USCA1 Opinion
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
____________________
No. 94-2251
HEWLETT-PACKARD COMPANY, INC.,
Plaintiff, Appellant,
v.
HELGE BERG, ETC., ET AL.
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge] ___________________
____________________
Before
Boudin, Circuit Judge, _____________
Bownes, Senior Circuit Judge, ____________________
and Stahl, Circuit Judge. _____________
____________________
Richard Allan Horning with whom Horning, Janin & Harvey, Kevin P. _____________________ ________________________ ________
Light, Choate, Hall & Stewart and Robert W. Sutis were on brief for _____ _______________________ _______________
appellant.
David A. Burman for appellees. _______________
____________________
August 3, 1995
____________________
BOUDIN, Circuit Judge. Hewlett-Packard appeals from an _____________
order of the district court confirming an arbitration award
rendered in a business dispute with appellees Helge Berg and
Lars Skoog and rejecting Hewlett-Packard's requests for a
stay of the confirmation proceeding or a declaration that it
is entitled to a set-off for the award. The case presents
several difficult legal issues which can be understood only
after a brief description of the facts and prior proceedings.
I. BACKGROUND I. BACKGROUND
In March 1982, Apollo Computer, now owned by Hewlett-
Packard, entered into a two-year distributorship contract
with a Swedish company called Dicoscan Distributed Computer
Scandinavia to sell Hewlett-Packard products in several
Nordic countries. The 1982 contract included an agreement to
submit any dispute under the contract to binding arbitration.
In March 1984, the parties executed a new distributorship
contract, which also contained an arbitration clause.
In the meantime, during 1983 and 1984, Dicoscan
experienced financial problems. In mid-1984, Apollo claimed
that Dicoscan was far behind in its payments. In September,
Apollo terminated the 1984 agreement. The following month,
Dicoscan filed for bankruptcy. The bankruptcy court assigned
to Berg and Skoog, directors and officers of Dicoscan, the
right to bring claims against Apollo based on the contracts.
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Berg and Skoog filed a request for arbitration with the
International Chamber of Commerce Court of Arbitration,
claiming millions of dollars of damages arising out of
Apollo's unilateral termination of the 1984 agreement.
Apollo counterclaimed in the arbitration by asserting that
the Swedish company had failed to pay about $10,000 due on
the 1984 contract and about $207,000 due under the 1982
contract. After a dispute about Berg and Skoog's right to
invoke arbitration, see Apollo Computer, Inc. v. Berg, 886 ___ _____________________ ____
F.2d 469, 473 (1st Cir. 1989), an arbitration proceeding was
begun.
The arbitrators were required by the parties' contracts
to apply Massachusetts law. Ultimately, the arbitrators
awarded around $700,000 plus interest to Berg and Skoog, but
allowed a set-off for the $10,000 that Dicoscan still owed
Apollo under the 1984 contract. To both parties' surprise,
the tribunal held that it was without jurisdiction to decide
Apollo's more substantial claim based on the 1982 contract,
ruling that the 1982 contract was not within the Terms of
Reference issued by the arbitrators at the beginning of the
proceeding.
As a result, Apollo was left with a sizable obligation
to Berg and Skoog on the 1984 contract without a
determination of its claim for more than $207,000 on the 1982
contract. Apollo unilaterally decided to pay the arbitration
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award amount but subtracted the $207,000 plus interest
(together, about $300,000) as a "setoff in recoupment,"
which, it said, is a time-honored common law doctrine
embraced in Massachusetts courts. Apollo also filed a
request with the tribunal for a second arbitration regarding
the 1982 contract. That tribunal has indicated that it will
hear the arbitration.
In January 1993, Apollo (later succeeded as the
plaintiff by Hewlett-Packard) filed the complaint in this
action with the Massachusetts district court. Hewlett-
Packard requested that the district court (1) declare that
Hewlett-Packard was entitled to the $207,000 set-off and that
the arbitration award is fully satisfied, and (2) vacate the
tribunal's award and correct it. Hewlett-Packard later
withdrew its second claim for relief.
Berg and Skoog moved to dismiss the complaint, arguing
that such declaratory relief is unavailable as to foreign
arbitration awards. Later, Berg and Skoog moved for
confirmation of the arbitration award. Hewlett-Packard
opposed confirmation of the award on the ground that, by
failing to include its 1982 set-off, the award was contrary
to public policy. In the alternative, Hewlett-Packard moved
to stay confirmation, pending the outcome of the second
arbitration. Hewlett-Packard also asked the court to compel
arbitration as to its 1982 claim.
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On November 7, 1994, the district judge filed a
memorandum, together with a separate order, disposing of all
of these motions. The court's order compelled arbitration
under the 1982 contract but it confirmed the award previously
made by the tribunal on the 1984 contract. The court said
that it was without power to stay the confirmation
proceeding, as Hewlett-Packard had requested, and that the
request for a set-off was an improper attempt to modify the
tribunal's award.
Apparently ready to enforce the now-confirmed
arbitration award, Berg and Skoog moved the court for entry
of final judgment, and proffered a detailed judgment
specifying the award, interest and attorney's fees. Four
days later, Hewlett-Packard filed its notice of appeal and
thereafter filed a response disputing certain aspects of the
proposed judgment. The district court has not acted on the
motion for entry of final judgment; and no such judgment has
been entered.
II. DISCUSSION II. DISCUSSION
Hewlett-Packard purports to appeal all three of the
district court's adverse actions: the confirmation of the
arbitration award, the refusal to stay that confirmation
proceeding pending the outcome of the second arbitration; and
the rejection of Hewlett-Packard's set-off claim declaration.
Commendably, Hewlett-Packard has alerted us to a possible
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jurisdiction problem, which this court is obliged to
consider. We do so but caution future panels that the
jurisdictional problems have not been briefed in this case.
Nothing in the record in this case purports to be a
"final judgment," set forth in a separate document as
required by Fed. R. Civ. P. 58, disposing of all claims.
Thus, in formal terms there is no basis for appeal of a
"final decision" under 28 U.S.C. 1291, even if the court
actually resolved all of the claims before it. Indeed, as
already noted, the defendants have pending a motion that
requests entry of a "final judgment."
Nevertheless, the November 7 order, insofar as it
confirms the arbitration award, is appealable now because
Congress directed in the statute governing arbitration-
related appeals that such an "order" confirming an award
should be immediately appealable. 9 U.S.C. 16(a)(1)(D).
The reason is a pro-arbitration policy designed to expedite
confirmation of arbitration awards. This is clear from
precedent and scholarly commentary. See, e.g., 15B C. __________
Wright, A. Miller & E. Cooper, Federal Practice and Procedure ______________________________
3914.17, at 9-12, 32-34 (2d ed. 1992).
There is one technical hitch. Seemingly, the order
confirming the award is not itself a judgment that can be
collected through court processes until it is entered on the
docket as a judgment. See 9 U.S.C. 13. This has nothing ___
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to do with the final judgment rule; rather, the statute that
governs confirmations provides that after a confirmation is
ordered, a separate "entry of judgment" must be made pursuant
to that order, and it is only at that stage that "[t]he
judgment so entered . . . may be enforced as if it had been
rendered in an action in the court in which it is entered."
Id. ___
Nevertheless, the Federal Rules of Civil Procedure do
not say that appeals can only be taken from judgments; on the
contrary, they contemplate that, subject to the complex rules
that determine what is immediately appealable, there may be
such a thing as an "appealable order" that is not a judgment.
Fed. R. Civ. P. 79(b). And, as already noted, Congress has
designated as immediately appealable "an order . . .
confirming . . . an [arbitration] award." 9 U.S.C.
16(a)(1)(D).
Our position is not at odds with Middleby Corp. v. _______________
Hussmann Corp., 962 F.2d 614 (7th Cir. 1992). Middleby held _______________ ________
that no immediate appeal could be taken where the district
court issued an order of confirmation but declined to enter
judgment after making a specific determination to delay
giving effect to the confirmation order until further
proceedings were concluded. Here, by contrast, the district
court denied the requested stay, and the confirmation order
is immediately effective, requiring only the filing of
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specified papers with the clerk to permit "the entry of
judgment thereon." 9 U.S.C. 13.
Because the confirmation order is appealable, we think
that there is also before us Hewlett-Packard's claim that the
confirmation proceeding should have been stayed. The reason
is simply that the underlying argument for a stay is also an
objection to the confirmation order itself. To this extent,
it is effectively an interlocutory ruling made in the process
of approving the confirmation request and like any other such
interlocutory ruling it is reviewable at the time that the
confirmation order itself is brought up on appeal. Cf. ___
Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, ____________ ______________________________
375 (1987); 15A Wright, Miller & Cooper, supra, 3905.1, at _____
249-63.
A similar argument might also be made to justify an
appeal now based on the district court's refusal to declare
Hewlett-Packard's right to the set-off it asserted. The
problem is complicated, but we see no need to resolve the
complexities. Whether or not the refusal to allow the set-
off is an appealable issue, the refusal at this time turns
out not to be a legal error, so the jurisdictional issue need
not be decided. See Norton v. Matthews, 427 U.S. 524, 530-32 ___ ______ ________
(1976); In re Pioneer Ford Sales, 729 F.2d 27, 31 (1st Cir. ________________________
1984).
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We turn now to the merits. Hewlett-Packard does not
object to the confirmation of the award in all respects; it
says it has paid the award except the disputed amount
including interest. But Hewlett-Packard says that the
district court erred by confirming the award in full instead
of either allowing a set-off or granting a stay of the
confirmation pending the results of the new arbitration.
We agree with the district court's rejection at this
time of the first alternative. Whether Hewlett-Packard has a
valid claim under the 1982 contract is subject to
arbitration; we agree with the district court--and Hewlett-
Packard--that the tribunal has never resolved the merits of
that claim. Whatever the Massachusetts law on set-offs, the
district court could not allow the set-off at present without
determining that Hewlett-Packard had a valid claim, which is
the very subject of the arbitration.
It is hard to imagine a step that would be more
offensive to the pro-arbitration policies reflected in
Congress' endorsement of the 1958 Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, often
called the New York Convention. The New York Convention was
approved by Congress, and implementing legislation was
codified at 9 U.S.C. 201-08. The statute enlists the aid
of federal courts to compel arbitration. 9 U.S.C. 206. By
contrast, the judicial set-off requested here would
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circumvent the 1982 contract to arbitrate and the now-pending
arbitration under that contract.
The request to defer confirmation of the award under the
1984 contract stands on a different footing. However the
case might stand absent the bankruptcy, Dicoscan's bankruptcy
gives Hewlett-Packard a very substantial prudential argument.
If the existing award were confirmed in full and reduced to
judgment, Hewlett-Packard would have to pay the full award to
the defendants as successors-in-interest of an insolvent
company. If in due course Hewlett-Packard then prevailed on
its claims against the insolvent company on a closely related
transaction, it would have no assurance of collecting
anything.
Further, Hewlett-Packard cannot be blamed for the
discrepant timing in the resolution of its claim, or at least
no argument to that effect has been made. After it was told
that the defendants did have arbitration rights despite an
anti-assignment clause in the contracts, Hewlett-Packard
apparently made a reasonable effort to have both the
defendants' claim and its own counterclaim resolved in one
proceeding at the same time. Only the arbitrators'
surprising interpretation of their mandate frustrated this
attempt.
Under these circumstances, the seemingly fair solution
would be to confirm the award in its uncontested part,
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reserving confirmation of the balance until the 1982 contract
dispute is arbitrated. The district court refused to
consider a stay of confirmation on the ground that it was
without power to do so. We fully understand the basis for
the district court's doubt about its authority, but we
conclude that it does have the power to issue a stay in the
peculiar circumstances of this case.
Ordinarily there could be no doubt that a court,
although obliged to decide a claim, would retain discretion
to defer proceedings for prudential reasons. Indeed, a
typical reason is the pendency of a related proceeding in
another tribunal. "[T]he power to stay proceedings is
incidental to the power inherent in every court to control
the disposition of the causes on its docket with economy of
time and effort for itself, for counsel, and for litigants."
Landis v. North Amer. Co., 299 U.S. 248, 254 (1936). ______ _______________
The question here is whether this traditional authority
is curtailed by the New York Convention and its implementing
legislation. The statute provides that, upon a petition for
confirmation, a district court "shall confirm the award _____
unless it finds one of the grounds for refusal or deferral of
recognition or enforcement of the award specified in the said
Convention." 9 U.S.C. 207 (emphasis added). Article VI of
the Convention is the only provision that deals with staying
confirmation. Article VI states:
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If an application for the setting aside or
suspension of the award has been made to a
competent authority [in the country where the award
has been made], the authority before which the
award is sought to be relied upon may, if it
considers it proper, adjourn the decision on the
enforcement of the award [and require a security].
The circumstances outlined in Article VI do not appear to
exist in this case. The question is whether a district court
may grant a stay in circumstances other than those authorized
in Article VI.
The fact that section 207 uses the word "shall" is not
decisive, because a stay is a deferral rather than refusal.
But the fact that the statute refers to the Convention and
the Convention lists a single ground for a stay could be
taken to exclude all other grounds under the principle of
expressio unius est exclusio alterius. That was, in __________________________________________
substance, the reasoning of the district court. However,
expressio unius is an aid to construction and not an ________________
inflexible rule. See, e.g., United States v. Massachusetts _________ ______________ _____________
Bay Transport. Auth., 614 F.2d 27, 28 (1st Cir. 1980). ______________________
Whatever we might think if the question were entirely open,
precedent informs our decision in this case. Domestic
arbitrations are governed by the United States Arbitration
Act (chapter 1 of Title 9) but not by the Convention (chapter
2 of Title 9). The Act states that, upon application, "the
court must grant [a confirmation] order unless the award is ____
vacated, modified, or corrected as prescribed in sections 10
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and 11 of this title." 9 U.S.C. 9 (emphasis added). But
courts routinely grant stays in such cases for prudential
reasons not listed in sections 10 and 11. E.g., Middleby, ____ ________
962 F.2d at 615-16.
Similarly, this court has held that district courts have
discretion to stay an action to compel arbitration pending ______
the outcome of related litigation, even though the Act states
that on a motion to compel the court "shall hear the parties"
and "shall proceed summarily to trial." 9 U.S.C. 4; see ___
Acton Corp. v. Borden, Inc., 670 F.2d 377, 383 (1st Cir. ____________ ____________
1982). In Acton, then-Judge Breyer held that, in drafting _____
the statute, Congress did not "intend[] a major departure
from the ordinary rule allowing one federal court to stay
litigation when another federal court is on the process of
deciding the same issue." We take the same view of Congress'
intentions in implementing the Convention.
Of course, a stay of confirmation should not be lightly
granted. A central purpose of the Convention--an
international agreement to which the United States is only
one of approximately one hundred signatories--was to expedite
the recognition of foreign arbitral awards with a minimum of
judicial interference. But the risk that the power to stay
could be abused by disgruntled litigants--real though that
risk is, see Spier v. Calzaturificio, 663 F. Supp. 871, 875 ___ _____ ______________
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(S.D.N.Y. 1987)--argues more for a cautious and prudent
exercise of the power than for its elimination.
Because the district court acted under a misapprehension
of its authority, we vacate the confirmation order and remand
for further proceedings. Whether confirmation or collection
of the award should be partially deferred pending the
resolution of the 1982 contract arbitration is a matter for
the district court to determine in the first instance.
Still, we think it would require some explanation if, in the
face of the equities of this case, the district court
concluded that the full award should be confirmed and
collected now.
The confirmation order is vacated and the matter is _______
remanded to the district court for further proceedings ________
consistent with this opinion.
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