Case: 12-20652 Document: 00512435784 Page: 1 Date Filed: 11/08/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 8, 2013
No. 12-20652
Lyle W. Cayce
Clerk
RAINIER DSC 1, L.L.C.; RAINIER DSC 2, L.L.C.; RAINIER DSC 3, L.L.C.;
RAINIER DSC 4, L.L.C.; RAINIER DSC 5, L.L.C.; RAINIER DSC 6, L.L.C.;
RAINIER DSC 7, L.L.C.; RAINIER DSC 8, L.L.C.; RAINIER DSC 9, L.L.C.;
RAINIER DSC 11, L.L.C.; RAINIER DSC 13, L.L.C.; RAINIER DSC 14,
L.L.C.; RAINIER DSC 15, L.L.C.; RAINIER DSC 16, L.L.C.; RAINIER DSC
18, L.L.C.,
Plaintiffs–Appellants
v.
RAINIER CAPITAL MANAGEMENT, L.P.; RAINIER DSC ACQUISITION,
L.L.C.; RAINIER PROPERTIES, L.P.; RAINIER PROPERTIES G.P., L.L.C.;
FOUNDATION SURGERY AFFILIATES, L.L.C.; FOUNDATION SURGERY
AFFILIATE OF SOUTHWEST HOUSTON, L.L.P.; FOUNDATION
SURGERY AFFILIATE OF SOUTHWEST HOUSTON, L.L.C.; WAYNE
ALANI, MD; EDDIE MATSE, MD; CHARLOTTE ALEXANDER, MD;
THOMAS PARR, MD; CARL HICKS, MD; VINCENT PHAN, MD;
GREGORY HOOVER, MD; TIMOTHY SITTER, MD; LIN JONES, MD;
EDWIN TAEGEL, MD; STAN JONES, MD; RAY VALDEZ, MD; EUGENE
LOU, MD; JAMES ALBRIGHT, MD; MARVIN LERNER, MD; EUGENE
ALFORD, MD; JAMES MARTIN, MD; PAUL BRINDLEY, MD; J. CARY
MOOREHEAD, MD; GARY CARD, MD; BRADFORD PATT, MD; NEWTON
DUNCAN, MD; STANFORD SHOSS, MD; JOSEPH EDMONDS, MD; JOHN
YOO, MD; JOHN JONES, MD; MARVIN CHANG, MD; JAMES LAI, MD;
ROBERT SICKLER, MD,
Defendants–Appellees
Appeal from the United States District Court
for the Southern District of Texas
Case: 12-20652 Document: 00512435784 Page: 2 Date Filed: 11/08/2013
No. 12-20652
Before SMITH, PRADO, and ELROD, Circuit Judges.
PER CURIAM:*
This case arises out of the district court’s dismissal of several defendants
before ordering the remaining defendants to arbitrate Plaintiffs’ claims. While
this Court exercises interlocutory jurisdiction over “an order refusing a stay,”
because no such order has been issued we dismiss for lack of jurisdiction.
I. FACTUAL BACKGROUND
The property that forms the basis of this dispute—a surgical and
imaging facility in Houston—was purchased by Foundation Surgery Affiliate
of Southwest Houston, LLP (“Southwest”) on April 18, 2000. In the second
quarter of 2007, Southwest began marketing the property for sale. On October
17, 2007, Southwest converted from a Texas limited liability partnership, an
LLP, to a Texas limited liability company, an LLC. The twenty-nine individual
defendant doctors practiced as members of Southwest.
On February 21, 2008, Southwest LLP and Rainier Capital Acquisitions,
LP 1 entered into a Purchase and Sale Agreement for the property. On March
24, 2008, the parties executed an Amendment to the Purchase and Sale
Agreement substituting Southwest LLC as the proper selling party in light of
the conversion. On May 20, 2008, Rainier Capital Acquisitions, LP assigned
all its interest in the Purchase Agreement and Sale Agreement to Rainier DSC
Acquisitions, LLC (“Rainier DSC”).
Rainier DSC intended to sell tenant-in-common interests in the
property, which would allow multiple investors to invest a percentage of money
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
1 Rainier Capital Acquisitions, LP is not a named defendant.
2
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to own a partial interest in the property. Rainier DSC marketed the tenant-
in-common interests through a Private Placement Memorandum (the “PPM”).
The PPM was used as the marketing document for potential investors. It
outlined the parties to the transaction, the risks of the investment, and
described the property. The PPM also identified the seller of the building and
the sole tenant of the property as the same entity—Southwest. The PPM
explained that Rainier Properties, L.P. (“Rainier Properties”) would manage
the property. The twenty-nine physician members of sole tenant Southwest
provided medical services at the property. Notably, the PPM did not include
any reference to Rainier Property Management GP, LLC (“Rainier GP”)—the
only named Rainier defendant the court did not order to arbitration.
On May 23, 2008, Rainier DSC purchased the property from Southwest.
Rainier DSC also entered into a Lease Agreement with Southwest for a term
of fifteen years. Additionally, Rainier DSC entered into a property
management agreement with Rainier Properties to manage the property. The
Lease Agreement did not contain an arbitration provision.
On May 23, 2008, Rainier DSC sold fractional tenant-in-common
interests to investor entities Rainier DSC 1, LLC, Rainier DSC 2, LLC, Rainier
DSC 3, LLC, Rainier DSC 4, LLC, Rainier DSC 5, LLC, Rainier DSC 8, LLC,
Rainier DSC 9, LLC, Rainier DSC 13, LLC, 2 Rainier DSC 14, LLC, and Rainier
DSC 15, LLC. As part of the investment transactions, each investor signed (1)
a Purchase Agreement with Rainier DSC for the purchase of its tenant-in-
common interest in the property, and (2) an Assignment whereby each tenant-
in-common agreed to be bound by the Tenants in Common Agreement and the
Management Agreement. On June 20, 2008, Rainier DSC sold additional
2Rainier DSC 11, LLC, is listed as a plaintiff but is neither included in the chronology
of events provided by the parties nor listed specifically in the text of Plaintiffs’ brief.
3
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tenant-in-common interests to investor entities Rainier DSC 6, LLC, Rainier
DSC 7, LLC, Rainier DSC 16, LLC, and Rainier DSC 18, LLC, (collectively,
with the above Rainier investors, “the Plaintiffs”). The Tenants in Common
Agreement, the Property Management Agreement, the Purchase Agreement,
and the Assignment and Assumption Agreements that Rainier DSC, Rainier
Capital Management, LP, and Rainier Properties signed contained arbitration
agreements. Rainier GP did not have any written agreement with the
Plaintiffs.
Southwest, the tenant, paid rents due under the lease between June
2008 and October 2010. In November 2010, Southwest began making partial
rent payments. Later, it stopped paying rent and vacated the property.
Defendant–Appellee Foundation Surgery Affiliates, LLC 3 (“FSA”) was
not a party to the real estate transactions. There was no contract between the
Plaintiffs and FSA.
II. PROCEDURAL BACKGROUND
In May 2012, the Plaintiffs sued the delinquent tenant, Southwest,
numerous Rainier entities, the twenty-nine individual doctors that are the
members of Southwest, and FSA in state court under several different theories
of liability.
Plaintiffs’ claim against the Rainier defendants is that they defrauded
the Plaintiffs in connection with the issuance of the “tenant-in-common”
shares. The claims stem from the fact that the Rainier defendants provided
Plaintiffs with the PPM.
3 A different, but similarly named entity is referenced a few time throughout the
record. However, it seems that Foundation Surgery Affiliate, Inc., was not only not a party,
but that it was no longer an entity when the building was sold in 2008. It had become
Foundation HealthCare Affiliates, LLC. HealthCare owns all of Foundation Surgery
Affiliates, LLC, and it in turn owns all of Foundation Surgery Holdings, LLC.
4
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The arbitration agreements the Plaintiffs seek to enforce are in the PPM
in the documents between only Rainier and the Plaintiffs. Plaintiffs do not
argue that anyone other than the Rainier defendants had agreements to
arbitrate.
The case was removed to the district court on June 15, 2012. On July
13, 2012, the district court set a status conference date for later in the month.
On July 17, 2012, the four Rainier defendants 4 filed an Opposed Motion to
Compel Arbitration. Significantly, they did not request or otherwise mention a
stay in their motion.
On July 23, 2012, the scheduled status conference took place. The
district court spoke with the parties for approximately three hours. The court
inquired into the basis for the Plaintiffs’ claims against FSA. The court elicited
that the thrust of the Plaintiffs’ claims against FSA and the individual doctors
came from a sentence from the PPM that stated “[t]he partners of Tenant
include approximately twenty-nine physicians and Foundation Surgery
Affiliates.” Southwest, as the tenant, was the only defendant party on the
Lease. The Plaintiffs acknowledged before the district court that they had no
direct claims against FSA. Instead, the claim’s basis was an alter ego theory.
The district court interlocutorily dismissed FSA 5 after Plaintiffs’ counsel
conceded that FSA was not on the lease and there was no other agreement
between the Plaintiffs and FSA. The only claims against Rainier GP were for
alter ego and piercing the corporate veil. There was no direct cause of action
4 Rainier Capital Management, LP, Rainier DSC, Rainier Properties, and Rainier GP.
5 The district court interlocutorily dismissed Southwest as well. However, later, when
the district court issued an order dismissing several parties with prejudice, it did not include
Southwest—only FSA, Rainier Capital Manager, LLC, and Rainier GP.
5
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against Rainier GP. Further, Rainier GP was not a signatory to an arbitration
agreement with the Plaintiffs. The court’s order also directed the Rainier
defendants to submit to the court a written primer on the identity and role of
the defendants in the case.
On July 31, the Plaintiffs filed their response to Rainier’s originally
opposed Motion to Compel Arbitration. Plaintiffs stated that if the Rainier
defendants would all agree to submit to arbitration, Plaintiffs would stop
trying to avoid arbitration. The Plaintiffs’ response also stated that the FAA
required a stay of proceedings. Three weeks later, the court held another
scheduled status conference. After the district court further questioned
Plaintiffs’ counsel about claims against particular defendants, the court
ordered Rainier Capital Management, LP, Rainier DSC, and Rainier
Properties to arbitration. The district court dismissed with prejudice the claim
against the fourth Rainier defendant, Rainier GP. 6 The court also dismissed
with prejudice the Plaintiffs’ claim against FSA.
III. DISCUSSION
As the appellants, the Plaintiffs bear the burden of establishing our
appellate jurisdiction. Martin v. Halliburton, 618 F.3d 476, 481 (5th Cir. 2010).
Generally, courts of appeals have jurisdiction over only “final decisions”
of the district court. 28 U.S.C. § 1291. However, there are several exceptions
that permit immediate appeal of an adverse determination. One exception is
laid out in § 16(a) of the FAA, which provides that an appeal may be taken
6 It also purported to dismiss Rainier Capital Manager, LLC because it was only the
manager of DSC Acquisitions. The court said that it was “going to respect its corporate form;
and it’s not responsible for what it manages” after Plaintiffs’ counsel was unable to articulate
a cause of action against it. Rainier Capital Manager, LLC, however, while mentioned in the
initial pleading, was apparently not a named party. Much confusion arose because of the
name similarity with Rainier Capital Management, LP.
6
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from an “order refusing a stay of any action under section 3 of this title.” 9
U.S.C. § 16(a)(1)(A) (emphasis added). “By that provision’s clear and
unambiguous terms, any litigant who asks for a stay under § 3 is entitled to an
immediate appeal from denial of that motion—regardless of whether the
litigant is in fact eligible for a stay.” Arthur Andersen LLP v. Carlisle, 556 U.S.
624, 627 (2009) (emphasis added).
The triggering event for interlocutory jurisdiction—the issuance of an
order refusing a stay—has not occurred here. It is undisputed that the district
court has not issued an order denying Plaintiffs’ request for a stay. Instead,
Plaintiffs argue that the court’s orders dismissing FSA, Rainier Capital
Manager, LLC, and Rainier GP were “de facto denials” of their request for a
stay. We disagree. Plaintiffs cite no authority for its argument that the district
court constructively denied their request.
Plaintiffs correctly state that the reason orders denying arbitration or a
stay pending arbitration are immediately appealable while orders granting the
same are not is to ensure that “private agreements to arbitrate are enforced
according to their terms.” Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp., 559
U.S. 662, 664 (2010). The district court correctly ordered the Plaintiffs and the
remaining Rainier defendants 7—those parties who had signed agreements to
arbitrate—to arbitration. As to those defendants, the district court has taken
no action other than to require and accept a status update from the parties
regarding their selection of an arbitrator. Thus, the district court has not
undermined the policy of preferring arbitration. The district court, rather than
de facto denying the stay request, has actually de facto granted the request by
7 Rainier DSC, Rainier Capital Management, LP, and Rainier Properties, LP.
7
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not taking any forward action between the parties to the arbitration
agreement.
We note that it is feasible that the district court overlooked the request
because Plaintiffs did not file a motion requesting a stay. Instead, Plaintiffs
requested a stay within their response to Rainier’s Motion to Compel
Arbitration. As discussed above, it is undisputed that Rainier did not move for
or otherwise request a stay in its Motion to Compel Arbitration. Thus, the
district court, in granting Rainier’s Motion to Compel Arbitration, could easily
have assumed it had addressed the only issue before it on those documents.
Further evidence that Plaintiffs’ stay request was not considered, much less
denied, is reflected in the district court’s docket entry. After hearing
arguments August 20, 2012, the district court noted that it had heard
argument on “all pending motions.” Thus, it did not think it had a motion to
stay pending. Regardless, the Plaintiffs have not met their burden of
demonstrating that the district court issued “an order refusing a stay.” 8
IV. CONCLUSION
For the foregoing reasons, we DISMISS for want of jurisdiction.
8 We note that nothing precludes the Plaintiffs from appealing the district court’s
dismissal of FSA, Rainier Capital Manager, LLC, and Rainier GP after a final judgment is
entered. See Fed. R. Civ. P. 54(b); see also Askanase v. Livingwell, Inc., 981 F.2d 807, 810
(5th Cir. 1993) (“When an action involves multiple parties, any decision that adjudicates the
liability of fewer than all of the parties [is] . . . not appealable unless certified by the district
judge under Rule 54(b).”). (citation omitted). The order does not mention Rule 54(b), state
that there is no just reason for delay, or indicate an intent that the order be a final and
immediately appealable judgment.
8