Fifth Circuit Dismisses Appeal Over Arbitration Order Due to Lack of Jurisdiction

In Southwestern Elec. Power Co. v. Certain Underwriters at Lloyds of London, No. 13-31130 (5th Cir., November 24, 2014), a public power company operating in Texas, Louisiana, and Arkansas, SWEPCO, purchased insurance coverage from United Kingdom-based Certain Underwriters at Lloyds of London (“Underwriters”) related to the construction of a Louisiana power plant.  The parties’ insurance contract contained an arbitration clause.  After a dispute arose between the two companies, SWEPCO filed a lawsuit against the Underwriters in state court.  In response, the Underwriters removed the case to federal court based upon diversity of citizenship and filed a motion to compel arbitration.

A magistrate judge issued a Report and Recommendation in the case stating “the insurance contract between the parties contained a clear and unambiguous arbitration clause.”  In September 2013, a district court adopted the Report, stayed court proceedings in the case, and granted the Underwriters’ motion to compel arbitration pursuant to the terms of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”).  Since further litigation was unlikely, the federal court also ordered that the case be closed for administrative purposes.

SWEPCO then filed a notice of appeal and asked the district court to enter a final judgment in the case.  The federal court issued an order construing its earlier order as final and stated “the order was alternatively eligible for immediate appeal under 28 U.S.C. § 1292(b) as involving a controlling question of law from which an immediate appeal might materially advance the ultimate termination of the litigation.”  Despite this, neither party requested leave to appeal the case to the nation’s Fifth Circuit under Section 1292(b).

Before the United States Court of Appeals for the Fifth Circuit, both parties conceded that each failed to seek the appellate court’s discretionary review under Section 1292(b).  Because of this, the court stated “Appellate jurisdiction hinges on whether the September 2013 Order is final and appealable under our case law.”  During oral argument, SWEPCO claimed that the district court’s September 2013 order was final.  The Underwriters countered that Fifth Circuit precedent treats an order staying litigation and administratively closing a case as interlocutory.

The Fifth Circuit first said it generally “has jurisdiction over appeals from final orders, and may raise the issue of jurisdiction sua sponte.”  The court then added that the Federal Arbitration Act (“FAA”) “governs appellate review of arbitration orders,” and carries out Congress’s intent to favor arbitration.  This includes an arbitral order that arises under the Convention.  In addition, the appellate court said a party may not appeal a non-final interlocutory order compelling arbitration pursuant to the Convention.

Next, the Fifth Circuit stated the United States Supreme Court has held an order concerning arbitration is final where the decision “ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.”  The appeals court also said “our case law has developed a clear distinction between final orders dismissing cases after compelling arbitration and interlocutory orders staying and administratively closing cases pending arbitration.”

After examining the facts of the case at hand, the Fifth Circuit found:

Here, the district court’s September 2013 Order compelling arbitration granted a “[s]tay” of the “[p]roceedings,” “ORDERED that this civil action is stayed,” and directed the clerk “to close the case for administrative purposes given the unlikelihood that further proceedings in this action will be necessary.” In a later ruling on SWEPCO’s Rule 58(d) motion for a separate judgment, the district court carefully construed its earlier ruling. Notably, the district court considered case law to construe the prior order “as a final, appealable decision within the statutory framework of the [FAA].” It did not issue a clarification that its prior order was intended to be final and appealable, did not purport to grant SWEPCO’s motion, and did not issue a new order with the necessary trappings of finality.

We conclude the September 2013 Order is interlocutory under our jurisprudence. See Mire, 389 F.3d at 165–67. The September 2013 Order stayed the case and closed it only for administrative purposes, rather than dismissing the case outright. Id.; CitiFinancial, 453 F.3d at 249–51. Although the district court did not anticipate a likelihood that further proceedings would be necessary, finality requires an order that “ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.” Green Tree, 531 U.S. at 86 (internal quotation marks omitted). Unlike the order in American Heritage, the September 2013 Order did not close the case outright. Cf. Am. Heritage, 294 F.3d at 707–08. Nor did the September 2013 Order dismiss the case. Instead, the order performed docket management by administratively closing the case, such that the parties could easily reopen it in the district court should further proceedings prove necessary. The September 2013 Order thus lacks finality, and we have no jurisdiction to review it.

Because the appellate court determined that the district court’s order was interlocutory and not final, the United States Court of Appeals for the Fifth Circuit dismissed the case for lack of jurisdiction.

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