
USCA1 Opinion

	




        May 12, 1992             ____________________        No. 92-1133                                  CORION CORPORATION,                                Plaintiff, Appellant,                                          v.                                   GIH-HORNG CHEN,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. William G. Young, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                           Campbell, Senior Circuit Judge,                                     ____________________                               and Cyr, Circuit Judge.                                        _____________                                 ____________________            Richard  L. Alfred,  Robert A.  Bertsche  and  Hill and  Barlow on            __________________   ___________________       ________________        Response  to  Order  to  Show Cause  and  Reply  Memorandum  Regarding        Appellate Jurisdiction, for appellant.            Ellen J.  Messing  and  Shilepsky, Messing  & Rudavsky,  P.C.,  on            _________________       _____________________________________        Memorandum in Opposition  to Appellant's Response to Show  Cause Order        and Reply Regarding Appellate Jurisdiction, for appellee.                                 ____________________                                 ____________________                      Per Curiam.  The question before  us is whether the                      __________            district court's  lengthy  memorandum and  order  determining            that the parties' dispute is arbitrable is a final appealable            order.   We  conclude  that  it  is  not.   We  turn  to  the            background.                                          I.                                          _                      Plaintiff  Corion Corporation  discharged defendant            Gih-Horng  Chen.  Chen  then invoked a  provision in Corion's            Personnel   Policies  Manual   which   provided  that   "[i]n            situations involving . .  . termination . . .  , an aggrieved            employee who is  dissatisfied with top  management's decision            will  be permitted  to have  the grievance  arbitrated by  an            impartial third party" and  demanded arbitration.  Corion did            not agree to arbitration and instead filed the instant action            seeking 1)  a  declaration  that  Chen was  not  entitled  to            arbitrate  the   discharge  decision  (count  1)   and  2)  a            declaration  that plaintiff  was  entitled to  discharge Chen            (count 2).  Corion maintained that the personnel handbook had            no  contractual force, but, even  if it did,  Chen had waived            any right to  arbitrate by failing to attend  hearings Corion            had scheduled to obtain Chen's input.                      Chen responded  with two motions.   The first asked            the  court  to dismiss  count  two  (Corion's request  for  a            declaration that Corion was entitled to discharge Chen).  The            second sought both a stay of all court proceedings (including                                         -2-            filing an answer) pending arbitration and an order compelling            arbitration.                      After  briefing and  argument,  the district  court            issued an opinion  concluding that the  arbitration provision            in the  manual was  contractually enforceable and  applied to            termination decisions.   As  for Corion's argument  that Chen            had  waived any right to  arbitrate, the district court ruled            that the arbitrator was  the one to decide  that issue.   The            court's  twenty-one page memorandum  and order concluded with            the following paragraph:                           For  the  foregoing reasons,  Chen's                      motion  to stay and compel arbitration is                      ALLOWED.    For  the same  reasons,  this                      Court has determined that  an enforceable                      agreement  to  arbitrate exists.   Chen's                      Motion  to   Dismiss  Count  II   of  the                      Complaint  is  ALLOWED.    The   case  is                      ordered  administratively  closed pending                      the outcome of the arbitration.            No separate document embodying the order has entered.                                         II.                                         __                      Corion  has appealed from the memorandum and order.            Corion  argues  that  the memorandum  and  order  is a  final            decision appealable  under 28 U.S.C.    1291 because Corion's            entire  lawsuit  has  been  adjudicated.    Count  2  (for  a            declaration that plaintiff  was entitled  to discharge  Chen)            has  been dismissed, and count 1 (for a declaration that Chen            is not entitled to arbitrate the discharge decision) has been            effectively resolved against plaintiff by granting the motion                                         -3-            to compel arbitration, Corion contends.  We disagree that the            order is final.                                          A                                          _                      First,   the  district  court  has  not  entered  a            judgment on  a piece  of paper  separate from  the underlying            opinion as required by Fed. R.  Civ. P. 58.  Were the absence            of  a separate document a  mere formality, the omission might            be  overlooked.   See  Fiore v.  Washington County  Community                              ___  _____     ____________________________            Mental Health Center, Nos. 91-1027, 91-1842, slip op. 21 (1st            ____________________            Cir. March 30, 1992)  (appellant waives the separate document            rule by  appealing).   But  cf.  Wang Laboratories,  Inc.  v.                                   ___  __   ________________________            Applied Computer  Sciences, Inc., 926  F.2d 92, 96  (1st Cir.            ________________________________            1991)  (case  remanded  to  district  court  for  entry  of a            separate document  where appellee  refused to  waive separate            document requirement).                                          B                                          _                      Here, however,  we think more  than informality  is            involved.    The  court did  not  enter  a  separate document            labelled final judgment, which  would have signalled its view            that the case had concluded.   Nor did it dismiss the  entire            action.    Rather,  it  granted defendant's  motion  to  stay            proceedings  pending  arbitration.   This  suggests  that the            district court itself did not intend to terminate its role or            to enter  a final judgment, but  rather acted in  a manner to            retain jurisdiction  pending the outcome of  arbitration.  To                                         -4-            be  sure,  the  district  court  directed that  the  case  be            "administratively  closed"  pending  arbitration.     In  the            circumstances  of this case, however, we do not think this is            equivalent  to a final judgment  of dismissal.   See Quinn v.                                                             ___ _____            CGR, 828 F.2d  1463 (10th Cir. 1987)  (dismissing appeal from            ___            order compelling  arbitration and ordering the  case "closed,            to  be reopened upon  a showing of  good cause" entered  in a            breach of contract action);  Campbell v. Dominick & Dominick,                                         ________    ____________________            Inc.,   872 F.2d 358 (11th Cir. 1989) (dismissing appeal from            ____            order  directing  arbitration, staying  judicial proceedings,            and closing the  case for statistical purposes entered  in an            action  seeking damages  under  the securities  act); 15B  C.            Wright,  A.  Miller,  &   E.  Cooper,  Federal  Practice  and                                                   ______________________            Procedure   3914.17 at p. 13 n.11 (1992) (concluding that the            _________            result in  the Campbell case  "implies that an  order closing                           ________            the  case  for statistical  purposes  does not  make  a final            judgment").  Rather, it is a reflection  of the fact that the            case is likely to be dormant until arbitration concludes.  In            short,  we  conclude that  the  district  court has  retained            jurisdiction.                      In  previous  cases  where  a  district  court  has            retained jurisdiction pending the outcome  of arbitration, we            have concluded  that  an order  staying  proceedings  pending            arbitration  or   directing  arbitration  is   not  final  or            immediately appealable.    De  Fuertes  v.  Drexel,  Burnham,                                       ___________      _________________                                         -5-            Lambert, Inc., 855 F.2d  10 (1st Cir. 1988),  is instructive.            _____________            There, the  plaintiff sought  to compel defendant  to deliver            securities.   Defendant  moved  to refer  the controversy  to            arbitration.    Plaintiffs opposed  arbitration,  arguing the            agreement to arbitrate was not  valid but forged.  Plaintiffs            lost  on  that point  in the  district  court, and  the court            ordered arbitration, but  specifically retained  jurisdiction            pending  the  outcome of  arbitration.   Plaintiffs appealed.            This  court concluded that  the order  compelling arbitration            and  retaining jurisdiction  was  not appealable  as a  final            decision because                      no   judgment   determining  the   entire                      controversy   between  the   parties  has                      entered.      Contrary   to   appellant's                      assertion, the litigation has  not ended.                      Rather, it  has  moved to  another  forum                      with  the expectation that it will return                      to the [district  court] for  entry of  a                      final judgment.            Id.  at  11.   The  opinion  then went  on  to  say that  the            ___            arbitration order  was not  immediately appealable  under any            exception  to  the  final  judgment rule  and  dismissed  the            appeal.                      Corion contends that De Fuertes is not  controlling                                           __________            and  relies on a  different line of  cases for appealability.            It  points out that most  courts have accepted  that an order            adjudicating an action which seeks nothing more than an order            to  compel arbitration  is a  final  appealable order.   See,                                                                     ___            e.g., Abernathy v. Southern  California Edison, 885 F.2d 525,            ____  _________    ___________________________                                         -6-            530 n.18 (9th Cir.  1989) ("[A]n order compelling arbitration            may  be immediately appealed if it is the full relief sought.            However, when the order  staying the proceeding or compelling            arbitration is only one step in the judicial proceedings  and            the case can be expected to return to the district court, the            order  is nonfinal  and  not subject  to immediate  appeal.")            (citations  omitted); 15C C. Wright,  A. Miller, & E. Cooper,            Federal Practice and Procedure,    3914.17 at pp. 10  n.7 and            ______________________________            15-19 (1992) ("an order granting or denying arbitration in an            action that  seeks only  to compel arbitration  ordinarily is            appealable  as a final judgment; if the same order is entered            in  an action  seeking  other relief,  ordinarily  it is  not            appealable  as a  final  judgment").    It then  argues  that            because  the district  court dismissed  count two  (the count            seeking a  declaration that Corion was  entitled to discharge            Chen)  and  effectively  disposed  of count  one  (seeking  a            declaration  of  non-arbitrability)  by  deciding   that  the            dispute was  arbitrable, Corion's action is  now analogous to            one in which  the sole  issue is arbitrability  and the  same            finality  rules  should apply.   In  other  words, just  as a            litigant  desiring arbitration  obtains a  final judgment  by            structuring  a  lawsuit  to  seek  no  more  than  an   order            compelling arbitration, so too should a litigant who believes            a dispute  is  not  arbitrable  obtain a  final  judgment  by            phrasing his action to  seek no more than a  declaration that                                         -7-            the dispute is not  arbitrable.  Now that,  through dismissal            of  count two,  Corion  is in  the  position of  the  latter,            finality  should  not be  defeated  by  the district  court's            reaching  out prematurely  to assert jurisdiction  over post-            arbitration proceedings, or so the argument would run.                      We leave for another  day the question whether, had            Corion's  action been limited to the request in count one for            a declaration  that the dispute was  not arbitrable, finality            could be defeated by the district court's purported retention            of  jurisdiction  pending  the  outcome  of  arbitration, see                                                                      ___            University  Life Ins. Co. v. Unimarc Ltd., 699 F.2d 846, 848-            _________________________    ____________            50 (7th  Cir. 1983) (finality of  order directing arbitration            in an  independent action  seeking only an  arbitration order            was  not defeated  by  court's retention  of jurisdiction  to            resolve any future disputes or to enforce any  future award);            Cincinnati Gas &  Elec. Co. v. Benjamin F. Shaw Co., 706 F.2d            ___________________________    ____________________            155, 157-58  (6th Cir. 1983)  (order compelling  arbitration,            but   retaining   jurisdiction   pending   the   outcome   of            arbitration, entered  in an  action seeking a  declaration of            non-arbitrability  treated as  final), for  that is  not this            case.     Corion  did  not  ask  the  court  to  decide  only            arbitrability;  it also  asked  the court  to determine  that            Corion was entitled to discharge Chen.  To be sure, the court            has  dismissed the second count in  view of its determination            that   the   personnel  manual   arbitration   provision  was                                         -8-            enforceable.    But it  has not  purported  to enter  a final            order,   and  it  may   well  contemplate  re-examining  that            dismissal  depending upon  the outcome  of arbitration.   For            example,  the court  declined to  determine whether  Chen had            waived  his right  to arbitrate,  as it  concluded that  that            issue  was  for  the  arbitrator.    Should  the  arbitrator,            however,  agree  with  Corion's  position  that  Chen  waived            arbitration, then, presumably, the court  may reinstate count            two.    Until a  final judgment  enters,  the court  is free,            subject  to  law of  the case  principles, to  re-examine its            orders.   In short, we do  not think that the  district court            has   impermissibly   reached   out  to   assert   or  retain            jurisdiction over the lawsuit.                      Corion  points to  several  cases  which, it  says,            support its position that the district court's memorandum and            order  is final  and appealable.   We  address two  which are            representative  of Corion's  position.   First  is County  of                                                               __________            Middlesex  v. Gevyn  Constr.  Corp., 450  F.2d  53 (1st  Cir.            _________     _____________________            1971),  cert. denied, 405 U.S. 955 (1972).  There, the county                    ____________            sought a declaration  that it was not obligated  to arbitrate            various construction disputes.   The defendant responded with            a  motion to compel arbitration and to enjoin the county from            spending the unpaid construction balance.  The district court            did  not grant the injunction, but  did order arbitration and            stayed further judicial proceedings.  The county appealed the                                         -9-            arbitration order, and this  court decided the merits  of the            appeal without discussing appealability.   Subsequently, this            court  in Langley v. Colonial Leasing Co. of New England, 707                      _______    ___________________________________            F.2d 1 (1st Cir. 1983), in an effort to explain the basis for            appellate  jurisdiction in  the Middlesex  case,  stated that                                            _________            "Middlesex  was a  declaratory judgment  action in  which the             _________            district   court's  'order  compelling  arbitration'  was  in            reality  a full  final judgment."   Langley,  707 F.2d  at 3.                                                _______            Corion  argues the same principles apply to it.  The district            court's determination that the dispute is arbitrable  coupled            with its  dismissal of count two  is in reality a  full final            judgment.                      Middlesex is  distinguishable.   The county  in the                      _________            Middlesex case did not ask the  court to decide the merits of            _________            the parties' underlying dispute as did Corion in  the present            case  by requesting  a declaration  that it  was  entitled to            discharge Chen.   Hence,  the arbitration order  in Middlesex                                                                _________            did dispose of the one substantive dispute -- arbitrability -            -  submitted  to the  court  (albeit  leaving unresolved  the            matter  of ancillary injunctive relief).  In contrast, in the            present  case,  Corion  has   asked  the  district  court  to            adjudicate the  parties' dispute, and the  district court, by            declining  to enter a final  judgment on a  separate piece of            paper,  has left open the possibility  that it may, depending            upon the results of arbitration, do just that.                                         -10-                      Second,  Corion  points  to  Robbins v.  George  W.                               ______              _______     __________            Prescott Pub.  Co., 614 F.2d 3  (1st Cir. 1980).   There, the            __________________            plaintiff  sued  his employer  for  breach  of an  employment            contract.    The  district  court ordered  the  defendant  to            arbitrate the  dispute even  though, under  the terms  of the            applicable collective bargaining agreement,  the union -- not            the employee --  had the power  to initiate arbitration,  but            the union  (not a party to  the suit) had declined  to do so.            In  according appellate  review,  this court  noted that  the            order might be appealable as a final judgment under 28 U.S.C.              1291 because, arbitration having been ordered, "it could be            thought that nothing was left for the court but supervision."            Ultimately, however,  this court  did not definitely  so hold            because  it  concluded  that  even   if  the  order  was  not            appealable under   1291, mandamus was appropriate in  view of            the importance of guarding against federal court interference            with the collective bargaining process.  We are not presented            here with such policy concerns.  Furthermore, we do not think            the district court was  necessarily left with "nothing .  . .            but  supervision."   Rather, if  the arbitrator  decides that            Chen  waived his right to  arbitration, the court  may end up            adjudicating exactly what Corion asked the court to decide --            whether  Corion was  entitled to  discharge Chen.   On  these            grounds Robbins is not controlling.                    _______                                          C                                          _                                         -11-                      In addition  to the absence of  a separate document            and the  wording  of  the  final  paragraph  of  the  21-page            memorandum  and order,  policy  considerations influence  our            conclusion that no final judgment has entered in the  present            action and our disinclination to analogize the present action            to  one  seeking  no  more than  a  determination  concerning            arbitrability.                      It  is  true that  an order  compelling arbitration            entered in  an action seeking  only an arbitration  order has            been considered final and immediately appealable by the party            resisting arbitration.    See, e.g.,  Graphic  Communications                                      ___  ____   _______________________            Union, Local 2  v. Chicago  Tribune Co., 779  F.2d 13,  14-16            ______________     ____________________            (7th Cir.  1985).   That is  not because it  is desirable  or            efficient to  bifurcate a  controversy over  termination into            two  separate lawsuits -- the first  concerning the forum and            the  second  either   the  merits  (if  the  dispute  is  not            arbitrable) or  challenges to the  arbitrator's decision  (if            the dispute is  arbitrable).  It is not.   See Abernathy, 885                                                       ___ _________            F.2d at 528 n.13  (9th Cir. 1989) ("We recognize that under              1291  an  order  compelling arbitration  may  be  immediately            appealed if  it is the complete relief sought.  . . . We also            recognize that  permitting direct  appeals of such  orders is            inconsistent with  the  policies underlying  the  arbitration            process.   Nevertheless, until the Supreme  Court or Congress            acts, the  final judgment  cases require such  an outcome.");                                         -12-            Zosky  v.  Boyer, 856  F.2d 554,  560  (3d Cir.  1988), cert.            _____      _____                                        _____            denied,  488 U.S. 1042  (1989) (same); Graphic Communications            ______                                 ______________________            Union, 779 F.2d at  15 ("it is rather a fluke in the law that            _____            allows  an order  to  arbitrate  to  be appealed  before  the            arbitration is completed").  Immediate appellate review of an            order   compelling   arbitration  "frustrate[s]   the  policy            favoring   speedy  resolution   of  labor   disputes  through            arbitration."   United Food & Commercial Workers Local 197 v.                            __________________________________________            Alpha Beta Co., 736  F.2d 1371, 1373-74 n.3 (9th  Cir. 1984).            ______________            The  delay  in  arbitration  wrought  by  immediate appellate            review  of the  forum decision  plus  the inefficiency  of an            appellate court  having to hear  two appeals (first  from the            arbitration  order and  second from  the order  enforcing (or            setting aside)  the arbitrator's decision), rather  than one,            make for lengthier and  more expensive dispute resolution, at            least in circumstances where the dispute was arbitrable.  But            immediate appealability of an  arbitration order in a lawsuit            which seeks  no more than  an order directing  arbitration is            the price or consequence of the final judgment rule, for once            the  order to arbitrate enters, the court has disposed of the            entire controversy then before it.  But see 15C C. Wright, A.                                                ___ ___            Miller,  &  E.  Cooper,  Federal Practice  and  Procedure,                                        ________________________________            3914.17 at  p. 26 (1992)  (suggesting a revision  of finality            concepts  under  which an  arbitration  order  entered in  an            independent action brought solely to compel arbitration would                                         -13-            not be immediately appealable,  the theory being that  "it is            always  better to keep a case open after ordering arbitration            as the  most efficient  vehicle for reviewing  any subsequent            challenges and ordering enforcement").                      The  systemic  delay  and  inefficiency  caused  by            immediate  appeals   of  arbitration  orders  will   tend  to            predispose us,  whenever possible  consistent with  the final            judgment  rule,  to  view  an  arbitration  order as  but  an            interlocutory order  entered in  an ongoing lawsuit  (and not            immediately appealable), rather than as a final resolution of            a  discrete  controversy.    Here, for  the  reasons  earlier            explained, we think  that the district court  has not finally            resolved  the entire  controversy before  it, but  rather has            specifically  left open  the  possibility  of revisiting  the            decision  to  dismiss count  two  and  that consequently  the            district  court's order  allowing Chen's  motion to  stay and            compel arbitration is not a final appealable order.                      Appeal dismissed.                      ________________                                         -14-
