The Supreme Court today granted certiorari to heal a circuit split over the question of whether the federal Arbitration Act allows strangers to a contract that contains an arbitration clause to appeal an order denying their motion to stay a federal court case pending arbitration. Arthur Andersen LLP v. Carlisle, No. 08-146 (U.S. Nov. 7, 2008) (order granting certiorari).
[Blawgletter has noted the disagreement among the D.C., Sixth, and Tenth Circuits and the Second Circuit here and here.]
The district court refused to allow strangers to an arbitration agreement to enforce it against plaintiffs that entered into the agreement with another defendant. [We've written about the "arbitration-by-estoppel" theory most recently here.] The Sixth Circuit dismissed the appeal on the ground that section 3 of the FAA permits appeals only if the appellants seek a stay pending arbitration "under an agreement in writing for such arbitration." 9 U.S.C. 3 (emphasis added). Because non-signatories don't actually have an arbitration-requiring "agreement in writing", the court reasoned, they can't appeal. The court thus followed DSMC Inc. v. Convera Corp., 358 U.S. App. D.C. 356, 349 F.3d 679 (D.C. Cir. 2003), and In re Universal Service Fund Telephone Billing Practices Litig., 428 F.3d 940, 944-45 (10th Cir. 2005). Carlisle v. Curtis, Mallet-Prevost, Colt & Mosle, LLP, 521 F.3d 597 (6th Cir. 2008).
The Second Circuit reached the opposite conclusion in Ross v. Am. Express Co., 478 F.3d 96 (2d Cir. 2007).
The cert. petition presents two variations on the appellate jurisdiction question — the first under FAA section 3, which requires an "agreement in writing" as the basis for a stay motion, and the second under section 16(a)(1)(A), which authorizes interlocutory appeals from an order "refusing a stay of any action under section 3 of this title". Apparently the petitioners think a win on either variation will produce victory.
SCOTUSBlog has a write-up on the case and links to the cert. petition and briefs.
How do we think the case will come out? We hazard that the Court's ferociously pro-arbitration trend will continue and that the Court therefore will read the FAA to authorize interlocutory appeals by non-signatories.
Although we prefer to bet on safer things like credit default swaps and collateralized debt obligations.