Fifth Circuit Lacks Jurisdiction Over Order Compelling Arbitration in Movant’s Non-Preferred Forum

The United States Court of Appeals for the Fifth Circuit has ruled that it lacks jurisdiction to consider an appeal from a lower court’s interlocutory order compelling arbitration in a different forum than the movant requested.  In Al Rushaid v. National Oilwell Varco, Inc., No. 15-20260 (5th Cir. Feb. 17, 2016), an oil drilling company (“Rushaid”) entered into a number of contracts with a group of related oil well companies.  Each contract was apparently formed under Texas law after Rushaid submitted purchase orders in response to price quotes it received from the various companies.  In 2011, Rushaid filed a single lawsuit against the oil well companies over the contracts.

All of the companies except one, NOV Norway, were served with Rushaid’s complaint and the case was removed to the Southern District of Texas.  After extensive discovery was conducted, NOV Norway was finally served.  In response, the oil well company filed a motion to compel the dispute to arbitration pursuant to the terms of its contract with Rushaid.

In 2014, the district court denied NOV Norway’s motion and the Fifth Circuit overturned the Southern District of Texas’ order on appeal.  Despite this, the Court of Appeals stated its decision did not “necessarily require the district court to compel any of the other parties to arbitrate their dispute or to stay proceedings.”  You can read more about the Fifth Circuit’s first opinion in the case in a prior Disputing blog post.

On remand, all of the oil well companies involved in the lawsuit sought to compel arbitration despite that only NOV Norway and NOV LP were signatories to an arbitration clause.  According to the Nonsignatory Defendant companies, they were also entitled to participate in arbitration due to equitable estoppel.

The district court rejected all arguments based on equitable estoppel, but found that NOV LP was contractually entitled to arbitration. Because that arbitration clause did not specify a forum, the district court ordered arbitration within the Southern District of Texas. All defendants have appealed. To sum up, if left undisturbed, the proceedings have fragmented. Claims against NOV Norway will be arbitrated before the ICC. Claims against NOV LP will be arbitrated within the Southern District of Texas. And claims against the Nonsignatory Defendants will be litigated in Texas state court.

On appeal, the Fifth Circuit stated its jurisdiction was circumscribed because the lower “court’s order was interlocutory in nature.”  The court next said it had the authority to consider “the appeal as it pertains to the Nonsignatory Defendants,” but “[w]e do not have jurisdiction to review interlocutory orders compelling arbitration.” After reviewing the decisions previously issued by each federal Circuit that considered whether a party may appeal after arbitration is compelled in a forum that was not the movant’s first choice, The Fifth Circuit held that Section 16 of the Federal Arbitration Act “forbids appellate review.”

Next, the court stated:

We also lack jurisdiction under the collateral order doctrine. The collateral order doctrine is a “‘narrow’ exception” that “should stay that way and never be allowed to swallow the general rule.” Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868, 114 S.Ct. 1992, 1996 (1994) (quoting Richardson–Merrell, Inc. v. Koller, 472 U.S. 424, 430, 105 S.Ct. 2757, 2761 (1985)). Appellants cite no case where a court has used the collateral order doctrine to exercise jurisdiction over an interlocutory order compelling arbitration. Section 16 provides a specific framework for determining whether and when an appeal is proper, and we will not interfere with the statutory design. See Johnson v. Consumerinfo.com, Inc., 745 F.3d 1019, 1021–22 (9th Cir .2014) (“The structure of the statute ? suggests that Congress intended to remove appellate jurisdiction from all orders listed in § 16(b)(1)-(4), regardless of whether any such order could otherwise be deemed collateral.”); ConArt, Inc. v. Hellmuth, Obata + Kassabaum, Inc., 504 F.3d 1208, 1211 (11th Cir.2007) (“Applying the Cohen collateral order doctrine to permit an appeal that § 16(b) specifically prohibits ? would amount to using a judge-made doctrine to erase an unequivocal congressional command.”); ATAC Corp. v. Arthur Treacher’s, Inc., 280 F.3d 1091, 1101–02 (6th Cir.2002) (The “argument that the collateral order doctrine provides this court jurisdiction over the appeal flies in the face of Congress’s purpose in passing § 16.”).

Ultimately, the Fifth Circuit Court of Appeals held “the appeals brought by NOV LP and NOV Norway must be dismissed,” before affirming the lower court’s order denying the Nonsignatory Defendants’ motion to compel arbitration.

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