Chase v. Sidney Frank Import

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

PATRICE CHASE; RONALD G. CHASE,
Plaintiffs-Appellees,

v.

SIDNEY FRANK IMPORTING COMPANY,
No. 97-1407
INCORPORATED; ALL-STATE
PROMOTIONS, INCORPORATED; SIDNEY
E. FRANK,
Defendants-Appellants.

Appeal from the United States District Court
for the District of South Carolina, at Charleston.
David C. Norton, District Judge.
(CA-96-1756-2-18)

Argued: October 1, 1997

Decided: January 8, 1998

Before HAMILTON and WILLIAMS, Circuit Judges, and
BUTZNER, Senior Circuit Judge.

_________________________________________________________________

Dismissed by unpublished per curiam opinion. Judge Hamilton wrote
a concurring opinion.

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COUNSEL

ARGUED: Henrietta Urbani Golding, BELLAMY, RUTENBERG,
COPELAND, EPPS, GRAVELY & BOWERS, P.A., Myrtle Beach,
South Carolina, for Appellants. Jay T. Gouldon, STONEY & GOUL-
DON, Charleston, South Carolina, for Appellees. ON BRIEF: Rich-
ard S.W. Stoney, STONEY & GOULDON, Charleston, South
Carolina, for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Sidney Frank Importing Company, Incorporated (Sidney Frank)
appeals the district court's decision to deny its motion to compel arbi-
tration. We find that Sidney Frank's appeal is premature and remand
the case to the district court to determine the enforceability of the
arbitration agreement.

I

Patrice Chase brought suit against Sidney Frank for assault and bat-
tery, for violation of South Carolina statutory law, for civil conspir-
acy, including conspiracy for wrongful termination and for various
other claims. Sidney Frank made a motion to compel arbitration of
Chase's claims in the United States District Court for the District of
South Carolina. Chase opposed the motion claiming that she was
fraudulently induced into signing the arbitration clause. She claims
that Beth Brillos, her immediate supervisor, advised her that the arbi-
tration clause only protected the company from suits brought by
employees who alleged that they were sexually harassed by customers
at company promotions. Brillos did not tell Chase that the clause cov-
ered all claims an employee might have against the company.

Further, Chase alleges that Brillos fraudulently induced her into
back-dating the arbitration clause to July 5, 1995. Chase contends she
agreed to the arbitration clause on July 14, 1995, the day she was
fired. Chase believes Brillos requested the back dating so that the

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clause would appear to have been agreed to before the company
decided to terminate her employment.

The district court denied the motion stating:

There is not sufficient evidence before this court to deter-
mine whether Defendants fraudulently induced Patrice to
agree to the arbitration clause. Accordingly, this court will
not presently compel arbitration of Patrice's wrongful termi-
nation claim but rather will withhold making a final deter-
mination pending further factual findings.

Sidney Frank appealed the district court's determination to this court.
Chase counters that this appeal is premature since the district court
has not made a determination on the validity of the arbitration clause.

II

Before a motion to compel arbitration can be granted, the district
court must first determine whether a valid arbitration clause exists.
When a party asserts fraud in the inducement of the arbitration clause
itself, the court must determine whether or not the clause is valid and
enforceable. Moseley v. Electronic & Missile Facilities, Inc., 374 U.S.
167 (1963); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388
U.S. 395 (1967). If the clause is not enforceable there is no right to
arbitration.

Once the district court makes this determination this court can hear
an appeal of that decision in certain circumstances. Section 16 of the
Federal Arbitration Act governs the appealability of arbitration
orders. It authorizes an immediate appeal from an order refusing a
stay of litigation pending arbitration or an order denying a motion to
compel arbitration. 9 U.S.C.A. § 16(a)(1)(A), (B), (C) (West Supp.
1997); see American Cas. Co. of Reading, Pennsylvania v. L-J, Inc.,
35 F.3d 133, 135 (4th Cir. 1994).

III

This case, however, is not yet ripe for an appeal under section 16.
For the case to be appealable under section 16, the district court must

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first decide whether the arbitration clause is enforceable. Once the
district court reaches a decision, that decision can be appealed. The
district court has not determined the enforceability of the arbitration
clause. The court explicitly stated that it needed more information
before reaching its decision. It has not precluded this case from ulti-
mately reaching arbitration, it has only delayed it until it can make a
determination on the validity of the arbitration agreement. Until the
district court makes this determination, we hold that this appeal is pre-
mature.

IV

The case must be remanded to the district court for determination
of the validity of the arbitration agreement. Having held this appeal
to be premature, we do not reach any of the other issues in the case.

DISMISSED

HAMILTON, Circuit Judge, concurring specially:

I concur in the court's opinion. I write separately only to note that
should the district court determine that Sidney Frank did not fraudu-
lently induce Chase into agreeing to the arbitration clause itself,
Chase's claim that Sidney Frank fraudulently induced her into enter-
ing into the employment agreement as a whole, a claim not specifi-
cally discussed by the district court, would be subject to arbitration
if the district court determined that it fell within the scope of the arbi-
tration clause. See Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
388 U.S. 395, 403-04 (1967); Peoples Sec. Life Ins. Co. v. Monumen-
tal Life Ins. Co., 867 F.2d 809, 813-14 (4th Cir. 1989).

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