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Interlocutory appeal will stop lower court litigation
July 01, 2005 by Ross Runkel at LawMemo

If a court denies an employer's motion to compel arbitration, and the employer appeals, is the employer entitled to a stay of the trial court litigation proceedings? Circuits are split, and the 10th Circuit now says "yes." McCauley v. Halliburton Energy Services (10th Cir 06/28/2005)

When McCauley sued his former employer, the trial court granted the employer's motion to arbitrate certain claims, but denied the motion as to other claims and ordered the parties to proceed to trial. The employer appealed the partial denial of its motion to compel arbitration, as permitted by the Federal Arbitration Act (FAA), 9 USC Section 16(a)(1)(C). The trial court denied the employer's motion to stay further litigation pending resolution of the appeal, but the 10th Circuit granted the motion.

The legal issue, a matter of first impression in the 10th Circuit: "Whether an interlocutory appeal from the denial of a motion to compel arbitration divests a district court of jurisdiction to proceed on the merits of the underlying claim while the appeal is pending."

There is a split among the circuits on this issue.

• Refusing a stay: Motorola Credit Corp. v. Uzan, 388 F.3d 39 (2nd Cir 2004); Britton v. Co-Op Banking Group, 916 F.2d 1405 (9th Cir 1990).
• Allowing a stay: Blinco v. Green Tree Servicing, LLC, 366 F.3d 1249 (11th Cir 2004); Bradford-Scott Data Corp. v. Physician Computer Network, Inc., 128 F.3d 504 (7th Cir 1997).

The 10th Circuit allowed a stay, assuming the appeal is non-frivolous.

The 9th Circuit has expressed concern over potential exploitation of a categorical rule that an appeal divests the trial court of jurisdiction, which "would allow a defendant to stall a trial simply by bringing a frivolous motion to compel arbitration." Addressing that concern, the 10th Circuit noted that "upon the filing of a motion to stay litigation pending an appeal from the denial of a motion to compel arbitration, the district court may frustrate any litigant's attempt to exploit the categorical divestiture rule by taking the affirmative step, after a hearing, of certifying the Section 16(a) appeal as frivolous or forfeited."

My view: There's no good answer for this dilemma, but I tend to favor disallowing a stay. Interlocutory appeals are already an exception to the general rule. These appeals should not keep the lower courts from doing their business. The 10th Circuit's technique of distinguishing frivolous from non-frivolous appeals will do little to help because it will be quite difficult to get a trial court to say an appeal is frivolous. As a result, interlocutory appeals will generally bring everything else to a halt. One more way to delay.

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