Morgan Keegan & Company, Inc. v. William Hamilton Smythe, III, Individually William H. Smythe, IV, Trust U/A/DTD 12/29/87, William H. Smythe, III, Trustee and Smythe Children's Trust 2 FBO Katherine S. Thinnes U/A/DTD 12/29/87

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
January 19, 2011 Session1

MORGAN KEEGAN & COMPANY, INC.
v.
WILLIAM HAMILTON SMYTHE, III, INDIVIDUALLY; WILLIAM H.
SMYTHE, IV, TRUST U/A/DTD 12/29/87, WILLIAM H. SMYTHE, III,
TRUSTEE; AND SMYTHE CHILDREN’S TRUST #2 FBO KATHERINE S.
THINNES U/A/DTD 12/29/87

An Appeal from the Chancery Court for Shelby County
No. CH092353 Walter L. Evans, Chancellor
_____________________________

W2010-01339-COA-R3-CV - Filed November 14, 2011

______________________________

This appeal involves a trial court’s order vacating an arbitration award. The parties engaged
in arbitration over a dispute in which the respondent investors asserted that the petitioner
investment company mismanaged their funds. The investors prevailed and received a
substantial arbitration award against the investment company. The investment company filed
a petition in the trial court to vacate the arbitration award, alleging partiality and bias on the
part of two members of the arbitration panel. After a hearing, the trial court entered an order
vacating the arbitration award and remanding the matter to the regulatory authority for a
rehearing before another panel of arbitrators. The respondent investors now appeal. We
dismiss the appeal for lack of appellate jurisdiction.

1
On March 24, 2011, this Court issued an Opinion in this case concluding that the appellate court did not
have subject matter jurisdiction over the appeal pursuant to the Tennessee Uniform Arbitration Act. On May
6, 2011, Smythe filed a “Motion to File Petition for Rehearing Beyond the Ten Day Deadline in Rule 39(B).”
Smythe argued in his petition that this case is governed by the Federal Arbitration Act, under which the trial
court’s order would be appealable. On May 18, 2011, this Court denied Smythe’s late-filed petition for
rehearing. However, the Court also withdrew the original decision due to the fundamental importance of
ascertaining the Court’s subject matter jurisdiction. The parties were then permitted to file supplemental
briefs on the issue. We now consider the appeal again, in light of the parties’ supplemental briefs.
 Tenn. R. App. P. 3 Appeal as of Right; Appeal Dismissed for Lack of Jurisdiction

H OLLY M. K IRBY, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J., and
J. S TEVEN S TAFFORD, J., joined.

Christopher S. Campbell and Laura S. Martin, Memphis, Tennessee; Jef Feibelman, David
E. Goodman, and Mary C. Hamm, Memphis, Tennessee; and Dale Ledbetter, Fort
Lauderdale, Florida, for the Respondent/Appellants, William Hamilton Smythe, III, et al.

John S. Golwen, William G. Whitman, and Annie T. Christoff, Memphis, Tennessee, for the
Petitioner/Appellee, Morgan Keegan & Company, Inc.

OPINION

F ACTS AND P ROCEEDINGS B ELOW

For a number of years, Respondent/Appellant William Hamilton Smythe, III (“Smythe”), had
multiple investment accounts at Petitioner/Appellee Morgan Keegan & Company (“Morgan
Keegan”) for himself and as trustee for members of his family.2 In the contracts that Smythe
signed when the investment accounts at Morgan Keegan were opened, Smythe agreed to
arbitrate any disputes in accordance with the Financial Industry Regulatory Authority
(“FINRA”) procedures.

Over time, Smythe came to believe that Morgan Keegan had improperly invested his
accounts in several funds, specifically with respect to the RMK family of funds (“the Fund”)
managed by James L. Kelsoe. After sustaining significant losses in the accounts, on April
30, 2008, Smythe, individually and as trustee of the funds at issue (collectively “Smythe”),
filed a claim with the FINRA to initiate an arbitration proceeding against Morgan Keegan.
In the claim, Smythe alleged that Morgan Keegan had engaged in improper investment
activity related to the Fund. On August 4, 2008, Morgan Keegan filed its response to the
Smythe claim.

In connection with the arbitration proceedings, pursuant to FINRA rules, Smythe and Morgan
Keegan each received a list of potential arbitrators. Both parties were given the opportunity
to strike arbitrators from the list. They ranked the remainder and returned to FINRA the
ranked list of arbitrators. Both parties’ lists included an arbitrator by the name of Eugene R.
Katz (“Katz”).

2
The underlying facts are not disputed for purposes of this appeal.

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After that, in accordance with FINRA rules, FINRA created a separate combined ranked list
of arbitrators from the lists provided by Smythe and Morgan Keegan, deleting arbitrators who
had been struck by either party. FINRA then “appointed an arbitration Panel based on the
parties’ consolidated lists.” The panel of arbitrators appointed for the Smythe case included
Katz. It also included Marion R. Allen, who later withdrew and was replaced by Michael S.
Hill (“Hill”). The final Panel (“Panel”) for the Smythe case was comprised of Spencer
Buchanan (“Buchanan”), Katz, and Hill. Katz and Hill were also on the panel of arbitrators
in unrelated cases against Morgan Keegan arising from the same Fund. Each Panel member
submitted an arbitrator disclosure report that was provided to the parties.

After the other Morgan Keegan cases on which Katz and Hill had served as arbitrators were
resolved unfavorably to Morgan Keegan, Morgan Keegan objected to Katz and Hill
remaining as members of the Smythe Panel. On October 2, 2009, Morgan Keegan filed a
motion for the recusal of arbitrator Katz, alleging that he was no longer “independent and
neutral” because of, inter alia, his involvement in the other arbitration cases against Morgan
Keegan and a connection to another claimant against Morgan Keegan arising out of the same
Fund. On October 12, 2009, Morgan Keegan filed a motion for the recusal of arbitrator Hill
based on his participation as an arbitrator in the other Morgan Keegan case. Arbitrators Katz
and Hill both declined to recuse themselves from the Panel.

The matter of the removal of Katz and Hill from the Smythe Panel was then submitted to the
Director of Arbitration (“the Director”) for consideration under FINRA Rule 12410(a)(1).3
On October 29, 2009, the Director denied the motions to remove Katz and Hill.

The arbitration hearing on the Smythe claim was conducted from November 2 through
November 6, 2009, before the Panel. On November 11, 2009, the Panel issued an award in
favor of Smythe, finding that Morgan Keegan was liable to Smythe in the amount of

3
That Rule provides:

Before the first hearing session begins, the Director may remove an arbitrator for conflict
of interest or bias, upon request by a party or on the Director’s own initiative.
(1) The Director will grant a party’s request to remove an arbitrator
if it is reasonable to infer, based on information known at the time of the
request, that the arbitrator is biased, lacks impartiality, or has a direct or
indirect interest in the outcome of the arbitration. The interest or bias must
be definite and capable of reasonable determination, rather than remote or
speculative. Close questions regarding challenges to an arbitrator by a
customer under this rule will be resolved in favor of the customer.

FINRA Code of Arbitration Procedure for Customer Disputes, Rule 12410(a)(1).

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$697,000 in compensatory damages, plus prejudgment interest, $20,000 in witness fees, and
$195,160 in attorney fees pursuant to Tennessee Code Annotated § 48-2-121.

Unhappy with the Panel’s ruling, on November 25, 2009, Morgan Keegan filed the instant
Petition and Application of Vacatur in the trial court below, pursuant to the Federal
Arbitration Act (“FAA”), 9 U.S.C. § 10(a), and the Tennessee Uniform Arbitration Act
(“TUAA”), Tennessee Code Annotated § 29-5-313(a). These statutes provide that an
arbitration award may be vacated upon a showing of “evident partiality” in one or more of
the arbitrators who participated in the decision.4 Morgan Keegan asked the trial court to
vacate the arbitration award based on these statutes “because there was evident partiality or
corruption in the arbitrators [Katz and Hill] or either of them,” and “because the arbitrators
were guilty of misbehavior by which the rights of Morgan Keegan have been prejudiced.”
The petition alleged that arbitrators Katz and Hill were not impartial because, among other
things, (1) both had previously sat as arbitrators on cases in which the arbitration panel held
against Morgan Keegan, based on the same investments or the same fund manager, (2) Katz
had an indirect financial interest in the outcome, and (3) Hill had previously rendered a
judgment for punitive damages in a claim related to investments in the same Fund. On this
basis, Morgan Keegan requested that the trial court vacate the arbitration award and remand
the case to FINRA for a “new arbitration hearing before a neutral and unbiased panel.”
Smythe filed a response and a memorandum of law in which he objected to the petition of
vacatur and requested that the award rendered by FINRA be confirmed.

4
Title 9 U.S.C. § 10(a) provides in pertinent part:

(a) In any of the following cases the United States court in and for the district wherein the
award was made may make an order vacating the award upon the application of any party
to the arbitration–
...
(2) where there was evident partiality or corruption in the arbitrators, or
either of them . . . .

9 U.S.C. § 10(a)(2).

The state-law counterpart, Tennessee Code Annotated § 29-5-313(a), is similar:

(a) Upon application of a party, the court shall vacate an award where:
...
(2) There was evident partiality by an arbitrator appointed as a neutral or
corruption in any of the arbitrators or misconduct prejudicing the rights of
any party . . . .

Tenn. Code Ann. § 29-5-313(a)(2) (2000).

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The parties submitted briefs and exhibits to the trial court. On February 25, 2010, the trial
court heard arguments on Morgan Keegan’s motion to vacate. At the conclusion of the
hearing, the trial court granted Morgan Keegan’s motion and remanded the case to FINRA
for a new hearing. The trial court stated:

The Court has reviewed and considered each of the areas of concern
that has been raised by the Petitioners in the cause and the Court is of the
opinion that a reasonable person under the facts of the case that have been
presented would conclude that Mr. Hill and Mr. Katz could not be perceived
as being impartial and fair and would be predisposed to view any facts in the
light most damaging to the Petitioners because of their previous hearings and
conclusions and other matters involving Morgan Keegan.
And the Court is of the opinion that the arbitration award, which may
be confirmed on rehearing was nevertheless filled with an air of partiality to
the extent that the Court cannot conclude that a reasonable person could
reasonably hear and make a fair determination of the facts in the case and that
the process was the result of evident partiality on the part of Mr. Hill and Mr.
Katz and that the process should be replayed.
So the Court is vacating the arbitrators’ award and referring the matter
back to FINRA for a new hearing.

On March 16, 2010, the trial court entered an Order Granting Motion for Vacatur and
Remanding Case to FINRA for New Hearing. The written order incorporated the trial
court’s oral ruling and stated specifically that “the Court finds that pursuant to 9 U.S.C. §
10(a)(2) and Tenn. Code Ann. § 29-5-313(a)(2) there was evident partiality by Arbitrator
Katz and Arbitrator Hill.” Smythe now appeals, challenging the trial court’s decision to
vacate the arbitration award and remand to FINRA.

ISSUES ON A PPEAL AND S TANDARD OF R EVIEW

On appeal, Smythe raises the following issues:

1. Whether the evidence presented by Morgan Keegan
demonstrated evident partiality of Arbitrator Eugene Katz?

2. Whether the evidence presented by Morgan Keegan
demonstrated evident partiality of Arbitrator Michael Hill?

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 3. Whether the court below erred in finding that a reasonable
person would have to conclude that Arbitrators Eugene Katz and
Michael Hill were evidently partial to Smythe?

4. Whether the decision of the FINRA Director of Arbitration not
to remove Arbitrators Katz and Hill from the Panel was fair to
Morgan Keegan?

Morgan Keegan asserts that the issue on appeal is simply whether the trial court, in vacating
the arbitration award, correctly found “that a reasonable person would find that two of the
three FINRA arbitrators were evidently partial based on the facts and totality of the
circumstances.”

As a threshold matter, we must consider whether this Court has subject matter jurisdiction
to hear this appeal. Under Rule 13(b) of the Tennessee Rules of Appellate Procedure, we are
required to determine whether we have subject matter jurisdiction before addressing the
merits of the appeal. See Tenn. R. App. P. 13(b); see also State ex rel. Garrison v. Scobey,
No. W2007-02367-COA-R3-JV, 2008 WL 4648359, at *4 (Tenn. Ct. App. Oct. 22, 2008).
Subject matter jurisdiction concerns the authority of the Court to hear a matter. Lack of
appellate jurisdiction cannot be waived, and the parties cannot consent to the existence of
appellate subject matter jurisdiction. Person v. Kindred Healthcare, Inc., No. W2009-
01918-COA-R3-CV, 2010 WL 1838014, at *2 (Tenn. Ct. App. May 7, 2010); Boykin v.
Casher (In re Estate of Boykin), 295 S.W.3d 632, 635 (Tenn. Ct. App. 2008). Even if the
parties do not raise the issue, this Court must consider its own subject matter jurisdiction sua
sponte. Ruff v. State, 978 S.W.2d 95, 98 (Tenn. 1998); Boykin, 295 S.W.3d at 635. “Unless
an appeal from an interlocutory order is provided by the rules or by statute, appellate courts
have jurisdiction over final judgments only.” Bayberry Assocs. v. Jones, 783 S.W.2d 553,
559 (Tenn. 1990). If this Court does not have subject matter jurisdiction over the appeal, the
appeal must be dismissed. See Boykin, 295 S.W.3d at 636. The determination of whether
subject matter jurisdiction exists is a question of law to be determined de novo on the record.
Elite Emergency Servs., LLC v. Stat Solutions, LLC, No. M2008-02793-COA-R3-CV, 2010
WL 845392, at *5 (Tenn. Ct. App. Mar. 10, 2010).

A NALYSIS

Relevant Provisions of the TUAA and the FAA

We first identify the statutory provisions that are relevant to appellate jurisdiction. The
TUAA grants statutory authority to this Court to hear appeals from the following arbitration-
related orders:

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 (a) An appeal may be taken from:
(1) An order denying an application to compel arbitration made
under § 29-5-303;
(2) An order granting an application to stay arbitration made
under § 29-5-303(b);
(3) An order confirming or denying confirmation of an award;
(4) An order modifying or correcting an award;
(5) An order vacating an award without directing a re-hearing; and
(6) A judgment or decree entered pursuant to the provisions of this part.
(b) The appeal shall be taken in the manner and to the same extent as from
orders or judgments in a civil action.

Tenn. Code Ann. § 29-5-319 (2000) (emphasis added).

The federal counterpart to this TUAA provision — 9 U.S.C. § 16 — is similar, but it also
includes a list of orders from which an appeal may not be taken:

(a) An appeal may be taken from–
(1) an order–
(A) refusing a stay of any action under section 3
of this title,
(B) denying a petition under section 4 of this title
to order arbitration to proceed,
(C) denying an application under section 206 of
this title to compel arbitration,
(D) confirming or denying confirmation of an
award or partial award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or modifying an
injunction against an arbitration that is subject to this title; or
(3) a final decision with respect to an arbitration that is subject
to this title.
(b) Except as otherwise provided in section 1292(b) of title 28, an appeal may
not be taken from an interlocutory order–
(1) granting a stay of any action under section 3 of this title;
(2) directing arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4) refusing to enjoin an arbitration that is subject to this title.

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9 U.S.C. § 16 (emphasis added). Thus, pertinent to this appeal, the critical difference
between the TUAA and the FAA is that, while the FAA provides that an appeal may be taken
from an order “vacating an award,” the TUAA permits an appeal only from “[a]n order
vacating an award without directing a re-hearing.” In this case, the trial court vacated the
award against Morgan Keegan and remanded the case to the FINRA for a new arbitration
hearing.

Summary of Parties’ Arguments on Appellate Jurisdiction

Morgan Keegan argues that the trial court’s order is not appealable under either the TUAA
or the FAA. Initially, Morgan Keegan claims that the FAA is wholly inapplicable because
there is no evidence in the record to support a finding that the parties’ contracts involve
interstate commerce. In the alternative, if the FAA is deemed applicable to the substantive
issues in this case, Morgan Keegan argues that the FAA does not apply to the issue of
appealability because it is procedural, not substantive, and this Court must apply state law
to the procedural issue of whether the trial court’s order is appealable. Under the pertinent
provision of the TUAA, Section 29-5-319(a)(5), an order vacating an arbitration award is
appealable if it does not direct a rehearing. Morgan Keegan relies on the negative inference
from this provision that an order vacating an arbitration award is not appealable if it does
direct a rehearing. Therefore, according to Morgan Keegan, the TUAA is applicable, the trial
court’s order is not appealable under the TUAA, and this appeal must be dismissed for lack
of subject matter jurisdiction.

In response, Smythe argues that the contracts at issue clearly involve interstate commerce,
and consequently the FAA is applicable, including its appealability provisions. Smythe
asserts that the plain terms of Section 16(a)(1)(E) of the FAA states that a trial court’s order
“vacating an award” is appealable, regardless of whether a rehearing is directed. He argues
that, to the extent that the FAA and the TUAA conflict on this issue, the FAA preempts the
TUAA. In the alternative, Smythe argues that, even if the TUAA governs the issue of
appealability, the trial court’s order is still appealable under state law as well. Subsection (3)
of Section 29-5-319(a) of the TUAA permits an appeal from “[a]n order . . . denying
confirmation of an award.” Smythe claims that the trial court’s order was, in effect, a denial
of his request for confirmation of the arbitration award, and so the order is appealable under
subsection (3). Therefore, Smythe argues, under either the FAA or the TUAA, the trial
court’s order is appealable, and this Court has jurisdiction over the appeal.

Applicability of the Federal Act

We begin our analysis by determining whether the FAA is applicable in this case. Section
2 of the FAA provides that “a contract evidencing a transaction involving [interstate]

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commerce5 to settle by arbitration a controversy thereafter arising out of such contract or
transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 9 U.S.C. § 2 (2006). “In enacting §
2 of the federal Act, Congress declared a national policy favoring arbitration . . . .”
Southland Corp. v. Keating, 465 U.S. 1, 10 (1984). The FAA applies to all state and federal
cases in which the contract at issue requiring arbitration involves or affects interstate
commerce. Id. at 10-11; Frizzell Constr. Co. v. Gatlinburg, L.L.C., 9 S.W.3d 79, 83-84
(Tenn. 1999). The United State Supreme Court has explained that the FAA extends to “the
full reach” of the Commerce Clause in the United States Constitution:

We have interpreted the term “involving commerce” in the FAA as the
functional equivalent of the more familiar term “affecting commerce”– words
of art that ordinarily signal the broadest permissible exercise of Congress’
Commerce Clause power. Because the statute provides for the enforcement
of arbitration agreements within the full reach of the Commerce Clause, it is
perfectly clear that the FAA encompasses a wider range of transactions than
those actually “in commerce” – that is, “within the flow of interstate
commerce.”
...
. . . Congress’ Commerce Clause power “may be exercised in individual cases
without showing any specific effect upon interstate commerce” if in the
aggregate the economic activity in question would represent “a general
practice . . . subject to federal control.” Mandeville Island Farms, Inc. v.
American Crystal Sugar Co., 334 U.S. 219, 236, 68 S. Ct. 996, 92 L. Ed. 1328
(1948). Only that general practice need bear on interstate commerce in a
substantial way.

Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56-57 (2003) (per curiam) (some internal
quotations and citations omitted). When interstate commerce is involved, the substantive
provisions of the FAA are to be applied in both federal and state courts. See Frizzell, 9
S.W.3d at 84 (citing Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 684-85 (1996) (citing
Southland Corp., 465 U.S. at 12).

5
The term “commerce,” as defined in 9 U.S.C. § 1, essentially means interstate commerce. See Flanary v.
Carl Gregory Dodge of Johnson City, LLC, No. E2004-00620-COA-R3-CV, 2005 WL 1277850, at *3
(Tenn. Ct. App. May 31, 2005).

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Given the broad reach of the FAA and the undisputed facts in the record in this case, there
is little doubt that the contracts in this case involve interstate commerce.6 It is undisputed
that the contracts at issue were signed when Smythe opened the investment accounts at
Morgan Keegan, and that the contracts included the arbitration provisions relied on in this
case. The underlying dispute involves Smythe’s claim that Morgan Keegan engaged in
improper investments. Numerous courts have concluded that securities transactions clearly
involve interstate commerce and that, therefore, the arbitration agreements connected with
such transactions are subject to enforcement under the FAA. See Wattenbarger v. A.G.
Edwards & Sons, Inc., 246 P.3d 961, 968-69 (Idaho 2010) (“[T]he FAA applies to all
substantive issues concerning arbitration because . . . the sale of securities, such as IRAs and
annuities, is a transaction in interstate commerce.”); Smith Barney, Inc. v. Henry, 775 So.
2d 722, 725 (Miss. 2001) (“[W]e easily recognize that the securities industry, on a national
level, meets the minimum threshold of affecting or bearing upon interstate commerce, and
thus initiates the [FAA].”); Park v. Merrill Lynch, Pierce, Fenner & Smith, 582 S.E.2d 375,
378 (N.C. Ct. App. 2003) (“Securities brokerage agreements are contracts ‘involving’
interstate commerce, and therefore, the FAA applies to them.”); see also Cortina v. Citigroup
Global Mkts., Inc., Civil No. 10cv2423–L(RBB), 2011 WL 3654496, at *1 (S.D. Cal. Aug.
19, 2011) (observing that “[t]here is no question the financial industry bears on interstate
commerce in a substantial way”); Rodriguez-Bird v. Santander Sec. Corp., Civil No.
09–2238 (JAF), 2010 WL 2541708, at *2 n.2 (D. Puerto Rico June 17, 2010) (noting that the
FAA applies to a contract to open a securities trading account because it “clearly implicates
interstate commerce”); Prudential Sec., Inc. v. Hornsby, 865 F. Supp. 447, 449 (N.D. Ill.
1994) (stating that “[i]t is axiomatic that the purchase and sale of securities relates to
interstate commerce”).

Moreover, though Morgan Keegan now disputes that the contract involves interstate
commerce, its first appellate brief filed in this cause stated that the FAA applied in this case
“because this matter involves an arbitration proceeding in which the underlying transactions
involved interstate commerce,” and because “[s]ecurities transactions involve interstate
commerce.” See Appellate Brief of Morgan Keegan at p. 15 n.20 (filed Oct. 14, 2010).
Thus, the record is sufficient for us to conclude that the contracts at issue involve interstate
commerce, and that the FAA applies to the enforcement of the arbitration agreements in this
case.

6
In the supplemental briefs filed in this cause, Smythe cites to copies of “[t]he current Morgan Keegan
contracts” that are posted on Morgan Keegan’s website to support his claim that those contracts “recognize
the applicability of the FAA.” As these contracts are not included in the appellate record, we did not
consider them; rather, we rely on other undisputed facts in the record to find that the contracts at issue in this
appeal involve interstate commerce.

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Having determined that the FAA applies overall to these contracts, the issue becomes
whether the FAA (Section 16) or the TUAA (Section 29-5-319) governs whether the trial
court’s order is appealable. Of course, if the application of either the federal statute or the
state statute would lead to the same result, we need not address whether federal law or state
law controls appealability. Therefore, we examine next whether the trial court’s order
vacating the arbitration award and directing a rehearing is appealable under either the TUAA
or the FAA.

Appealability Under the Tennessee Act

As noted above, Smythe argues that this Court has jurisdiction over this appeal pursuant to
subsection (3) of Section 29-5-319(a) of the TUAA. Morgan Keegan counters that the
negative inference from subsection (5) of Section 29-5-319(a) of the TUAA indicates that
the trial court’s order, vacating the arbitration award and directing a rehearing, is not
appealable.

The parties have not cited, nor have we found, any Tennessee caselaw addressing whether
a trial court’s order vacating an arbitration award and directing a rehearing is appealable
pursuant to Section 29-5-319(a). The issue, then, is one of first impression. When presented
with an issue of first impression, particularly one that involves the interpretation of a uniform
act, it is useful to review decisions in other states. See Parrish v. Marquis, 172 S.W.3d 526,
530 (Tenn. 2005). Decisions from states that, like Tennessee, have adopted the Uniform
Arbitration Act, are persuasive because the TUAA specifically states that it “shall be so
construed as to effectuate its general purpose to make uniform the law of those states which
enact it.” T.C.A. § 29-5-320 (2000).

Subsection (3) of Tennessee Code Annotated § 29-5-319(a)

To support the argument that this Court has jurisdiction to hear this appeal under subsection
(3) of Section 29-5-319(a) of the TUAA, Smythe relies on the reasoning employed by the
Utah appellate court in Hicks v. UBS Financial Services, Inc., 226 P.3d 762 (Utah Ct. App.
2010). In Hicks, one party filed a motion with the trial court to confirm the arbitration
award, and the other party filed a motion to vacate the award. These motions were
consolidated and considered together by the trial court. After a hearing, the trial court
entered a single order in which it denied the motion to confirm the award, granted the motion
to vacate the award, and ordered a rehearing. Hicks, 226 P.3d at 766. An appeal was filed
by the party whose motion to confirm was denied. On appeal, the Utah appellate court first
addressed whether it had jurisdiction to hear the appeal, considering the same provisions in
the Uniform Arbitration Act at issue in the instant case. The Hicks court noted that
subsection (3) granted the appellate court authority to adjudicate the denial of the motion to

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confirm, but that subsection (5) appeared to bar appellate jurisdiction over the trial court’s
decision to vacate and direct a new hearing, “the opposite of an allowed appeal of an order
vacating without ordering a rehearing.” Id. at 766-67.

Reviewing decisions under the Uniform Arbitration Act from other jurisdictions, the Hicks
court noted a split of authority as to whether an appellate court has jurisdiction over the
appeal of an order addressing both a motion to confirm and a motion to vacate. Ultimately,
considering Utah precedent and the Utah constitution, the Hicks court concluded that it was
bound by stare decisis to adopt the minority position, namely, that it had jurisdiction to
consider the appeal. Id. at 767-68 (citing Amalgamated Transit Union, Local 382 v. Utah
Transit Auth., 99 P.3d 379 (Utah App. 2004), and Utah Const. art. VIII, § 5). The Hicks
court noted the Utah constitution mandated an appeal as a matter of right “in all cases” from
all final orders and judgments. It reasoned that the trial court’s decision was a final judgment
because, “[b]y granting Hicks’s motion to vacate and denying UBS’s motion to confirm, the
district court resolved all claims before it and was left with nothing further to rule upon.”
Id. at 768. Therefore, the Hicks court held that it had jurisdiction over the appeal.

As noted in Hicks, a minority of jurisdictions have determined that, when a trial court denies
confirmation of an arbitration award, vacates the arbitration award, and orders a rehearing,
the order is final and appealable under Uniform Arbitration Act provisions identical to
Section 29-5-319(a)(3). See Karcher Firestopping v. Meadow Valley Contractors, Inc., 204
P.3d 1262, 1264-66 (Nev. 2009) (surveying other states’ positions on the issue); see also
Nat’l Ave. Bldg. Co. v. Stewart, 910 S.W.2d 334, 341 (Mo. Ct. App. 1995) (accepting
jurisdiction over the appeal when the trial court’s order both denied a motion to confirm the
arbitration award and vacated the trial court’s decision and remanded the case for further
proceedings); Air Shield Remodelers, Inc. v. Biggs, 969 S.W.2d 315, 317 (Mo. Ct. App.
1998) (same). In line with these cases, Smythe urges this Court to find authority under
subsection (3) of Section 29-5-319(a) of the TUAA to hear this appeal.

In the case at bar, the record on appeal reflects that the only request made by Smythe to
confirm the arbitration award was included in his response and memorandum in opposition
to Morgan Keegan’s petition for vacatur. Unlike the appellant in Hicks, Smythe did not file
a motion to confirm the Panel’s arbitration award. Moreover, the order of the trial court
below does not include an express denial of a request for confirmation of the award; the
order states only that the arbitration award “is vacated . . . and the case is remanded to
FINRA for a new hearing.” Under these circumstances, we cannot find that the trial court’s
order is in effect an order “denying confirmation of an [arbitration] award.” T.C.A. § 29-5-
319(a)(3); see Person v. Kindred Healthcare, Inc., No. W2009-01918-COA-R3-CV, 2010
WL 1838014, at *4 (Tenn. Ct. App. May 7, 2010) (holding that, where the appellant filed a
motion to dismiss based on an arbitration agreement, but no party filed a motion to compel

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arbitration, the trial court’s denial of the motion to dismiss cannot be deemed to be an order
“denying an application to compel arbitration” under Section 29-5-319(a)(1)). Therefore, we
find that the caselaw cited by Smythe is inapplicable to the facts in this case.7 Finding no
other authority indicating that subsection (3) applies, we must conclude that this Court was
not granted jurisdiction to hear this appeal pursuant to Section 29-5-319(a)(3) of the TUAA.

Subsection (5) of Tennessee Code Annotated § 29-5-319(a)

Morgan Keegan relies on subsection (5) of Section 29-5-319(a) of the TUAA in arguing that
this Court is not authorized to exercise jurisdiction over an appeal from a trial court’s order
that both vacates an arbitration award and directs a rehearing. In support of its position,
Morgan Keegan cites, inter alia, the Missouri case of Crack Team USA, Inc. v. American
Arbitration Association, 128 S.W.3d 580 (Mo. Ct. App. 2004). In Crack Team, involving
a lower court order similar to the order in the instant case, the Missouri Court of Appeals
interpreted the Missouri counterpart to Section 29-5-319, identical in all pertinent respects.
Like Tennessee’s statute, the Missouri statute authorizes appeals from “[a]n order vacating
an [arbitration] award without directing a rehearing.” Crack Team, 128 S.W.3d at 581
(quoting V.A.M.S. § 435.440.1(5)).

The Missouri appellate court in Crack Team held that an appeal from an order vacating an
arbitration award and directing a rehearing was not authorized under the plain language of
the Missouri statute. The court reasoned that, “[b]y providing for an appeal only from an
order vacating an award without directing a rehearing, Section 435.440.1(5) implicitly bars
appeals from orders that direct a rehearing.” Id. at 583 (citing Maine Dep’t of Transp. v.
Maine State Employees Ass’n, 581 A.2d 813, 815 (Me. 1990)). To hold otherwise, the court
stated, “would render the language ‘without directing a rehearing’ without effect, mere
surplusage. Such a construction would be inconsistent with the rules of statutory
interpretation.” Id. (citation omitted). The Crack Team court observed that this construction
of the statute was consistent with decisions in several other jurisdictions interpreting the
same provision of the Uniform Arbitration Act. Id. (citing Connerton, Ray & Simon v.
Simon, 791 A.2d 86 (D.C. 2002); Carner v. Freedman, 175 So. 2d 70 (Fla. Dist. Ct. App.
1965); Maine Dept. of Transp., 581 A.2d at 815; Kowler Assocs. v. Ross, 544 N.W.2d 800
(Minn. Ct. App. 1996); Neb. Dept. of Health & Hum. Serv’s v. Struss, 623 N.W.2d 308
(Neb. 2001); Stolhandske v. Stern, 14 S.W.3d 810 (Tex. Ct. App. 2000); Prudential Secs.,
Inc. v. Vondergoltz, 14 S.W.3d 329 (Tex. Ct. App. 2000)); see also Boyce v. St. Paul Prop.
& Liab. Ins. Co., 618 A.2d 962, 969 n.4 (Pa. Super. Ct. 1992).

7
We do not address the issue of whether Tennessee would adopt the majority or minority view under the facts
presented in Hicks v. UBS Financial Services, Inc., 226 P.3d 762 (Utah Ct. App. 2010).

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Considering these authorities, we must construe the Tennessee statute. In interpreting the
statute, we apply “well-defined precepts” of statutory interpretation:

Our primary objective is to carry out legislative intent without broadening or
restricting the statute beyond its intended scope. Houghton v. Aramark Educ.
Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing legislative
enactments, we presume that every word in a statute has meaning and purpose
and should be given full effect if the obvious intention of the General
Assembly is not violated by so doing. In re C.K.G., 173 S.W.3d 714, 722
(Tenn. 2005). When a statute is clear, we apply the plain meaning without
complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507
(Tenn. 2004). Our obligation is simply to enforce the written language. Abels
ex rel. Hunt v. Genie Indus., Inc., 202 S.W.3d 99, 102 (Tenn. 2006). When
a statute is ambiguous, however, we may refer to the broader statutory scheme,
the history of the legislation, or other sources to discern its meaning. Colonial
Pipeline[v. Morgan], 263 S.W.3d [827,] 836 [(Tenn. 2008)]. Courts must
presume that a legislative body was aware of its prior enactments and knew the
state of the law at the time it passed the legislation. Owens v. State, 908
S.W.2d 923, 926 (Tenn.1995).

Estate of French v. Stratford House, 333 S.W.3d 546, 554 (Tenn. 2011).

From our review of the language in the Tennessee statute and the caselaw from other
jurisdictions, we are persuaded that subsection (5) of Section 29-5-319(a) of the TUAA must
be construed as in Crack Team and the majority of courts that have considered the issue.8
In our view, the language in the TUAA is plain and unambiguous. We agree with the
reasoning in Crack Team that, by including the phrase “without directing a rehearing” in
subsection (5) to modify “[a]n order vacating an award,” the legislature indicated its intent
to exclude from the list of appealable orders an order that vacates an award and directs a
rehearing.

This interpretation of Section 29-5-319(a)(5) is consistent with the reasons for the well-
established rule that a trial court’s decision to grant a new trial is not a final, appealable
order, as explained in a recent decision by this Court:

It is well-settled that an “order granting a new trial is not a final judgment and
is not appealable as of right.” Evans v. Wilson, 776 S.W.2d 939, 941 (Tenn.

8
Neither party has cited a case that has interpreted the pertinent provision of the Uniform Arbitration Act
differently, nor have we found one.

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 1989) (citing Panzer v. King, 743 S.W.2d 612, 616 (Tenn. 1988)). See also
Davis v. Flynn, No. E1999-00421-COA-R3-CV, 2000 WL 807613, at *1
(Tenn. Ct. App. June 21, 2000). This is because an order granting a new trial
does not end the litigation; rather, it “ensure[s] that further proceedings [will]
follow.” State v. Miller, No. 02C01-9708-CC-00300, 1998 WL 902592, at *3
(Tenn. Crim. App. Dec. 29, 1998); see Blackburn v. CSX Transp., Inc., No.
M2006-01352-COA-R10-CV, 2008 WL 2278497, at *4 (Tenn. Ct. App. May
30, 2008) (recognizing that “an order granting a new trial is not a final order”
and that it is “interlocutory”). This is implicitly recognized in Rule 4 of the
Tennessee Rules of Appellate Procedure, insofar as Rule 4 provides that the
thirty-day time limitation for filing an appeal runs from the date of an “order
denying a new trial or granting or denying any other such [post-judgment]
motion.” Tenn. R. App. P. 4(b) (emphasis added); see also Turner v. Jordan,
957 S.W.2d 815, 817 (Tenn. 1997) (noting that an appeal from a grant of a
new trial must be by permissive interlocutory appeal).

See Cooper v. Tabb, 347 S.W.3d 207, 218 (Tenn. Ct. App. 2010) (footnote omitted). Thus,
although the denial of a motion for a new trial is final and appealable, an order granting a
new trial is not, because such an order essentially ensures that the legal proceedings will
continue. In the same way, if the trial court directs a rehearing of an arbitration claim, the
order ensures that the arbitration proceedings will continue. See Kowler Assocs., 544
N.W.2d at 802 (stating that, when the trial court vacates an arbitration award and directs a
rehearing, “appellate review is premature because the arbitration process has not been
completed”). For all of these reasons, we conclude that an order vacating an arbitration
award and directing a rehearing is not appealable under the TUAA.

Appealability Under the Federal Act

Title 9 U.S.C. § 16(a)(1)(E) of the FAA permits appeals from any order “vacating an award,”
but does not include the proviso “without directing a rehearing.” Smythe cites numerous
federal cases finding that, when a district court enters an order vacating an arbitration award
and remanding for further arbitration proceedings, the order is appealable under Section
16(a)(1)(E) of the FAA. See HCC Aviation Group, Inc. v. Employer Reinsurance Corp.,
243 Fed. Appx. 838, 842 n.5 (5th Cir. 2007); Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d
321, 328 (1st Cir. 2000); Jay Foods, L.L.C. v. Chem. & Allied Prod. Workers Union, 208
F.3d 610, 612-13 (7th Cir. 2000); Virgin Islands Hous. Auth. v. Coastal Gen. Constr. Servs.
Corp., 27 F.3d 911, 913-14 (3d Cir. 1994). One court summarized as follows: “The FAA
does not distinguish between orders vacating arbitration awards without directing a rehearing
and those orders which vacate awards and direct a rehearing of the arbitration dispute; both
are appealable.” Atlantic Aviation, Inc. v. EBM Group, Inc., 11 F.3d 1276, 1280 (5th Cir.

-15-
1994), overruling on other grounds recognized by Action Indus., Inc. v. U.S. Fid. & Guar.
Co., 358 F.3d 337, 341 n.10 (5th Cir. 2004). Another federal appellate court observed:
“Courts of appeals routinely assume, though without discussion, that an order vacating an
arbitrator’s decision but remanding for additional arbitration is appealable under §
16(a)(1)(E), rather than non-appealable under § 16(b).” Perlman v. Swiss Bank Corp.
Comprehensive Disability Prot. Plan, 195 F.3d 975, 980 (7th Cir. 1999).

Morgan Keegan has cited no authority to support a contrary interpretation of Section
16(a)(1)(E) of the FAA.9 In light of the overwhelming weight of authority, we are persuaded
that an order vacating an arbitration award and remanding for a rehearing is appealable under
the FAA.
Choice of Law

Thus, we have determined that the order of the trial court in this case is not appealable under
the TUAA, but is appealable under the FAA. This conclusion compels us to consider
whether the appealability provisions of the TUAA or the FAA are applicable in a Tennessee
court under the facts of this case.10 This raises questions of preemption and whether the issue
of appealability is procedural or substantive.

9
We note that some confusion may have existed with respect to appealability issues under the FAA before
1988; however, many such issues were resolved with the 1988 amendment to the FAA and the addition of
Section 16. See, e.g., Ottley v. Schwartzberg, 819 F.2d 373, 375-76 (2d Cir. 1987); Shearson Loeb Rhoades,
Inc. v. Much, 754 F.2d 773, 775-76 (7th Cir. 1985); but see Pearlman, 195 F.3d at 979-80 (noting that the
1988 amendment “changed the rules for appeals from decisions concerning arbitration”); Jack Ingram
Motors, Inc. v. Ward, 768 So. 2d 362, 365 (Ala. 1999) (opining that Section 16 was enacted in 1988 in
response to a Supreme Court case holding that orders compelling or denying arbitration were not appealable).
Since then, it appears that Section 16(a)(1)(E) has uniformly (or “routinely” without discussion) been
interpreted to provide that a trial court’s order vacating an arbitration award and remanding for a rehearing
is appealable. Some courts qualify this rule, adding that such orders are appealable only if the trial court
remanded the case for a new arbitration, and that the order would not be appealable if the remand were made
only for purposes of obtaining clarification from the arbitration panel. See, e.g., Virgin Islands Hous. Auth.,
27 F.3d 911, 913-14. Because the trial court in the instant case remanded for an entirely new arbitration
proceeding, its order would have been appealable even under this interpretation of Section 16.
10
For a thorough discussion of the interplay between federal law and state law on the arbitration of claims
under the federal Securities Act of 1934 and the enforceability of an agreement to arbitrate, see Anna M.
Vescovo, Securities Law – The States’ Role in Arbitration Legislation: Does It Exist?, 21 Univ. Mem. L.
Rev. 79 (Fall 1990).

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 Volt

The decision of the United States Supreme Court in Volt Information Sciences, Inc. v.
Board of Trustees, 489 U.S. 468 (1988), while not determinative on the issue before us, is
nevertheless instructive and provides necessary background for our analysis. In Volt, the
parties entered into a construction contract that included an arbitration clause. The contract
also specified that the entire agreement, including the arbitration clause, would be governed
by California law.11 See Volt, 489 U.S. at 474-76. After the plaintiff sued the defendant in
California state court, the defendant filed a motion to compel arbitration. The trial court
denied the motion to compel and stayed the arbitration pending the outcome of collateral
litigation pursuant to California Civil Procedure Code Annotated § 1281.2(c). This type of
stay, while authorized under California law, was not authorized by the FAA, 9 U.S.C. §§ 3
and 4.12

On appeal, the plaintiff in Volt argued that the trial court had erred in applying state law to
order the stay, because the contract was governed by the FAA, and the procedures set forth
in the FAA preempted the state law to the contrary. In response, the defendant claimed that

11
The question of whether the choice-of-law provision applied to the arbitration agreement was disputed, but
the debate surrounding that issue is not relevant here.
12
Section 3 provides in part:

If any suit or proceeding be brought in any of the courts of the United States upon any issue
referable to arbitration under an agreement in writing for such arbitration, the court in which
such suit is pending . . . shall on application of one of the parties stay the trial of the action
until such arbitration has been had in accordance with the terms of the agreement . . . .

9 U.S.C. § 3 (emphasis added).

Section 4 provides in part:

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a
written agreement for arbitration may petition any United States district court which, save
for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty
of the subject matter of a suit arising out of the controversy between the parties, for an order
directing that such arbitration proceed in the manner provided for in such agreement. Five
days’ notice in writing of such application shall be served upon the party in default. Service
thereof shall be made in the manner provided by the Federal Rules of Civil Procedure. . .
.

9 U.S.C. § 4 (emphasis added).

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Sections 3 and 4 of the FAA were not applicable in state court, because they were procedural
rules applicable only in federal court and, consequently, could not preempt the California
statute. Id. at 476-77.

In considering the parties’ arguments, the Volt Court first recognized that California law, not
the FAA, governed the case because the parties had agreed to the application of California
law in their contract. Id. at 477. In light of this conclusion, the Volt Court did not address
the defendant’s argument that the procedural provisions of the FAA did not apply in state
court, though it commented in dicta that “the argument is not without some merit.” Id. In
a footnote, the Court explained its comment:

While we have held that the FAA’s “substantive” provisions — §§ 1 and 2 —
are applicable in state as well as federal court, see Southland Corp. v. Keating,
465 U.S. 1, 12, 104 S. Ct. 852, 859, 79 L. Ed.2d 1 (1984), we have never held
that §§ 3 and 4, which by their terms appear to apply only to proceedings in
federal court, see 9 U.S.C. § 3 (referring to proceedings “brought in any of the
courts of the United States”); § 4 (referring to “any United States district
court”), are nonetheless applicable in state court. See Southland Corp. v.
Keating, supra, at 16, n. 10, 104 S. Ct., at 861 n. 10 (expressly reserving the
question whether “§§ 3 and 4 of the Arbitration Act apply to proceedings in
state courts”); see also id., at 29, 104 S. Ct., at 867 (O’CONNOR, J.,
dissenting) (§§ 3 and 4 of the FAA apply only in federal court).

Id. at 477 n.6.

Given that the parties’ contract provided that California law would govern the dispute, the
Volt Court addressed whether the FAA preempted California law. In discussing this issue,
the Court recognized that, in enacting the FAA, Congress did not intend to preempt the entire
field of arbitration. “The FAA contains no express preemptive provision, nor does it reflect
a congressional intent to occupy the entire field of arbitration.” Id. at 477. The Court
observed: “There is no federal policy favoring arbitration under a certain set of procedural
rules; the federal policy is simply to ensure the enforceability, according to their terms, of
private agreements to arbitrate.”13 Id. at 476. It explained, however, that even when
Congress has not preempted an entire area of the law, “state law may nonetheless be
preempted to the extent that it actually conflicts with federal law — that is, to the extent that
it ‘stands as an obstacle to the accomplishment and execution of the full purposes and

13
This observation was made in the course of reaching the conclusion that the intermediate appellate court
did not err in interpreting the contractual choice-of-law provision to mean that the parties intended for
California rules of arbitration to apply to their arbitration agreement. See Volt, 489 U.S. at 476.

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objectives of Congress.’” Id. at 477 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).
Therefore, the question became whether California’s arbitration rule permitting the stay
“would undermine the goals and policies of the FAA.” Id. at 477-78.

To make this determination, the Volt Court capsuled the purpose and objectives of the FAA,
stating that “[t]he FAA was designed ‘to overrule the judiciary’s long-standing refusal to
enforce agreements to arbitrate,’ ” and “to place such agreements ‘upon the same footing as
other contracts.’ ” Id. at 478 (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213,
219-20 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974) (quoting H.R. Rep.
No. 96, 68th Cong., 1st Sess., 1, 2 (1924))). The Court observed: “While Congress was no
doubt aware that the Act would encourage the expeditious resolution of disputes, its passage
‘was motivated, first and foremost, by a congressional desire to enforce agreements into
which parties had entered.’” Id. (quoting Byrd, 470 U.S. at 220). This Congressional
purpose, the Court commented, was recognized in the Court’s prior decisions holding that
the FAA preempts state laws that require a judicial forum for claims that the parties agreed
to resolve by arbitration. Id. (citing cases). It cautioned, however, that these prior decisions
did not mean that the FAA would not permit “the enforcement of agreements to arbitrate
under different rules than those set forth in the Act itself. . . . Arbitration under the Act is a
matter of consent, not coercion, and parties are generally free to structure their arbitration
agreements as they see fit.” Id. at 479. For this reason, the Court concluded that California
law was not preempted by the FAA, finding that enforcement of the contractual choice-of-
law provision was “fully consistent with the goals of the FAA, even if the result is that
arbitration is stayed where the Act would otherwise permit it to go forward.” Id. Thus, Volt
did not address the question presented in this case, namely, whether a state court should apply
federal law or state law to the issue of appealability. The principles relied on in Volt,
however, inform our analysis of that issue.

Procedural versus Substantive

With the Court’s analysis in Volt as background, we consider whether the state appellate
court is to apply the appealability provision of the FAA or the TUAA. As seen below,
resolution of this issue requires us to consider whether the appealability provisions are
substantive or procedural, and whether the appealability provisions of the TUAA are
preempted by the FAA.

Smythe urges this Court to find that, if the FAA applies to an arbitration agreement, it applies
in all respects. Smythe cites numerous Tennessee cases applying the FAA, rather than the
TUAA, to a contract that involves interstate commerce. For example, Smythe cites
Warbington Constr., Inc. v. Franklin Landmark, L.L.C., 66 S.W.3d 853, 856 (Tenn. Ct.
App. 2001); Dale Supply Co. v. York Int’l Corp., No. M2002-01408-COA-R3-CV, 2003

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WL 22309461, at *3 (Tenn. Ct. App. Oct. 9, 2003); Teachout v. Conseco Sec., Inc., No.
M2003-00621-COA-R3-CV, 2004 WL 1877224, at *2 (Tenn. Ct. App. Aug. 20, 2004);
Spann v. Am. Express Travel Related Servs. Co., 224 S.W.3d 698, 709 (Tenn. Ct. App.
2006). Smythe urges this Court to find that it has subject matter jurisdiction over this appeal
under the FAA, without regard to whether the statutory provisions at issue are “substantive”
or “procedural,” citing cases from other jurisdictions that have adopted this view.

In response, Morgan Keegan argues that we must differentiate between substantive and
procedural statutory provisions, because the procedural parts of the FAA do not preempt the
corresponding provisions of the TUAA, relying on the principles articulated by the Supreme
Court in Volt, and citing cases from other jurisdictions to that effect. Morgan Keegan
maintains that the Tennessee cases cited by Smythe are inapposite because all involve
substantive provisions of the FAA, the TUAA, or both. To rebut, Smythe argues that
Morgan Keegan’s position is undermined by this Court’s decision in Spell v. LaBelle, No.
W2003-00821-COA-R3-CV, 2004 WL 892534 (Tenn. Ct. App. Apr. 22, 2004). It
acknowledges a split of authority in cases from other jurisdictions, and argues that Spell
shows that Tennessee courts apply all provisions of the FAA to a contract that involves
interstate commerce, including the appealability provisions in Section 16.

We examine the implications of prior Tennessee caselaw, considering first the Spell v.
LaBelle decision cited by Smythe. In Spell, the plaintiff and the defendant entered into a
contract that included an arbitration clause. Spell, 2004 WL 892534, at *1. The arbitration
clause specified that any arbitration would take place in Chicago, Illinois. The plaintiff sued
the defendant in Tennessee state court for breach of the contract, and the defendant filed a
motion to dismiss based on the arbitration clause. Id. The Tennessee trial court entered an
order staying the litigation and compelling arbitration, but the trial court also, sua sponte,
reformed the contract to require the arbitration to take place in Memphis, Tennessee, rather
than Chicago, Illinois. Id. The defendant appealed to this Court, and the plaintiff argued that
the Tennessee appellate court did not have subject matter jurisdiction to hear an appeal of an
order compelling arbitration, citing Section 16 of the FAA. Id. at *2.

The appellate court in Spell first found that the contract at issue involved interstate
commerce, and so was governed by the FAA. Id. It recognized that the primary purpose of
the FAA is to make certain “that private agreements to arbitrate are enforced according to
their terms.” Id. at *3 (citing Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52,
53-54 (1995)). The court noted that Section 16 of the FAA is a “provision governing appeals
of orders concerning arbitration,” and that it “endeavor[s] to promote appeals from orders
barring arbitration and limit appeals from orders directing arbitration.” Id. at *2 (quoting
Filanto, S.P.A. v. Chilewich Int’l Corp., 984 F.2d 58, 60 (2d Cir. 1993) (citation omitted)).
The appellate court acknowledged that the trial court’s order was, on its face, an order

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compelling arbitration, not ordinarily appealable under Section 16. It concluded, however,
that the effect of the trial court’s order was to deny the parties their agreed-upon arbitration
by dictating a new forum for the arbitration. Denying an appeal in this situation for lack of
appellate jurisdiction, the court held, would thwart the purposes of Section 16 and of the
FAA as a whole, and would “not ensure the ‘speed, simplicity, and economy associated with
arbitration.’ ” Id. at *3 (quoting D AVID D. S IEGEL, P RACTICE C OMMENTARY: A PPEALS FROM
A RBITRABILITY D ETERMINATIONS, 9 U.S.C. § 16, at 532 (West Supp. 1997)). For these
reasons, the appellate court held that the trial court’s order was appealable under the FAA,
limiting its holding to “the unique situation where the trial court orders arbitration but, sua
sponte, reforms the parties’ choice of law and forum selection clauses.” Id.

As noted by Smythe, the Spell Court applied the appealability provisions in Section 16 of the
FAA to an appeal in a Tennessee court. However, Spell explicitly limited its holding to the
“unique” factual situation presented in that case. There is no indication that the appellate
court in Spell considered the issue of preemption, or whether the result would have been
different under the TUAA. Indeed, there is not even a mention of the TUAA in Spell, or any
indication that the result under the TUAA would be different. For these reasons, we find that
the decision in Spell is not controlling on the issue before us. See also Thompson v.
Terminix Int’l Co., No. M2005-02708-COA-R3-CV, 2006 WL 2380598, *3 (Tenn. Ct. App.
Aug. 16, 2006) (concluding that the order compelling arbitration and staying the action is not
appealable under either the FAA or the TUAA).

The other Tennessee cases cited by Smythe involve provisions of the FAA that are clearly
substantive, not procedural, and none involve inconsistencies between the procedural
provisions of the FAA and the TUAA. See Warbington Constr., 66 S.W.3d at 856 (applying
9 U.S.C. § 10(a) in determining whether an arbitration award should be vacated); see also
Spann, 224 S.W.3d at 709-11; Dale Supply Co., 2003 WL 22309461, at *3. Therefore, these
Tennessee cases are not illuminating on the issue presented in this appeal. Consequently, we
find no binding Tennessee caselaw on the issue of whether to apply the appealability
provisions of the FAA or the TUAA in state court, in a situation in which the result would
differ depending on which law applied.

Thus, we are faced with another issue of first impression. As we have stated above, when
presented with an issue of first impression, particularly one that involves the interpretation
of a uniform act, it is useful to review decisions in other states. See Parrish, 172 S.W.3d at
530. As note above, there appears to be a split of authority on the issue.

A minority of jurisdictions have held that, where interstate commerce is involved, the FAA
governs all aspects of the case, even the appealability provisions of Section 16. See Pre-Paid
Legal Servs. Inc. v. Anderson, 918 So. 2d 634, 634 (Miss. 2005); Carpenter v. Brooks, 534

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S.E.2d 641, 645 (N.C. Ct. App. 2000); Dakota Wesleyan Univ. v. HPG Int’l, Inc., 560
N.W.2d 921, 922-23 (S.D. 1997). These cases applied the appealability provision of the
FAA with no discussion of the corresponding state law. Notably, however, a Missouri court
explicitly applied Section 16 of the FAA instead of the corresponding state law provision,
reasoning that it could not apply a state substantive or procedural law that was “in
derogation” of the FAA. VCW, Inc. v. Mut. Risk Mgmt. Ltd., 46 S.W.3d 118, 121-22 (Mo.
Ct. App. 2001); see Getz Recycling, Inc. v. Watts, 71 S.W.3d 224, 228 n.1 (Mo. Ct. App.
2002) (following VCW).

On the other hand, the majority of jurisdictions that have considered the issue have held that
the state’s law on appealability of an arbitration order is procedural, and that state procedural
laws apply in state court unless they are preempted by the FAA — “that is, to the extent that
[they] ‘stand[] as an obstacle to the accomplishment and execution of the full purposes and
objectives of Congress.’” Volt, 489 U.S. at 477 (quoting Hines, 312 U.S. at 67); see So. Cal.
Edison Co. v. Peabody W. Coal Co., 977 P.2d 769, 774-75 (Ariz. 1999) (en banc, applying
Arizona law on appealability, because the purposes of the FAA were not defeated thereby);
Am. Gen. Fin. Servs. v. Vereen, 639 S.E.2d 598, 601 (Ga. Ct. App. 2006) (applying Georgia
law on appealability because it does not undermine the purposes and objectives of the
FAA);14 Saavedra v. Dealmaker Devs., LLC, 8 So. 3d 758 (La. Ct. App. 2009) (finding that
Louisiana law on appealability did not undermine the purposes of the FAA, stating that “state
courts are . . . free to follow their own procedural rules regarding the timing of appeals unless
those rules undermine the goals and principles of the FAA”); Wells v. Chevy Chase Bank,
F.S.B., 768 A.2d 620, 629 (Md. Ct. App. 2001) (holding that Maryland law on appealability
was not preempted because it does not undermine the goals of the FAA, noting that most
courts reach this conclusion); Weston Sec. Corp. v. Aykanian, 703 N.E.2d 1185, 1189
(Mass. Ct. App. 1998) (finding that FAA does not preempt Massachusetts law on
appealability because it does not stand as an obstacle to the accomplishment and execution
of the full purposes of Congress in the FAA); Kremer v. Rural Comty. Ins. Co., 788 N.W.2d
538, 545-46 (Neb. 2010) (finding the trial court order to be appealable under Nebraska law,
because allowing the appeal did not undermine the FAA’s goals and objectives); Batton v.
Green, 801 S.W.2d 923, 928 (Tex. Ct. App. 1990) (applying Texas law on appealability
because those procedural rules were not “anti-arbitration”); see also Cronus Invs., Inc. v.
Concierge Servs., 107 P.3d 217, 226 (Cal. 2005) (holding that California procedural rules
applied because “the United States Supreme Court does not read the FAA’s procedural
provisions to apply to state court proceedings”); Atlantic Painting & Contracting Inc. v.
Nashville Bridge Co., 670 S.W.2d 841, 846 (Ky. 1984) (holding that “[t]he procedural
aspects [of the FAA] are confined to federal cases;” decided before the enactment of Section

14
Although certiorari was granted in this case, our research reveals no subsequent history in these
proceedings.

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16); Xaphes v. Mowry, 478 A.2d 299, 301 (Me. 1984) (determining that the question of
appealability was a matter of state law; decided before the enactment of Section 16);
Moscatiello v. Hilliard, 939 A.2d 325, 329 (Pa. 2007) (applying Pennsylvania 30-day time
limit for review of arbitration awards, holding that “[t]he FAA does not preempt the
procedural rules governing arbitration in state courts”). In addition, there is one Missouri
case in accord with the majority view, decided after the VCW case. See Whitney v. Alltel
Commc’ns, Inc., 173 S.W.3d 300, 306-07 (Mo. Ct. App. 2005) (applying Missouri law to
the appealability issue, concluding that the court “may apply state procedural rules so long
as they do not defeat any of the substantive rights granted by Congress in the [FAA]”).

After careful review of all of these cases, we are persuaded that the analysis followed by the
majority of courts is the correct analytical framework for this issue. Thus, we find that the
TUAA provision regarding appealability is a procedural provision that is applicable to
arbitration cases in state courts. This holding, distinguishing between the substantive and
procedural provisions of the TUAA, is in line with the Supreme Court’s analysis in Volt. In
the Volt decision, the Court indicated that Congress did not intend to preempt the entire field
of arbitration, and that “[t]here is no federal policy favoring arbitration under a certain set
of procedural rules; the federal policy is simply to ensure the enforceability, according to
their terms, of private agreements to arbitrate.”15 Volt, 489 U.S. at 477. Furthermore, in Volt
and in other cases, the Court has specifically refrained from holding that Sections 3 and 4 of
the FAA apply to proceedings in state courts.16 Southland, 465 U.S. at 16 n.10; Volt, 489
U.S. at 477 n.6; see also Cronus, 107 P.3d at 226 (relying on Southland and Volt in
concluding that the procedural provisions of the FAA do not apply to state court
proceedings). Consistent with Volt, this Court has recognized in dicta that Section 16 of the
FAA “establishes procedures for interlocutory appeals of federal court orders,” and that the
TUAA was intended to “provide procedures for the enforcement of arbitration agreements
in state court.” Hubert v. Turnberry Homes, LLC, No. M2005-00955-COA-R3-CV, 2006
WL 2843449, at *3-4 (Tenn. Ct. App. Oct. 4, 2006) (emphasis added); see MBNA Am., N.A.

15
Although this Court’s decision in Spell v. LaBelle did not cite the Volt case, the analysis in Spell is fully
consistent with Volt. Specifically, the Spell Court found that it had jurisdiction to hear the appeal so as to
not frustrate the central purpose of the FAA, i.e., “to ensure ‘that private agreements to arbitrate are enforced
according to their terms.’ ” Spell, 2004 WL 892534, at *3 (quoting Mastrobuono v. Shearson Lehman
Hutton, Inc., 514 U.S. 52, 53-54 (1995)).
16
We are mindful that Sections 3 and 4 of the FAA contain language specifically indicating that those
provisions apply only in federal district court, while Section 16 of the FAA does not contain such limiting
language. See Cronus, 107 P.3d at 224-25 (discussing the limiting language in Sections 3 and 4).
Nevertheless, as we have discussed, the majority of courts that have addressed the issue have found that
Section 16, as a “procedural” provision of the FAA, is not applicable in state court proceedings where the
state arbitration statute contains its own appealability provision.

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v. Darocha, No. E2006-02000-COA-R3-CV, 2007 WL 2323399, at *3-4 (Tenn. Ct. App.
Aug. 15, 2007) (relying on Section 29-5-313 of the TUAA as dictating the vacatur process,
though the contract expressly called for the application of the FAA).

Considering all of these authorities, we adopt the majority view and hold specifically that
Section 29-5-319 of the TUAA is procedural, and that it applies in Tennessee court
proceedings unless preempted. This holding makes it necessary for us to consider whether
the FAA preempts Section 29-5-319 of the TUAA.

Preemption

Under Volt, a state procedural law is preempted by the FAA only if the state statute “‘stands
as an obstacle to the accomplishment and execution of the full purposes and objectives of
Congress.’” Volt, 489 U.S. at 477 (quoting Hines, 312 U.S. at 67). We look, then, to cases
that tell us the purposes and objective of Congress in enacting the FAA. Volt described the
purpose of the FAA as “‘to overrule the judiciary’s long-standing refusal to enforce
agreements to arbitrate,’” and “to place such agreements ‘upon the same footing as other
contracts.’”17 Volt, at 478 (quoting Dean Witter Reynolds, 470 U.S. at 219-20; Scherk, 417
U.S. at 511 (quoting H.R. Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924)). As noted in Spell,
the United States Supreme Court has also stated that the FAA was enacted “to ensure ‘that
private agreements to arbitrate are enforced according to their terms.’” Mastrobuono, 514
U.S. at 53-54, cited in Spell, 2004 WL 892534, at *3. “The broad purpose of section 16 [of
the FAA] was to implement Congress’ ‘deliberate determination that appeal rules should
reflect a strong policy favoring arbitration,’ ” and to “prevent parties from frustrating
arbitration through lengthy preliminary appeals.” Stedor Enters. Ltd. v. Armtex, Inc., 947
F.2d 727, 730-31 (4th Cir. 1991). Thus, Section 16 of the FAA “endeavor[s] to promote
appeals from orders barring arbitration and limit appeals from orders directing arbitration.”
Spell, 2004 WL 892543, at *2-3 (citing Filanto, S.P.A., 984 F.2d at 60 (citation omitted)).

17
English courts traditionally disfavored arbitration agreements and refused to enforce them. Early American
courts adopted this hostility toward arbitration agreements, and the unwillingness to enforce arbitration
agreements became firmly embedded into our common law. Scherk v. Alberto-Culver Co., 417 U.S. 506,
510-11 (1974). “The courts . . . felt that the precedent was too strongly fixed to be overturned without
legislative enactment.” Southland Corp., 465 U.S. at 13 (quoting H.R. Rep. No. 96, 67 Cong., 4th Sess. 6
(1923)). Consistent with this nationwide attitude, “Tennessee’s judicial system has not always looked with
favor on private arbitration even though arbitration has existed in various forms since the Roman era.”
Hubert v. Turnberry Homes, LLC, No. M2005-00955-COA-R3-CV, 2006 WL 2843449, at *4 (Tenn. Ct.
App. Oct. 4, 2006). Thus, in 1983, the Tennessee legislature enacted the TUAA “to provide procedures for
the enforcement of arbitration agreements in state court.” Id.

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Smythe has not demonstrated that Section 29-5-319(a)(5) of the TUAA undermines the
purposes of the FAA, or that it stands as an obstacle to the accomplishment of the objectives
of the FAA, as the purposes and objectives are articulated above. We acknowledge that the
TUAA does not permit appeal of an order vacating an arbitration award and requiring a
rehearing, and thereby forces a second arbitration. This result, however, does not appear to
obstruct the above-stated purpose of the FAA, that is, to reverse judicial hostility to
arbitration agreements, and to mandate that all arbitration agreements involving interstate
commerce be enforced as written.

Smythe notes that this Court in Spell also considered the overall purpose of arbitration, “to
save the parties time, money and effort by substituting for the litigation process the
advantages of speed, simplicity, and economy associated with arbitration.” Spell, 2004 WL
892534, at *3 (quoting S IEGEL, P RACTICE C OMMENTARY: A PPEALS FROM A RBITRABILITY
D ETERMINATIONS, 9 U.S.C. § 16, at 352 (West Supp. 1997)). Smythe argues forcefully that
requiring him to proceed to a second arbitration before determining the propriety of the trial
court’s vacatur does not ensure the speed, simplicity, and economy associated with
arbitration.

We considered this argument at some length. Certainly, if the trial court’s vacatur order is
erroneous, Smythe will have been forced to endure unnecessarily the expense, delay, and
emotional toll of a second large and complex arbitration proceeding. This is no small matter.
However, despite any misgivings we may have about the trial court’s order of vacatur,18 we
must consider the issue of preemption and this Court’s appellate jurisdiction without regard
to the merits of the appeal. While a straight application of TUAA Section 29-5-319 has the
potential to hinder “speed, simplicity, and economy” where the underlying trial court decision
turns out to be erroneous, it also ensures that the arbitration process will be carried out to
finality before resort to the courts is permitted and minimizes the involvement of courts in
the arbitration process.19 See Volt, 489 U.S. at 477 (“There is no federal policy favoring
arbitration under a certain set of procedural rules; the federal policy is simply to ensure the
enforceability, according to their terms, of private agreements to arbitrate.”); Stedor Enters.,
947 F.2d at 728 (noting that the FAA reflects “a strong congressional policy against appeals
which delay the onset of arbitration”); Filanto, 984 F.2d at 60 (Congress, in enacting
Section 16, endeavored to promote appeals from orders barring arbitration and to limit

18
We expressly do not address the merits of the issues raised in this appeal.
19
This is in contrast to Spell, in which the trial court’s sua sponte decision to reform the choice of law and
forum selection clauses of the parties’ arbitration agreement was inherently contrary to the central purpose
of the FAA, to enforce private arbitration agreements according to their terms. Spell, 2004 WL 892534, at
*3.

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appeals from orders directing arbitration). Thus, Section 29-5-319 does not obstruct the
objectives of “speed, simplicity, and economy associated with arbitration.”

Accordingly, we find that Section 29-5-319 of the TUAA is not preempted by the FAA.
Therefore, the TUAA applies to the issue of whether the trial court’s order is appealable.
Under Section 29-5-319 of the TUAA, this Court is without jurisdiction to hear Smythe’s
appeal.

Rule 2 of the Tennessee Rules of Appellate Procedure

Finally, Smythe argues that, irrespective of our interpretation of Section 29-5-319(a) of the
TUAA, this Court should find “good cause” pursuant to Rule 2 of the Tennessee Rules of
Appellate Procedure to suspend the rules of finality and exercise jurisdiction over this appeal.
Smythe cites cases in other jurisdictions in which the appellate court found that, despite a
lack of statutory authority for an appeal of an order vacating an arbitration award and
remanding for a rehearing, the appellate court should nevertheless exercise its discretion to
assert jurisdiction over the appeal in the interest of justice and judicial economy. See Metro.
Airports Comm’n v. Metro. Airports Police Fed’n, 443 N.W.2d 519, 523 (Minn. 1989)
(holding that, although an order vacating the arbitration award and remanding the case for
a rehearing is not appealable under the state’s version of the uniform arbitration act, the
appellate court exercised its “constitutionally independent appellate authority to review
whatever case it deems necessary in the interests of justice”); State v. Davidson & Jones
Constr. Co., 323 S.E.2d 466, 469 (N.C. Ct. App. 1984) (holding that, even though the order
vacating the arbitration award and granting a rehearing was not a final order, the appellate
court nevertheless exercised its discretion to entertain the appeal under an appellate rule
governing certiorari review).

The Court is cognizant of the difficulty to the parties of again arbitrating these long-standing
disputes. However, this Court has held that our authority under Rule 2 to suspend the Rules
of Appellate Procedure should be exercised very sparingly, only in extraordinary
circumstances. We must conclude that the circumstances in this case do not warrant the
exercise of our discretion to suspend the requirements of the Rules of Appellate Procedure,
in direct contravention of the clear legislative intent behind Section 29-5-319(a)(5) of the
TUAA.

C ONCLUSION

In sum, we conclude that, although the FAA applies to the substantive issues in this case, the
TUAA governs the appealability of the trial court’s order. Under the TUAA, Section 29-5-
319(a)(3) does not authorize this appeal, because there was no motion to confirm, and the

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trial court did not address confirmation of the arbitration award in its order. The applicable
provision of the TUAA is Section 29-5-319(a)(5), which indicates that an order vacating an
arbitration award and directing a rehearing is not appealable. We find that this provision of
the TUAA is procedural and is not preempted by federal law. Finally, we decline to exercise
our discretion under Rule 2 to suspend the Rules of Appellate Procedure or to otherwise seek
to avoid the effect of the plain language of Section 29-5-319(a). Therefore, because an
appeal from the trial court’s decision in this cause is not authorized under Section 29-5-
319(a) of the TUAA or any other authority, we must dismiss this appeal for lack of subject
matter jurisdiction.

The appeal is dismissed for lack of subject matter jurisdiction. Costs on appeal are taxed to
Appellants William Hamilton Smythe, III, Individually; William H. Smythe, IV, Trust
U/A/DTD 12/29/87; William H. Smythe, III, Trustee; and Smythe Children’s Trust #2 FBO
Katherine S. Thinnes U/A/DTD 12/29/87, and their surety, for which execution may issue,
if necessary.

_________________________________
HOLLY M. KIRBY, JUDGE

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