were part of an

overall scheme to defraud. Plaintiffs request that we reverse

the stay as to all parties, or at least as to the parties not participating in the arbitration. Alternatively, plaintiffs

request that we order the district court to place a reasonable

time limitation on the duration of the stay.

Defendants contend that the district court did in fact

consider all of plaintiffs’ allegations and properly exercised

its discretion in determining that a stay is warranted pending

the outcome of the arbitration proceedings in London. Defendants

5 argue that plaintiffs never alleged any misrepresentations

pertaining specifically to the arbitration clauses, but instead

merely alleged fraudulent inducement of the contracts as a whole.

According to defendants, the district court therefore properly

found that the issue of fraudulent inducement was itself subject

to arbitration. Defendants also argue that the district court

properly exercised its discretion to stay all claims pending the

results of the arbitration because the claims asserted against

other litigants who are not parties to the arbitration are all closely related to the claims pending in the arbitration.

Defendants argue that we need not reach these issues, however,

because this court lacks jurisdiction to consider plaintiffs’

appeal of the district court’s order staying litigation pending

arbitration. We agree.

We first address the issue of our jurisdiction. Section 3

of the Federal Arbitration Act (FAA) provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, 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, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3. The district court has no discretion to deny the

stay if the issues in the case are within the scope of the

arbitration agreement, at least with respect to the parties to

that agreement. See Hornbeck Offshore (1984) Corp. v. Coastal

6 Carriers Corp. (In re Complaint of Hornbeck Offshore (1984)

Corp.), 981 F.2d 752, 754 (5th Cir. 1993). The district court,

in its discretion, may also stay the proceedings against other

parties not subject to the arbitration agreement pending the

outcome of arbitration as a means of controlling its docket. See

id. at 755 (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 20 n.23 (1983)).

Section 16(b) of the FAA pertains to appeals and states that

“an appeal may not be taken from an interlocutory order . . . granting a stay of any action under section 3 of this title.” 9

U.S.C. § 16(b). Thus, we must determine whether the district

court’s order granting the stay constitutes an interlocutory

order from which an appeal may not be taken.

“In determining whether an order affecting arbitration is final or interlocutory, most courts distinguish between arbitration actions that are independent and those that are embedded among other claims. Generally, if the only issue before the court is the dispute's arbitrability, the action is considered independent and a court's decision on that issue constitutes a final decision. If, however, the case includes other claims for relief, an arbitrability ruling does not end the litigation on the merits, but is considered interlocutory only.” Ilva (USA), Inc. v. Alexander’s Daring M/V, 10 F.3d 255, 256 (5th

Cir. 1993) (quoting McDermott Int’l, Inc. v. Underwriters at

Lloyds Subscribing to Memorandum of Ins. No. 104207, 981 F.2d

744, 747 (5th Cir. 1993) (further internal quotation marks

omitted)). Because plaintiffs have appealed from an order of the

district court staying litigation in favor of arbitration, and

because there are other issues before the court besides the

dispute’s arbitrability, the plain language of § 16(b) of the FAA

7 denies this court jurisdiction to review the district court’s

order. See Altman Nursing, Inc. v. Clay Capital Corp., 84 F.3d

769, 770-71 (5th Cir. 1996); McDermott, 981 F.2d at 747-48;

Turboff v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 867 F.2d

1518, 1520-21 (5th Cir. 1989).

Plaintiffs contend that because there are parties to the

dispute who are not parties to the arbitration proceedings, we

should reach a different conclusion with respect to our

jurisdiction. However, in both McDermott and West of England Ship Owners Mutual Insurance Association (Luxembourg) v. American

Marine Corp., 981 F.2d 749 (5th Cir. 1993), the district court’s

stay applied to parties not subject to arbitration, but we

nevertheless concluded that we lacked jurisdiction to review the

propriety of the stay. See West of England Ship Owners Mut. Ins.

Assoc., 981 F.2d at 750-51 (“[T]he district court . . . stayed

the proceeding as to all defendants, including those not subject

to the arbitration agreement. . . . [T]he orders were

interlocutory, and appeal is barred by § 16(b).”); McDermott, 981

F.2d at 748 (describing claims between parties not participating in arbitration that were stayed by district court, but

nevertheless concluding that “[b]ecause the district court’s

orders were interlocutory, not final, appeal is barred by

§ 16(b)”). Thus, plaintiffs’ argument lacks merit.3

3 Even were we to conclude that § 16(b) only denied us jurisdiction to consider the appeal of parties to the arbitration, we would still conclude that we lack jurisdiction to consider the appeal of others not party to the arbitration in this case because the appeal is interlocutory and, as described

8 Plaintiffs urge us to find 28 U.S.C. § 1292(a)(1)

jurisdiction under the Supreme Court’s decision in Gulfstream

Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271 (1988). This

argument is equally unavailing. In Gulfstream, the Supreme Court

stated that a stay order, under very limited circumstances, may

be appealed as an interlocutory order granting or refusing an

injunction under 28 U.S.C. § 1292(a)(1). See id. at 287-88.

Specifically, § 1292(a)(1) provides appellate jurisdiction “over

orders that grant or deny injunctions and orders that have the practical effect of granting or denying injunctions and have

serious, perhaps irreparable, consequence.” Id. (internal

quotation marks omitted). Plaintiffs argue that the district

court’s stay order has the practical effect of granting an

injunction and will lead to serious, irreparable consequences.

Even if we agreed with this contention, under our precedent, this

avenue of review is foreclosed to plaintiffs after Congress

amended the FAA to preclude our jurisdiction to review an

interlocutory order that stays an action in district court

pending arbitration. See Turboff, 867 F.2d at 1520-21 (“[Congress’s amendment to the FAA] also eliminates any vestige

of uncertainty surrounding the scope of Gulfstream . . . in

arbitration cases. . . . Thus, in the absence of a § 1292(b)

certificate from the district court, we have no jurisdiction over

its interlocutory orders concerning arbitration.”); Jolley v.

Paine Webber Jackson & Curtis, Inc., 864 F.2d 402, 404 (5th Cir.

infra, all other avenues of jurisdiction are foreclosed.

9 1989) (“Gulfstream held that orders granting or denying stays of

legal proceedings on equitable grounds are not automatically

appealable under § 1292(a)(1). . . . The district court’s order

granting a stay pending arbitration is not appealable under

§ 1292(a)(1).”) (internal quotation marks, citation, and emphasis

omitted), supplemented by 867 F.2d 891 (5th Cir. 1989).4

Next, plaintiffs rely on the collateral order doctrine in an

attempt to establish a basis for our jurisdiction. We have

jurisdiction to review a collateral order so long as the order “(1) conclusively determine[s] the disputed question; (2)

resolve[s] an important issue completely separate from the merits

of the action; and (3) [is] effectively unreviewable on appeal

from a final judgment.” Jolley, 864 F.2d at 404. In Jolley, we

held that a district court order granting a stay pending

arbitration is not appealable under the collateral order doctrine

because such an order is reviewable on appeal from a final

judgment, and thus does not meet the third requirement of the

collateral order doctrine. See id. We reached this conclusion

because the parties will have an opportunity to obtain a final judgment from the district court after arbitration and can then

seek review of that final judgment. See id.; West of England

Ship Owners Mut. Ins. Assoc., 981 F.2d at 751 & n.9.

4 Moreover, in the event that Gulfstream is still applicable to an appeal of a discretionary stay by a party not subject to the arbitration agreement, we conclude that plaintiffs have not met the requirements of Gulfstream because they have not shown that serious or irreparable consequences will flow from the district court’s stay order.

10 Plaintiffs argue that they will not have the opportunity to seek

review after the arbitration concludes because the issues in the

London arbitration are not the same as the issues at stake in the

district court. According to plaintiffs, the issues in London

are limited to those raised by MEPS and do not include the issues

raised by plaintiffs in their federal court action. As

defendants point out, however, plaintiffs have the opportunity to

raise any of the claims that are currently pending in district

court as counter-claims or defenses in the arbitration proceeding and may not complain that there will be no review of the issues

that they have chosen not to raise for strategic reasons in

arbitration. We therefore refuse to depart from our circuit

precedent to allow plaintiffs to appeal the district court’s stay

under the collateral order doctrine.

Finally, plaintiffs seek our review of the district court’s

order via an application for writ of mandamus. A writ of

mandamus is “an extraordinary remedy, reserved for extraordinary

situations.” McDermott, 981 F.2d at 748. We have traditionally

exercised our mandamus power “only ‘to confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel

it to exercise its authority when it is its duty to do so.’” Id.

(quoting Gulfstream, 485 U.S. at 289). Plaintiffs have the

burden of demonstrating a “‘clear and indisputable’” right to

mandamus before we are authorized to issue a writ. Id. (quoting

Gulfstream, 485 U.S. at 289). Because Congress has expressly

limited interlocutory review of a district court’s decision to

11 stay arbitration, plaintiffs bear a particularly heavy burden.

See id. Plaintiffs have failed to carry the burden in this case.

Contrary to plaintiffs’ assertions, the district court did not

fail to consider their arguments, and did not clearly overstep

its authority in staying these proceedings pending the outcome of

the London arbitration. It is a well-established principle that

“a writ of mandamus is not to be used as a substitute for

appeal.” Id. We therefore deny plaintiffs’ application for the

writ and dismiss this appeal for lack of jurisdiction.

III. CONCLUSION

For the foregoing reasons, we DISMISS plaintiffs’ appeal for

lack of jurisdiction and DENY the application for writ of

mandamus.