Hewlett-Packard v. Berg

• Court: Court of Appeals for the First Circuit
• Decided: August 3, 1995
• Docket: 94-2251
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________



        No. 94-2251



                            HEWLETT-PACKARD COMPANY, INC.,



                                Plaintiff, Appellant,



                                          v.



                               HELGE BERG, ETC., ET AL.



                                Defendants, Appellees.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                     [Hon. Joseph L. Tauro, U.S. District Judge]
                                            ___________________



                                 ____________________



                                        Before



                                Boudin, Circuit Judge,
                                        _____________



                            Bownes, Senior Circuit Judge,
                                    ____________________



                              and Stahl, Circuit Judge.
                                         _____________



                                 ____________________



            Richard Allan Horning with whom Horning,  Janin & Harvey, Kevin P.
            _____________________           ________________________  ________

        Light, Choate,  Hall & Stewart and  Robert W. Sutis were  on brief for
        _____  _______________________      _______________

        appellant.

            David A. Burman for appellees.
            _______________


____________________



                                    August 3, 1995

                                 ____________________



BOUDIN, Circuit Judge.  Hewlett-Packard  appeals from an
                         _____________



            order of  the district court confirming  an arbitration award



            rendered in a business dispute  with appellees Helge Berg and



            Lars Skoog  and rejecting  Hewlett-Packard's  requests for  a



            stay of the confirmation proceeding  or a declaration that it



            is entitled to  a set-off for the  award.  The case  presents



            several difficult  legal issues which can  be understood only



            after a brief description of the facts and prior proceedings.



                                    I.  BACKGROUND
                                    I.  BACKGROUND



                 In March  1982, Apollo  Computer, now owned  by Hewlett-



            Packard, entered  into  a two-year  distributorship  contract



            with a Swedish company  called Dicoscan Distributed  Computer



            Scandinavia  to  sell  Hewlett-Packard  products  in  several



            Nordic countries.  The 1982 contract included an agreement to



            submit any dispute under the contract to binding arbitration.



            In  March 1984,  the parties  executed a  new distributorship



            contract, which also contained an arbitration clause.



                 In  the  meantime,   during  1983  and   1984,  Dicoscan



            experienced financial  problems.  In mid-1984, Apollo claimed



            that  Dicoscan was far behind in its payments.  In September,



            Apollo terminated  the 1984 agreement.   The following month,



            Dicoscan filed for bankruptcy.  The bankruptcy court assigned



            to Berg  and Skoog, directors  and officers of  Dicoscan, the



            right to bring claims against Apollo based on the contracts.


-2-
                                         -2-



Berg and Skoog filed a request  for arbitration with the



            International  Chamber  of  Commerce  Court  of  Arbitration,



            claiming  millions  of  dollars  of damages  arising  out  of



            Apollo's   unilateral  termination  of  the  1984  agreement.



            Apollo counterclaimed  in the  arbitration by asserting  that



            the  Swedish company had failed  to pay about  $10,000 due on



            the  1984  contract and  about  $207,000 due  under  the 1982



            contract.   After a dispute  about Berg and  Skoog's right to



            invoke arbitration, see   Apollo Computer, Inc. v. Berg,  886
                                ___   _____________________    ____



            F.2d 469, 473 (1st Cir. 1989),  an arbitration proceeding was



            begun.



                 The arbitrators  were required by the parties' contracts



            to  apply Massachusetts  law.    Ultimately, the  arbitrators



            awarded around $700,000 plus interest  to Berg and Skoog, but



            allowed a  set-off for the  $10,000 that Dicoscan  still owed



            Apollo  under the 1984 contract.   To both parties' surprise,



            the tribunal held that it was without  jurisdiction to decide



            Apollo's more  substantial claim based on  the 1982 contract,



            ruling that the  1982 contract  was not within  the Terms  of



            Reference issued by  the arbitrators at the beginning  of the



            proceeding.



                 As a  result, Apollo was left with  a sizable obligation



            to  Berg   and  Skoog   on  the   1984  contract   without  a



            determination of its claim for more than $207,000 on the 1982



            contract.  Apollo unilaterally decided to pay the arbitration


-3-
                                         -3-



award  amount  but  subtracted  the  $207,000  plus  interest



            (together,  about  $300,000)  as  a  "setoff in  recoupment,"



            which,  it  said,  is  a  time-honored  common  law  doctrine



            embraced  in  Massachusetts  courts.   Apollo  also  filed  a



            request with the tribunal  for a second arbitration regarding



            the  1982 contract.  That tribunal has indicated that it will



            hear the arbitration.



                 In  January  1993,   Apollo  (later  succeeded  as   the



            plaintiff by  Hewlett-Packard)  filed the  complaint in  this



            action  with  the  Massachusetts  district  court.   Hewlett-



            Packard requested  that the  district court (1)  declare that



            Hewlett-Packard was entitled to the $207,000 set-off and that



            the arbitration award is fully satisfied, and (2) vacate  the



            tribunal's  award  and  correct it.    Hewlett-Packard  later



            withdrew its second claim for relief.



                 Berg and  Skoog moved to dismiss  the complaint, arguing



            that  such declaratory  relief is  unavailable as  to foreign



            arbitration  awards.    Later,   Berg  and  Skoog  moved  for



            confirmation  of  the  arbitration  award.    Hewlett-Packard



            opposed  confirmation of  the award  on  the ground  that, by



            failing to include  its 1982 set-off, the  award was contrary



            to public policy.   In the alternative, Hewlett-Packard moved



            to  stay  confirmation, pending  the  outcome  of the  second



            arbitration.  Hewlett-Packard also  asked the court to compel



            arbitration as to its 1982 claim.


-4-
                                         -4-



On  November  7,  1994,   the  district  judge  filed  a



            memorandum, together with a  separate order, disposing of all



            of these  motions.   The court's order  compelled arbitration



            under the 1982 contract but it confirmed the award previously



            made by the  tribunal on the 1984  contract.  The  court said



            that  it   was  without   power  to  stay   the  confirmation



            proceeding, as  Hewlett-Packard had  requested, and  that the



            request for a set-off  was an improper attempt to  modify the



            tribunal's award.  



                 Apparently   ready   to   enforce    the   now-confirmed



            arbitration award, Berg  and Skoog moved the court  for entry



            of  final  judgment,  and   proffered  a  detailed   judgment



            specifying  the award,  interest and  attorney's fees.   Four



            days later,  Hewlett-Packard filed  its notice of  appeal and



            thereafter filed a response  disputing certain aspects of the



            proposed judgment.  The  district court has not acted  on the



            motion  for entry of final judgment; and no such judgment has



            been entered.



                                   II.  DISCUSSION
                                   II.  DISCUSSION



                 Hewlett-Packard  purports to  appeal  all  three of  the



            district court's  adverse actions:   the confirmation  of the



            arbitration  award,  the refusal  to  stay  that confirmation



            proceeding pending the outcome of the second arbitration; and



            the rejection of Hewlett-Packard's set-off claim declaration.



            Commendably, Hewlett-Packard  has alerted  us  to a  possible


-5-
                                         -5-



jurisdiction  problem,  which   this  court  is  obliged   to



            consider.   We  do  so but  caution  future panels  that  the



            jurisdictional problems have not been briefed in this case.



                 Nothing  in the  record in  this case  purports to  be a



            "final  judgment,"  set  forth  in  a  separate  document  as



            required  by Fed.  R. Civ.  P. 58,  disposing of  all claims.



            Thus,  in formal  terms there  is  no basis  for appeal  of a



            "final  decision" under 28 U.S.C.    1291, even  if the court



            actually  resolved all of the  claims before it.   Indeed, as



            already  noted, the  defendants  have pending  a motion  that



            requests entry of a "final judgment."



                 Nevertheless,  the  November  7  order,  insofar  as  it



            confirms  the arbitration  award, is  appealable now  because



            Congress  directed  in  the  statute  governing  arbitration-



            related  appeals that  such  an "order"  confirming an  award



            should be  immediately appealable.   9 U.S.C.    16(a)(1)(D).



            The reason  is a pro-arbitration policy  designed to expedite



            confirmation  of  arbitration awards.    This  is clear  from



            precedent  and  scholarly  commentary.   See,  e.g.,  15B  C.
                                                     __________



            Wright, A. Miller & E. Cooper, Federal Practice and Procedure
                                           ______________________________



              3914.17, at 9-12, 32-34 (2d ed. 1992).



                 There  is one  technical  hitch.   Seemingly, the  order



            confirming the  award is not  itself a judgment   that can be



            collected through court processes until it is entered  on the



            docket as a judgment.  See  9 U.S.C.   13.  This has  nothing
                                   ___


-6-
                                         -6-



to  do with the final judgment rule; rather, the statute that



            governs  confirmations provides that  after a confirmation is



            ordered, a separate "entry of judgment" must be made pursuant



            to that  order, and  it  is only  at that  stage that  "[t]he



            judgment  so entered . . . may be  enforced as if it had been



            rendered in an action  in the court in which it  is entered."



            Id.
            ___



                 Nevertheless, the Federal  Rules of  Civil Procedure  do



            not say that appeals can only be taken from judgments; on the



            contrary, they contemplate that, subject to the complex rules



            that determine  what is immediately appealable,  there may be



            such a thing as an "appealable order" that is not a judgment.



            Fed. R. Civ. P. 79(b).   And, as already noted,  Congress has



            designated  as  immediately  appealable   "an  order  .  .  .



            confirming  .  .  . an  [arbitration]  award."    9 U.S.C.   



            16(a)(1)(D).



                 Our position  is  not at  odds  with Middleby  Corp.  v.
                                                      _______________



            Hussmann  Corp., 962 F.2d 614 (7th Cir. 1992).  Middleby held
            _______________                                 ________



            that no immediate  appeal could be  taken where the  district



            court issued an  order of confirmation but declined  to enter



            judgment  after  making  a specific  determination  to  delay



            giving  effect  to  the  confirmation   order  until  further



            proceedings were concluded.   Here, by contrast, the district



            court denied  the requested stay, and  the confirmation order



            is  immediately  effective,  requiring  only  the  filing  of


-7-
                                         -7-



specified  papers  with the  clerk  to permit  "the  entry of



            judgment thereon."  9 U.S.C.   13.



                 Because the  confirmation order is  appealable, we think



            that there is also before us Hewlett-Packard's claim that the



            confirmation proceeding should have  been stayed.  The reason



            is simply that the underlying argument for  a stay is also an



            objection to the  confirmation order itself.  To this extent,



            it is effectively an interlocutory ruling made in the process



            of approving the confirmation request and like any other such



            interlocutory ruling it  is reviewable at  the time that  the



            confirmation order  itself  is brought  up  on appeal.    Cf.
                                                                      ___



            Stringfellow v. Concerned Neighbors  in Action, 480 U.S. 370,
            ____________    ______________________________



            375  (1987); 15A Wright, Miller & Cooper, supra,   3905.1, at
                                                      _____



            249-63.



                 A  similar argument  might  also be  made to  justify an



            appeal  now based on the  district court's refusal to declare



            Hewlett-Packard's  right to  the  set-off it  asserted.   The



            problem is complicated,  but we  see no need  to resolve  the



            complexities.  Whether or  not the refusal to allow  the set-



            off  is an appealable issue,  the refusal at  this time turns



            out not to be a legal error, so the jurisdictional issue need



            not be decided.  See Norton v. Matthews, 427 U.S. 524, 530-32
                             ___ ______    ________



            (1976);  In re Pioneer Ford Sales,  729 F.2d 27, 31 (1st Cir.
                     ________________________



            1984).


-8-
                                         -8-



We turn now  to the  merits.   Hewlett-Packard does  not



            object to the confirmation  of the award in all  respects; it



            says  it  has  paid  the award  except  the  disputed  amount



            including  interest.    But  Hewlett-Packard  says  that  the



            district court erred by confirming  the award in full instead



            of  either allowing  a  set-off or  granting  a stay  of  the



            confirmation pending the results of the new arbitration.



                 We  agree with  the district  court's rejection  at this



            time of the first alternative.  Whether Hewlett-Packard has a



            valid   claim  under   the  1982   contract  is   subject  to



            arbitration; we agree  with the district  court--and Hewlett-



            Packard--that the  tribunal has never resolved  the merits of



            that claim.  Whatever the Massachusetts law on set-offs,  the



            district court could not allow the set-off at present without



            determining that Hewlett-Packard had  a valid claim, which is



            the very subject of the arbitration.



                 It  is hard  to  imagine  a  step  that  would  be  more



            offensive  to  the   pro-arbitration  policies  reflected  in



            Congress'  endorsement   of  the   1958  Convention  on   the



            Recognition and Enforcement of Foreign Arbitral Awards, often



            called  the New York Convention.  The New York Convention was



            approved   by  Congress,  and  implementing  legislation  was



            codified at 9 U.S.C.    201-08.  The statute  enlists the aid



            of federal courts to compel arbitration.  9 U.S.C.   206.  By



            contrast,   the   judicial  set-off   requested   here  would


-9-
                                         -9-



circumvent the 1982 contract to arbitrate and the now-pending



            arbitration under that contract.



                 The request to defer confirmation of the award under the



            1984  contract stands  on a different  footing.   However the



            case might stand absent the bankruptcy, Dicoscan's bankruptcy



            gives Hewlett-Packard a very substantial prudential argument.



            If the existing award  were confirmed in full and  reduced to



            judgment, Hewlett-Packard would have to pay the full award to



            the  defendants  as  successors-in-interest of  an  insolvent



            company.  If in due course  Hewlett-Packard then prevailed on



            its claims against the insolvent company on a closely related



            transaction,  it   would  have  no  assurance  of  collecting



            anything.



                 Further,  Hewlett-Packard  cannot  be  blamed   for  the



            discrepant timing in the resolution of its claim, or at least



            no argument to that effect has been made.  After  it was told



            that the  defendants did  have arbitration rights  despite an



            anti-assignment  clause  in  the  contracts,  Hewlett-Packard



            apparently  made  a  reasonable   effort  to  have  both  the



            defendants' claim  and its  own counterclaim resolved  in one



            proceeding  at   the  same  time.     Only  the  arbitrators'



            surprising  interpretation  of their mandate frustrated  this



            attempt.



                 Under these  circumstances, the seemingly  fair solution



            would be  to  confirm  the award  in  its  uncontested  part,


-10-
                                         -10-



reserving confirmation of the balance until the 1982 contract



            dispute  is  arbitrated.    The  district  court  refused  to



            consider a stay  of confirmation  on the ground  that it  was



            without power to  do so.   We fully understand the  basis for



            the  district  court's  doubt  about its  authority,  but  we



            conclude that it  does have the power to issue  a stay in the



            peculiar circumstances of this case.



                 Ordinarily  there  could  be  no  doubt  that  a  court,



            although obliged  to decide a claim,  would retain discretion



            to  defer  proceedings for  prudential  reasons.   Indeed,  a



            typical reason  is the  pendency of a  related proceeding  in



            another  tribunal.    "[T]he  power to  stay  proceedings  is



            incidental to the  power inherent in  every court to  control



            the disposition of the  causes on its docket with  economy of



            time and effort for itself, for counsel, and  for litigants."



            Landis v. North Amer. Co., 299 U.S. 248, 254 (1936).
            ______    _______________



                 The question here is whether this traditional  authority



            is curtailed  by the New York Convention and its implementing



            legislation.  The statute provides that,  upon a petition for



            confirmation,  a  district  court "shall  confirm  the  award
                                               _____



            unless it finds one of the grounds for refusal or deferral of



            recognition or enforcement of the award specified in the said



            Convention."  9 U.S.C.   207 (emphasis added).  Article VI of



            the Convention is the only provision that deals  with staying



            confirmation.  Article VI states:


-11-
                                         -11-



If  an  application   for  the  setting  aside   or

                 suspension  of  the  award   has  been  made  to  a

                 competent authority [in the country where the award

                 has  been made],  the  authority  before which  the

                 award  is  sought to  be  relied  upon may,  if  it

                 considers it  proper, adjourn  the decision  on the

                 enforcement of the award [and require a security].



            The circumstances  outlined in  Article VI  do not  appear to



            exist in this case.  The question is whether a district court



            may grant a stay in circumstances other than those authorized



            in Article VI.



                 The fact that section  207 uses the word "shall"  is not



            decisive, because a stay  is a deferral rather  than refusal.



            But  the fact that the  statute refers to  the Convention and



            the  Convention lists  a single  ground for  a stay  could be



            taken  to exclude  all other grounds  under the  principle of



            expressio  unius  est  exclusio   alterius.    That  was,  in
            __________________________________________



            substance,  the reasoning  of the  district court.   However,



            expressio  unius  is  an  aid  to  construction  and  not  an
            ________________



            inflexible rule.   See, e.g., United  States v. Massachusetts
                               _________  ______________    _____________



            Bay  Transport.  Auth.,  614 F.2d  27,  28  (1st  Cir. 1980).
            ______________________



            Whatever we might think  if the question were  entirely open,



            precedent  informs  our  decision  in this  case.    Domestic



            arbitrations are  governed by  the United  States Arbitration



            Act (chapter 1 of Title 9) but not by the Convention (chapter



            2  of Title 9).  The  Act states that, upon application, "the



            court  must grant [a confirmation] order  unless the award is
                   ____



            vacated, modified, or corrected  as prescribed in sections 10


-12-
                                         -12-



and 11 of this title."  9  U.S.C.   9 (emphasis added).   But



            courts  routinely grant  stays in  such cases  for prudential



            reasons  not listed in sections  10 and 11.   E.g., Middleby,
                                                          ____  ________



            962 F.2d at 615-16.



                 Similarly, this court has held that district courts have



            discretion to  stay an  action to compel  arbitration pending
                                              ______



            the outcome of related litigation, even though the Act states



            that on a motion to compel the court "shall hear the parties"



            and  "shall proceed summarily  to trial."  9  U.S.C.   4; see
                                                                      ___



            Acton  Corp. v.  Borden, Inc.,  670 F.2d  377, 383  (1st Cir.
            ____________     ____________



            1982).   In Acton,  then-Judge Breyer held  that, in drafting
                        _____



            the  statute, Congress  did not  "intend[] a  major departure



            from  the ordinary  rule allowing one  federal court  to stay



            litigation when  another federal court  is on the  process of



            deciding the same issue."  We take the same view of Congress'



            intentions in implementing the Convention.



                 Of course, a stay of confirmation should  not be lightly



            granted.      A  central   purpose   of  the   Convention--an



            international agreement  to which  the United States  is only



            one of approximately one hundred signatories--was to expedite



            the recognition of foreign arbitral  awards with a minimum of



            judicial interference.  But  the risk that the power  to stay



            could  be abused by  disgruntled litigants--real  though that



            risk is, see Spier  v. Calzaturificio, 663 F. Supp.  871, 875
                     ___ _____     ______________


-13-
                                         -13-



(S.D.N.Y.  1987)--argues  more  for  a cautious  and  prudent



            exercise of the power than for its elimination.



                 Because the district court acted under a misapprehension



            of its authority, we vacate the confirmation order and remand



            for further  proceedings.  Whether confirmation or collection



            of  the  award  should  be  partially  deferred  pending  the



            resolution  of the 1982 contract  arbitration is a matter for



            the  district  court  to  determine in  the  first  instance.



            Still,  we think it would require some explanation if, in the



            face  of  the  equities  of  this case,  the  district  court



            concluded  that  the  full  award  should  be  confirmed  and



            collected now.



                 The  confirmation order  is  vacated and  the matter  is
                                              _______



            remanded  to  the  district  court  for  further  proceedings
            ________



            consistent with this opinion.


-14-
                                         -14-