F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
November 8, 2005
UNITED STATES COURT OF APPEALS
Clerk of Court
TENTH CIRCUIT
IN RE UNIVERSAL SERVICE FUND
TELEPHONE BILLING PRACTICE
LITIGATION,
Plaintiff - Appellee,
v. No. 04-3241
SPRINT COMMUNICATIONS
COMPANY, L.P.; AT&T
CORPORATION,
Defendants - Appellants,
HARRIS, WILTSHIRE & GRANNIS
LLP,
Respondent - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. No. 02-MD-1468-JWL)
Mark D. Hinderks, Stinson Morrison Hecker LLP, Overland Park, Kansas for
Defendant - Appellant Sprint Communications Company, L.P.
Michael Doss (Mark S. Blocker with him on the briefs), Sidley Austin Brown &
Wood L.L.P., Chicago, Illinois for Defendant - Appellant AT&T Corp.
Marc M. Seltzer (David H. Orozco and Stephen E. Morrissey, Susman Godfrey
L.L.P., Los Angeles, California; Samuel D. Heins, Stacey L. Mills, Vincent J.
Esades, and Barbara J. Felt, Heins Mills & Olson, PLC, Minneapolis, Minnesota;
Barry C. Barnett and Shawn J. Rabin, Susman Godfrey L.L.P., Dallas, Texas;
Marc R. Stanley, Roger L. Mandel, and Martin Woodward, Stanley Mandel &
Iola, L.L.P., Dallas, Texas; and Isaac Diel, Bonner Springs, Kansas, with him on
the brief) Susman Godfrey, L.L.P., Los Angeles, California for Plaintiffs -
Appellees.
Before EBEL and PORFILIO, Circuit Judges, and HERRERA, District Judge. *
PORFILIO, Circuit Judge.
Appellants AT&T Corporation (“AT&T”) and Sprint Communications
Company, L.P. (“Sprint”) (jointly “Defendants”) seek reversal of an order of the
district court denying their motion to compel arbitration and stay in this multi-
district class action. Appellees (“Plaintiffs”) have challenged our jurisdiction to
hear this interlocutory appeal. We conclude the appeal does not comply with the
interlocutory appeal provisions of the Federal Arbitration Act (FAA); therefore,
we grant the motion to dismiss for lack of jurisdiction.
The underlying action is predicated upon a complaint which avers
Defendants conspired with each other and MCI Worldcom Communications, Inc.
*
The Honorable Judith C. Herrera, United States District Judge for the
District of New Mexico, sitting by designation.
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(“MCI”) 1 to violate provisions of the Federal Communications Act, 47 U.S.C.
§§ 201 and 202; the Clayton Act, 15 U.S.C. §§ 15 and 26; and the Sherman Act,
15 U.S.C. § 1. This appeal, however, pertains only to the district court’s denial of
mandatory arbitration and a stay under the FAA. The district court concluded
there was no legal basis for granting that relief. In re Universal Service Fund
Telephone Billing Practices Litigation, 320 F. Supp. 2d 1135 (D. Kan. 2004).
The Defendants urge us to review the merits of that holding.
Plaintiffs’ complaint avers AT&T and Sprint conspired among themselves
and with MCI to recover funds from the federal Universal Service Fund program.
During the course of litigation, as provided by the terms of a written arbitration
agreement, the district court compelled arbitration of the claims of plaintiff
residential customers of MCI. 2 After passage of some time, Defendants moved to
compel arbitration of the claims of MCI business customers and to stay the
litigation pending the outcome of that arbitration. Even though Defendants had
no arbitration agreements with those business customers, both asserted an
equitable right to arbitration through equitable estoppel. Their claim was based
on the assertion that because those business customers had agreed to arbitration
with MCI, equity required Defendants be placed on an equal footing. The district
1
MCI is not a party to this appeal.
2
See In re Universal Service Fund Telephone Billing Practices Litigation, 300 F.
Supp. 2d. 1107 (D. Kan. 2003).
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court denied the motions on the specific ground of waiver, but additionally
concluded it would not apply equity to enforce arbitration of the MCI business
claims. Id.
Before proceeding to the merits of this appeal, our first responsibility is to
determine whether we have jurisdiction to do so. “[J]urisdiction is a threshold
question which an appellate court must resolve before addressing the merits of the
matter before it.” Timpanogos Tribe v. Conway, 286 F.3d 1195, 1201 (10th Cir.
2002), citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (1998).
Ordinarily, federal courts only have appellate jurisdiction over “final decisions.”
28 U.S.C. § 1291. A final decision is one that “ends the litigation on the merits
and leaves nothing for the court to do but execute the judgment.” Catlin v.
United States, 324 U.S. 229, 233 (1945); see also Rekstad v. First Bank System,
Inc., 238 F.3d 1259, 1261 (10th Cir. 2001).
Because the district court’s order denying the motion to compel did not end
the litigation on the merits, it was not a final decision. Therefore, as the basis for
our jurisdiction, Defendants have relied upon 9 U.S.C. § 16(a)(1)(A) and (B),
both of which grant interlocutory appeal in matters involving applications for
mandatory arbitration and stays under the FAA.
Section 16(a)(1)(A) provides an appeal from an order “refusing a stay of
any action under section 3” of the FAA. Section 3 creates the availability of a
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stay of an action based upon “any issue referable to arbitration under an
agreement in writing for such arbitration.” (emphasis added). Section
16(a)(1)(B) permits an appeal from an order “denying a petition to order
arbitration under section 4” of the FAA. Section 4, in turn, creates a right of
action for “[a] party aggrieved by the alleged . . . refusal of another to arbitrate
under a written agreement.” 9 U.S.C. § 4 (emphasis added). Therefore, whether
Defendants are appealing from the district court’s denial of a stay or its refusal to
compel arbitration, the plain language of the applicable jurisdictional statute
mandates Defendants’ prior reliance upon a written agreement to arbitrate as a
condition precedent to our jurisdiction.
Citing that plain language, Plaintiffs have moved to dismiss the appeal
because neither of the Defendants could have relied upon such written agreements
because none exists. Therefore, they argue, Defendants cannot be “aggrieved”
parties who have the right to an interlocutory appeal within the context of § 16(a).
This court has not yet considered this precise issue.
However, in DSMC Inc. v. Convera Corp, 349 F. 3d 679 (D.C. Cir. 2003),
(“DSMC”), the D.C. Circuit decided a virtually identical appeal. The court
dismissed an interlocutory appeal in which the appellants sought review of orders
denying a stay and compelling arbitration under 9 U.S.C. §§ 3 and 4. The
appellants asserted jurisdiction by relying upon equitable estoppel as a substitute
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for the statutory requirement of a written arbitration agreement. Focusing on the
strict construction required of statutes which create interlocutory appeals and the
elements of jurisdiction established in 9 U.S.C. § 16(a), the court held an
appellant’s prior reliance upon a written agreement to compel arbitration is a
necessary predicate to an interlocutory appeal under the FAA. Id. at 683.
Moreover, the court concluded a theory of equitable estoppel is incompatible with
that jurisdictional requirement. Id. at 683-84.
Although the facts of DSMC are convoluted, we relate them because of the
implications arising from their similarity to the facts of this case. The underlying
action was instituted by DSMC Inc. claiming NGT Library (“NGTL”) breached a
contract between DSMC Inc. and NGTL by entering a subsequent contract with
Convera Corporation. DSMC Inc.’s claim against NGTL was referred by the
district court to arbitration under provisions of an arbitration clause in the contract
in litigation.
DSMC Inc. then filed a parallel action against Convera on several grounds
based upon the contract between NGTL and Convera. NGTL later filed a motion
to intervene in that action for the purpose of seeking a stay of the suit pending the
outcome of the DSMC Inc.-NGTL arbitration. NGTL contended because the
arbitration and the action between DSMC Inc. and Convera contained the same
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issues, the suit threatened the outcome of the arbitration, and NGTL was entitled
therefore to a stay until arbitration was completed
Although it had no arbitration agreement with DSMC Inc, Convera then
filed a motion to compel DSMC Inc. to arbitrate its claim against Convera.
Convera theorized equitable estoppel and the federal policy favoring arbitration
supported its motion.
Treating the arguments of the appellants separately, the court first disagreed
with NGTL’s contention the “identicality” of the issues in the parallel action and
those in arbitration entitled NGTL to a § 3 stay despite the absence of arbitrable
issues between DSMC Inc. and Convera. Assuming the validity of the identicality
theory, the court held: “the litigation may not be stayed under Section 3 because
the issues in the litigation are not ‘referable’ to arbitration under an agreement.”
349 F.3d at 684 (citation omitted). The court continued, “NGTL is a signatory, to
be sure, but its issues with DSMC. are already subject to arbitration. There is no
arbitration agreement between DSMC and Convera, and so Section 3 does not
apply in this case.” Id. (emphasis in original). With that conclusion, the court
dismissed NGTL’s appeal. See also, IDS Life Ins. Co. v. SunAmerica, Inc., 103
F.3d 524, 530 (7th Cir. 1996).
Convera’s attempt to appeal the order denying arbitration under 9 U.S.C. § 4
was subject to the same analysis. As the court explained, § 4 “applies only to ‘an
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alleged failure . . . to arbitrate under a written agreement for arbitration’ –not an
alleged failure to arbitrate when principles of equitable estoppel indicate that you
should.” 349 F.3d. at 383. Like the position advocated by Defendants here,
Convera maintained the arbitration between DSMC Inc. and NGTL, which was
required by a written arbitration agreement, related to issues in the pending suit,
giving Convera an equitable right to arbitration under § 4. Again the court
disagreed, stating, “Section 4 does not merely require that there be a written
agreement somewhere in the picture. It requires that the motion to compel be
based on an alleged failure to arbitrate under that written agreement.” Id.
(emphasis added). 3 We believe that analysis is sound.
Defendants attempt to avoid this reasoning and the result it portends by
subscribing to a broad interpretation of 9 U.S.C. §16(1). They posit the general
federal policy favoring arbitration does not permit such a “cramped reading of
section 4 of the FAA.” Indeed, they argue, “[s]ection 4 broadly provides standing
to move to compel on [sic] any party ‘aggrieved’ by another’s failure to arbitrate.”
They stoutly maintain they satisfy section 4’s requirement of a “written agreement
for arbitration” simply because “MCI’s business customers entered into written
3
The court also noted the effort to compel arbitration by estoppel was an
antithetical to § 4 because the doctrine of equitable estoppel applies only in the
absence of a written agreement. DSMC Inc. v. Convera Corp., 349 F.3d 679, 683
(D.C. Cir. 2003).
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arbitration agreements with MCI.” Thus, because of the conspiracy claims against
Defendants and MCI, the latter’s agreements “are encompassed within the broad
arbitration provisions in these MCI small business agreements.” Essentially,
Defendants’ position is that they are “aggrieved” within the meaning of 9 U.S.C.
§ 4 because they must be put to the expense of litigation rather than to simple
resolution of the claims against them by the expedience of arbitration. 4
Defendants maintain “[c]ourts have repeatedly accepted appellate
jurisdiction where the district court had denied arbitration motions by litigants that
were not signatories to the relevant arbitration agreement.” They support this
contention with a number of cases which simply are not apposite, however,
because none of them rule upon the jurisdictional basis for their holdings. Indeed,
none of them consider the issue before us. Defendants artfully seek to avoid this
problem by arguing:
4
Defendants have also suggested jurisdiction can be obtained through 28 U.S.C.
§ 1292(a)(1) which grants interlocutory jurisdiction over appeals from specific
decisions involving injunctions. Indeed, this court has previously accepted this
statute as permitting interlocutory appeal from the denial of an application to
compel arbitration. See Peterson v. Shearson/Am. Express, Inc., 849 F. 2d 464,
465 (10th Cir. 1988). However, that decision was reached prior to the enactment
of 9 U.S.C. § 16 which uniquely addresses appeals from denials of motions to
compel and stay arbitration. Because § 16 specifically deals with the subject of
arbitration, it has superceded Peterson and makes § 1292(a)(1) inapposite to this
case. See DSMC, 349 F.3d at 682; McLaughlin Gormley King Co. v. Terminix
Int’l Co., 105 F.3d 1192, 1193 (8th Cir. 1997.
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That these decisions did not discuss the basis for their jurisdiction
over the appeal does not lessen their import, as every court of appeals
is obliged to evaluate and confirm its jurisdiction whether or not
raised by either party.
While arguable, that contention is not persuasive because although Defendants’
assumption is an apt statement of federal jurisprudence, it does not necessarily
flow from the opinions of the courts. The only logical inference we can make is
that the courts simply did not consider the matter of jurisdiction. As Judge
Roberts observed in DSMC:
We are also cognizant that jurisdictional rules should be, to the extent
possible, clear, predictable, bright-line rules that can be applied to
determine jurisdiction with a fair degree of certainty from the outset.
Asking whether the parties are signatories to a written agreement to
arbitrate satisfies these criteria. On the other hand, the application of
equitable estoppel - if permitted in this context - requires a
multifactor factual and legal inquiry to determine whether the issues
to be litigated by the non-signatory are sufficiently intertwined with
the issues subject to arbitration. That type of analysis, in turn, would
require this court to delve deeply into the merits of a case before even
deciding whether we had interlocutory appellate jurisdiction - an
unattractive prospect.
DSMC, 349 F.3d at 683-84.
Defendants miss the point on another level as well. The issue in this appeal
is not whether they have a right to compel arbitration, but whether they have a
right to an interlocutory appeal from the denial of a motion seeking to compel
arbitration. Given that statutes allowing interlocutory appeals should be narrowly
construed, Defendants stand the scope of appellate jurisdiction on its head. See
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Perry Educ. Ass’n. v. Perry Local Educator’s Ass’n., 460 U.S. 37, 43 (1983);
Bombardier Corp. v. Nat’l R.R Passenger Corp. 333 F.3d 250, 253 (D.C. Cir.
2003).
We also agree with the DSMC court that dismissing this appeal does not
mean equitable estoppel cannot be employed to compel arbitration. Indeed, our
holding is limited to whether Defendants can invoke interlocutory appellate
jurisdiction to challenge the merits of the district court’s order. In the absence of
jurisdiction, any thoughts we might express on whether the doctrine of equitable
estoppel can or should be recognized in the circumstances of this case would be
without effect. Thus, on the merits of the district court’s order, we express no
opinion. Judgment AFFIRMED.
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