Fifth Circuit Holds that a District Court Is Not Required to Stay Proceedings on Merits Pending Appeal of Denial of a Motion to Compel Arbitration

In Weingarten Realty Investors v. Miller, No. 11-20676 (5th Cir. Nov. 1, 2011), Weingarten Realty Investors (“WRI”) and Miller Sheriden, LLC (“Miller”), created a joint venture. WRI loaned that joint venture $75,000,000 under the Loan Agreement between WRI and the joint venture. Miller did not sign the Loan Agreement individually but did sign a third-party guarantee (“Limited Guarantee”) for the loan, on the same day the Loan Agreement was executed, in which guarantee he and Miller guaranteed half of the loan. There is no arbitration clause in the Limited Guarantee and the Loan Agreement does not list the Limited Guarantee as a Loan Document.

When the joint venture did not pay the note on the extended maturity date, WRI unsuccessfully sought payment from the guarantors. WRI sued Miller pursuant to the Limited Guarantee. Miller moved to compel arbitration and the district court denied the motion. The district court held that Miller is not entitled to arbitration because he is not a party to any Loan Document. Miller then appealed the denial of the motion to compel arbitration and also moved for a stay on the underlying case pending appeal of the arbitration motion. The district court denied the stay. Miller appealed to the U.S. Court of Appeals for the Fifth Circuit.

The Fifth Circuit affirmed the district court’s denial of the stay pending appeal, holding that while a district court has the discretion to stay the proceedings on the merits, a stay is not automatic. The court denied Miller’s stay because Miller “fails to show a likelihood of winning on the merits or that the balance of equities tips in his favor.”

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