                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-23-2004

CTF Hotel Holdings v. Marriott Intl Inc
Precedential or Non-Precedential: Precedential

Docket No. 02-2732




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"CTF Hotel Holdings v. Marriott Intl Inc" (2004). 2004 Decisions. Paper 359.
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                       PRECEDENTIAL        Before: McKEE, SMITH and WEIS,
                                                     Circuit Judges.
   UNITED STATES COURT OF
          APPEALS                           (Opinion Filed: August 23, 2004)
    FOR THE THIRD CIRCUIT


                                         EMM ET T. FLOOD, ESQ. (Argued)
      No. 02-2732 and 02-2898            GREGORY B. CRAIG, ESQ.
                                         KENNETH C. SMURZYNSKI, ESQ.
                                         BRENDAN V. SULLIVAN, JR., ESQ.
                                         Williams & Connelly LLP
  CTF HOTEL HOLDINGS, INC.,              725 12th Street, N.W.
                                         Washington, DC 20005
                  v.
                                         DANIEL A. DREISBACH, ESQ.
MARRIOTT INTERNATIONAL, INC.;            JESSE A. FINKELSTEIN, ESQ.
RENAISSANCE HOTEL OPERATING              Richards, Layton & Finger, P.A.
         COMPANY;                        P.O. Box 551
       AVENDRA L.L.C.                    Wilmington, DE 19899

       Marriott International, Inc.,     Attorneys for Appellants and Cross-
      Renaissance Hotel Operating        Appellees,
             Company,                    Marriott International, Inc., and
                Appellants No. 02-2732   Renaissance Hotel Operating Co.

      CTF Hotel Holdings, Inc.,          JONATHAN J. LERNER, ESQ.
         Cross-Appellant No. 02-2898     (Argued)
                                         MAURA B. GRINALDS, ESQ.
                                         TIMOTHY G. NELSON, ESQ.
  On Appeal from the United States       Skadden, Arps, Slate, Meagher & Flom
              District Court             LLP
      for the District of Delaware       4 Times Square
    (Civil Action No. 02-CV-271)         New York, NY 10036
 District Judge: Hon. Sue L. Robinson
                                         EDWARD P. WELCH, ESQ.
                                         STEPHEN D. DARGITZ, ESQ.
                                         Skadden, Arps, Slate, Meagher & Flom
     Argued: November 3, 2003            LLP
                                         1 Rodney Square
                                         P.O. Box 636
                                         Wilmington, DE 19899
Attorneys for Appellee and Cross-                   signed an agreement with HPI to manage
Appellant,                                          44 other hotels (“the HPI Master
CTF Hotel Holdings, Inc.                            Agreement”).      Marriott International
                                                    purchased Renaissance in 1997 and
                                                    continued to operate it as a wholly-owned
                                                    subsidiary. In 1999, Marriott, HPI and
       OPINION OF THE COURT                         CTF entered into an agreement governing
                                                    all of the aforementioned 64 hotels and
                                                    incorporating the CTF and HPI Master
                                                    Agreements (“the 1999 Agreement”).2
                                                           Section IX.K of the 1999
McKEE, Circuit Judge.
                                                    Agreement addresses dispute resolution
        We are asked to determine if the            and states:
District Court erred in ruling that CTF
                                                            Governing Law ; Dispute
Holdings, Inc., was not obligated to
                                                            Resolution. . . . In the event
arbitrate its breach of contract dispute with
                                                            of any dispute or difference
Marriott International and Renaissance
                                                            arising out of or relating to
Hotels (together “Marriott”). We are also
                                                            this Agreement, if such
asked to determine if the court erred in
                                                            dispute or difference relates
staying that litigation pending resolution of
                                                            to or arises out of a Hotel
related arbitration between Marriott and
                                                            owned or leased by CTF (or
Hotel Property Investments Ltd. (“HPI”).
                                                            otherwise governed by the
For the reasons that follow, we will affirm
                                                            CTF Master Agreement),
the court’s ruling that CTF was not
                                                            then such dispute or
required to go to arbitration, but we will
                                                            difference shall be subject to
reverse the District Court’s decision to stay
                                                            the dispute resolution
CTF’s suit against Marriott for breach of
                                                            provisions in the CTF
contract pending resolution of Marriott’s
arbitration with HPI.
   I. FACTS AND PROCEDURAL
            HISTORY
      In 1993, Renaissance signed an                CTF was then known as “Stouffer Hotel
agreement with CTF to manage the 20                 Holdings, Inc.” JA 211.
CTF hotels at issue here (“the CTF Master
Agreement”).1     In 1995, Renaissance                  2
                                                          The 1999 Agreement was produced
                                                    after CTF notified Marriott that Marriott
                                                    had breached the CTF Master Agreement
  1
   Renaissance Hotel was then known as              in 1998, and gave Marriott a final notice of
“Ramada Hotel Operating Company” and                default in April 1999.

                                                2
             Master Agreement; 3                        The CTF Master Agreement is
             and if such dispute or             silent as to the duty to arbitrate and
             difference relates to              therefore imposes no such obligation.
             or arises out of a                 However, the HPI Master Agreement
             Hotel owned o r                    contains the following section requiring
             leased by HPI (or                  arbitration:
             otherwise governed
                                                       9.6 Governing Law :
             by the HPI Master
                                                       Arbitration: Consent to
             Agreemen t), then
                                                       Jurisdiction. The parties
             such dispute or
                                                       hereto shall use their best
             difference shall be
                                                       efforts to settle any disputes
             subject to the dispute
                                                       or differences arising out of
             resolution provisions
                                                       o r r e l a ti n g t o th i s
             in the HPI Master
                                                       Agreement. . . . If they do
             A g reeme n t.4
                                                       not reach [a] solution within
             Nothing herein is
                                                       a period of thirty (30) days,
             intended to require
                                                       t h e n t h e d i s p u t e or
             arbitration of any
                                                       difference shall be finally
             dispute under the
                                                       settled by arbitration in
             CTF        M aster
                                                       accordance with the rules of
             Agreement or to
                                                       the American Arbitration
             limit any right any
                                                       Association.
             party may have to
             proceed in federal or
             state court on any
                                                        In 2001 and 2002, CTF and HPI
             dispute under the
                                                began questioning Marriott’s performance
             CTF        M aster
                                                under the 1999 Agreement, and in March
             Agreement. 5
                                                2002, CTF notified Marriott that it was in
                                                default under that Agreement. 6 Marriott
     3                                          thereafter initiated arbitration against CTF
       We shall refer to the portion of
                                                and HPI seeking declaratory relief
Section IX.K up to this footnote as
                                                regarding the issues that had been
“Clause 1."
                                                identified in the default notice. One such
     4
         We shall refer to the portion of       issue involved proceeds from an audio-
Section IX.K from the end of Clause 1 to        visual program conducted in certain hotels
this footnote as “Clause 2.”
     5                                             6
        We shall refer to the portion of             This was the second notice of default
Section IX.K from the end of Clause 2 to        that CTF had issued Marriott. See supra
this footnote as “Clause 3.”                    note 2.

                                            3
operated by Marriott (the “Molloy                   CTF also petitioned the District Court to
dispute”). Another issue involved the               enjoin Marriott’s attempt to require it to
scope of CTF’s and HPI’s rights to review           arbitrate its disputes, and Marriott moved
and audit the amount of unrestricted                to compel CTF to arbitrate pursuant to the
allowances Marriott received under its              Federal Arbitration Act, 9 U.S.C. § 4.
management agreements (the “audit
                                                            As noted earlier, the District Court
dispute”).
                                                    granted CTF’s motion to enjoin arbitration
        HPI did not dispute that it was             of its claims and denied Marriott’s motion
obligated to arbitrate the Molloy and audit         to compel CTF to arbitrate. However, the
disputes with Marriott under the 1999               court then stayed litigation of CTF’s
Agreement. However, CTF maintained                  breach of contract suit pending the
that it was not obligated to arbitrate. It          resolution of Marriott’s arbitration with
filed a 21-count complaint against Marriott         HPI. The court explained that it was doing
and a third defendant, Avendra LLC,7 in             so “in order to promote some efficiencies
the District Court. The complaint included          of judicial administration and in light of
issues involving the Molloy and audit               the participation in this litigation of
disputes as well as other claims for relief.8       defendant Avendra (a non-party to the
                                                    Master and 1999 Agreements).”

    7
                                                           Thereafter, Marriott appealed the
      Marriott describes Avendra as “an             court’s refusal to compel CTF to arbitrate,
independent company founded by Marriott             and CTF cross-appealed the court’s order
International, Inc., Hyatt Corporation, Bass        staying CTF’s breach of contract suit
Hotels & Resorts, Inc., Fairmont Hotels             pending resolution of the arbitration
Inc., and Club-Corp., Inc. to provide               between Marriott and HPI.9
centralized procurement services with
improved quality and pricing of goods and
services through the aggregation of
purchasing power.” Appellant’s Br. at 6.            and Avendra of aiding and abetting breach
                                                    of fiduciary duty and tortious interference
    8
      Count 2 of the complaint raises the           with contract, and state claims against all
disputes over both the audit provision and          three defendants for unjust enrichment,
the returns from the Molloy program.                civil RICO violations, and Robinson-
CTF’s complaint also states the following           Patman Act violations.
claims against Marriott: breach of contract,
                                                      9
breach of fiduciary duty, intentional                  Marriott also filed a motion to dismiss
mis representation, ne g l i g en t                 CTF’s appeal arguing that the District
misrepresentation, fraud, conversion, and           Court’s stay was not a final order. We
breach of the covenant of good faith and            consider Marriott’s motion to dismiss the
fair dealing. The other counts in the               appeal together with the merits.
complaint accuse Marriott International

                                                4
           II. JURISDICTION                          singles out a claim for extended delay,
                                                     while others of a similar nature proceed, is
        We may review the denial of
                                                     appealable).
Marriott’s motion to compel arbitration
under 9 U.S.C. § 16(a)(1)(B), which                          Here, the District Court decided
provides for jurisdiction over appeals from          two important legal issues. First, it found
orders “denying a petition under [9 U.S.C.           the 1999 agreement did not require CTF to
§ 4] to order arbitration to proceed[.]”             arbitrate the Molloy and audit disputes in
                                                     CTF’s complaint. Second, it delayed
        Marriott questions whether we have
                                                     CTF’s litigation so that it would not
jurisdiction over CTF’s cross-appeal of the
                                                     proceed until after the arbitration between
District Court’s stay, and has moved to
                                                     HPI and Marriott was resolved. In a very
dismiss CTF’s appeal for lack of subject-
                                                     practical sense, CTF – which admittedly
matter jurisdiction. Marriott argues that
                                                     has the right to bring suit in the federal
the stay is not a final order and is therefore
                                                     court – has been blocked from proceeding
not appealable. We agree that a stay is
                                                     in that forum until the issues are resolved
usually not a final order because it
                                                     in the arbitration.
provides only a temporary respite from
litigation. Marcus v. Twp. of Abington, 38                   The stay order at issue here is not
F.3d 1367, 1370 (3d Cir. 1994). However,             “indefinite” per se because the District
when a stay amounts to an effective                  Court stated that it would “reconsider [the
dismissal of the underlying suit, it may be          stay] if it appears that the arbitration is not
subjected to appellate review. Cheyney               proceeding apace.” There is, however, no
State Coll. Faculty v. Hufstedler, 703 F.2d          way of foretelling how long CTF’s suit
732, 735 (3d Cir. 1983) (citing Moses H.             must remain in limbo. Moreover, we see
Cone Hosp. v. Mercury Constr. Corp., 460             no way for CTF to attempt to expedite
U.S. 1 (1983)); see also United States v.            HPI’s arbitration with Marriott because
Spears, 859 F.2d 284, 287 (3d Cir. 1988)             CTF is not a party to it.
(holding that appellate review was
                                                             If CTF’s suit must suffer
effectively foreclosed unless we exercised
                                                     indeterminate delay pending the outcome
pendent jurisdiction because the issues
                                                     of HPI’s arbitration with Marriott, CTF
would become moot and untouchable
                                                     will be without any way of challenging the
because of the procedural limbo in which
                                                     propriety of the District Court’s stay or the
the decision placed the case). We have
                                                     procedural limbo that inevitably results
also recognized that an indefinite stay
                                                     from it. CTF will certainly not be able to
order that unreasonably delays a plaintiff’s
                                                     challenge the order at the conclusion of
right to have its case heard is appealable.
                                                     that arbitration because the stay will
Hufstedler, 703 F.2d at 735; see also
                                                     become moot and unreviewable. Time
Haberern v. Lehigh & New England Ry.,
                                                     only runs in one direction. Accordingly,
554 F.2d 581, 584 (3d Cir. 1977) (holding
                                                     we can not correct any error the District
that a stay order of indefinite length which

                                                 5
Court may have made in staying CTF’s               District Court’s stay order here involve
suit unless we review it now.                      “consideration of myriad factors affecting
                                                   judicial economy, the ‘hardship or
        We have recognized the concept of
                                                   inequity’ that Marriott would face in going
pendent appellate jurisdiction where a case
                                                   forward with the litigation, and the injury
is “rife with special circumstances which
                                                   that a stay would inflict on CTF. ”
bring it outside the general rule and so
                                                   Concurring and Dissenting Op. at 2 (citing
limit its precedential value as to not
                                                   Landis v. N. Am. Co., 299 U.S. 248, 254-
measurably weaken our continued
                                                   55 (1936)). As our colleague also points
aversion to piecemeal appeals.” Haberern,
                                                   out, those “considerations are distinct
554 F.2d at 584. However, in Swint v.
                                                   from the question s of contract
Chambers Cty. Comm’n., 514 U.S. 35, 48
                                                   interpretation presented in Marriott’s
(1995), the Supreme Court “counsel[ed]
                                                   appeal.” Id. The fact that they are
resistance to expansion of appellate
                                                   “distinct” does not mean, however, that
jurisdiction . . . ”. In doing so, however,
                                                   they are not “intertwined.”
the Court noted that it had “not universally
required courts of appeals to confine                      Since the District Court’s stay order
review to the precise decision                     would be unreviewable and moot at the
independently subject to appeal.” Id. at 50        conclusion of HPI’s arbitration with
(citing Thornburgh v. American College             Marriott, the umbilical connection
of Obstetricians and Gynecologists, 476            between it and the District Court’s stay is
U.S. 747, 755-57 (1986)). Swint did not            not neatly severed. As will be evident
resolve “whether or when it may be proper          from our discussion below, “there is
for a court of appeals, with jurisdiction          sufficient overlap in the facts relevant to
over one ruling, to review, conjunctively,         both the appealable and non-appealable
related rulings that are not themselves            issues to warrant plenary review.” Palcko
independently appealable.” 514 U.S. at             v. Airborne Express, Inc., 372 F.3d 588,
50-51.                                             594 (3d Cir. 2004) (emphasis in original)
                                                   (quoting E.I. Dupont de Nemours & Co.,
       Following Swint, we concluded that
                                                   269 F.3d at 203). The case is therefore
the Supreme Court had limited the
                                                   “rife with special circumstances” allowing
doctrine of pendent appellate jurisdiction
                                                   for appellate review without running afoul
to two circumstances: “inextricably
                                                   of this court’s “continued aversion to
intertwined orders or review of the non-
                                                   piecemeal appeals[,]” Haberern, 554 F.2d
appealable order where it is necessary to
                                                   at 584, or the Supreme Court’s holding in
ensure meaningful review of the
                                                   Swint. In addition, at this point of the
appealable order.” E.I. Dupont de
                                                   proceedings, we are unable to determine
Nemours & Co. v. Rhone Poulenc Fiber &
                                                   what preclusive effect, if any, the
Resin Intermediates, S.A.S., 269 F.3d 187,
                                                   arbitration may have on CTF’s suit in the
203 (3d Cir. 2001). As Judge Smith
                                                   District Court. Accordingly, we hold that
correctly points out, the merits of the

                                               6
we may properly exercise pendent                              Thus, Section IX.K of the 1999
appellate jurisdiction over the District              Agreement controls our analysis. Marriott
Court’s order staying that suit while HPI             argues that Clause 2, which states that a
proceeds with its arbitration against                 dispute relating to a Hotel owned or leased
Marriott.                                             by HPI must be resolved under the HPI
                                                      Master Agreement, governs the disputes at
            III. DISCUSSION
                                                      issue. According to Marriott, the instant
         A. Marriott’s Appeal10                       disputes relate to both HPI hotels and CTF
                                                      h o tels a s is evident from th e
       Marriott appeals the District
                                                      litigation/arbitration involving M arriott,
Court’s conclusion that the Agreements
                                                      CTF, and HPI. Therefore, argues M arriott,
allow CTF to litigate its claims and do not
                                                      its dispute with CTF has to be governed by
require arbitration. Marriott argues that
                                                      Clause 2 and the HPI Master Agreement
t h e d i s p u t e s a t is su e i n v ol v ed
                                                      controls. As noted above, the HPI Master
interpretation of provisions of the 1999
                                                      Agreement contains a dispute resolution
Agreement, and that CTF must arbitrate
                                                      clause requiring “the parties [thereto]” to
any disputes relating both to CTF and HPI
                                                      arbitrate disputes that can not be settled by
hotels under the dispute resolution
                                                      the good faith efforts of those parties.
provision in that agreement.
                                                             However, CTF was not a party to
        “Arbitration is strictly a matter of
                                                      that agreement. Moreover, Marriott’s
contract. If a party has not agreed to
                                                      interpretation ignores that Clause 1 of
arbitrate, the courts have no authority to
                                                      Section IX.K is also relevant to the
mandate that [it] do so.” Bel-Ray Co. v.
                                                      disputes at issue here because they relate
Chemrite, 181 F.3d 435, 444 (3d Cir.
                                                      to CTF hotels as well as HPI hotels and
1999). Principles of contract law therefore
                                                      thus implicate the CTF Master Agreement.
govern our inquiry. When interpreting
                                                      As noted above, the CTF Master
contracts, we are required to read contract
                                                      Agreement does not require arbitration of
language in a way that allows all the
                                                      disputes between CTF and Marriott. As
language to be read together, reconciling
                                                      also noted above, we are obligated to
conflicts in the language without rendering
                                                      interpret contracts in a manner that gives
any of it nugatory if possible. New Castle
                                                      meaning to every word. If we read
Cty. v. National Union Fire Ins. Co., 174
                                                      Clauses 1 (“such dispute . . . relates to . . .
F.3d 338, 349 (3d Cir. 1999).
                                                      a Hotel owned or leased by CTF”) and 2
                                                      (“such dispute . . . relates to . . . a Hotel
                                                      owned or leased by HPI”) as mutually
   10
     We exercise plenary review over the              exclusive, the confusion disappears along
District Court’s legal conclusions about              with the c onflict.            Under this
contract provisions for arbitration. Harris           interpretation, where a dispute relates to
v. Green Tree Fin. Corp., 183 F.3d 173,               CTF, the CTF Master Agreement governs
176 (3d Cir. 1999).

                                                  7
and there is no duty to arbitrate pursuant to       Agreement. No such language appears,
Clause 1; but where a dispute relates to            and Clause 3 is precisely to the contrary.
HPI, the HPI Master Agreement governs               That Clause clearly provides for certain
and there is a duty to arbitrate pursuant to        disputes arising under the 1999 Agreement
Clause 2. Accordingly, under New Castle             to be excepted from arbitration.          It
County, we read Clauses 1 and 2 as                  therefore vitiates Marriott’s argument that
mutually exclusive in order to eliminate            Clause 2 gives rise to a presumption that
the conflict and give meaning to every              all disputes arising under the 1999
word in the relevant clauses of the 1999            Agreement must be arbitrated. Such a
Agreement.                                          presumption is applicable only in “the
                                                    absence of any express provision
        Moreover,          the     resulting
                                                    excluding a particular grievance from
interpretation is eminently reasonable.
                                                    arbitration. . . .” AT & T Tech., Inc. v.
The 1999 Agreement maintained the
                                                    Comm. Workers of America, 475 U.S. 643,
separate CTF and HPI Master Agreements
                                                    650 (1986) (internal citation and quotation
with their corresponding dispute resolution
                                                    marks omitted). Moreover, even if the
provisions. As CTF observes, “the lack of
                                                    disputes regarding CTF hotels are identical
a unitary arbitration provision for disputes
                                                    to those regarding HPI hotels, CTF’s claim
common to CTF and HPI in Section IX.K
                                                    pertains only to its hotels. Such disputes
is no accident . . . .” Brief at 21. Clause 3
                                                    are subject to the CTF Master Agreement,
makes this crystal clear. As noted above,
                                                    and CTF is therefore not required to
Clause 3 provides that: “Nothing herein is
                                                    arbitrate.
intended to require arbitration of any
dispute under the CTF Master Agreement                      Marriott argues that evidence
or to limit any right any party may have to         outside the parties’ contracts establishes
proceed in federal or state court on any            that CTF and HPI have an identity of
d ispute u n de r t he C TF M aste r                interests that makes them functionally the
Agreement.”       Marriott’s interpretation         same corporation, thus binding CTF to
requires that we strike Clause 3 from the           HPI’s contractual obligation to arbitrate
1999 Master Agreement. Of course, we                disputes. Marriott also argues that, even if
can not do that.                                    CTF is not actually contractually obligated
                                                    to arbitrate these disputes, CTF should be
        If the parties really intended the
                                                    estopped from litigating its claim because
result Marriott urges upon us here, they
                                                    the parties’ correspondence indicates that
could easily have provided for it by simply
                                                    it relied on the HPI Master Agreement to
requiring that any dispute that similarly
                                                    assert its rights. Both arguments require
involves Marriott’s operation of both CTF
                                                    us to consider evidence extrinsic to the
and HPI hotels be governed by the HPI
                                                    written contract.      Such evidence is
Master Agreement or be subject to
                                                    admissible to explain the terms of a written
arbitration, notwithstanding anything to
                                                    contract when there is ambiguity in the
the contrary in the CTF Master

                                                8
contract. 58 N.Y. J UR. 2d Evidence and                      The District Court identified two
Witnesses §586 (2003). 11 The contracts               grounds for staying the litigation,
here leave no ambiguity regarding the                 Avendra’s participation and judicial
t er m s of the dispute resolutio n                   efficiency. Neither justifies the stay.
mechanisms.            Therefore, extrinsic
                                                              Judicial efficiency does not, by
e v i d e n c e s u c h a s t h e p a rt i e s’
                                                      itself, allow a federal court to refuse to
correspondence can not properly be
                                                      exercise its jurisdiction in favor of
considered. This leaves these arguments
                                                      proceedings in an alternative forum. The
without any foundation.
                                                      Supreme Court has stated: “[g]enerally, as
        Thus, the District Court correctly            between state and federal courts, the rule is
held that CTF is not required to arbitrate            that the pendency of an action in the state
its dispute with Marriott, and it properly            court is no bar to proceedings concerning
denied Marriott’s motion to compel                    the same matter in the Federal court
arbitration and enjoined the arbitration of           having jurisdiction,” noting that federal
CTF’s disputes.                                       courts have a “virtually unflagging
                                                      obligation . . . to exercise the jurisdiction
          B. The Cross-Appeal
                                                      given them.” Colorado River Water
        As we noted earlier, CTF cross-               Conservation Dist. v. United States, 424
appeals the District Court’s stay of its              U.S. 800, 817 (1976) (internal citations
claim against Marriott and Avendra. It                and quotation marks omitted); see
argues that the District Court abused its             genera lly E RWIN C HEMERINSKY ,
discretion by staying litigation pending              F EDERAL J URISDICTION § 14.2 (3d ed.
resolution of the separate arbitration                1999). The Court later reaffirmed this
proceeding between Marriott and HPI.                  holding, stating that its task as a reviewing
CTF claims that the stay abrogated its right          court was “not to find some substantial
to resolve its disputes through litigation, a         reason for the exercise of federal
right that the District Court acknowledged            jurisdiction by the District Court; rather,
in denying Marriott’s motion to compel                the task is to ascertain whether there exist
arbitration. According to CTF, the District           ‘exceptional’ circumstances, the ‘clearest
Court took away with one hand the very                of justifications,’ that can suffice under
thing it awarded with the other. We                   Colorado River to justify the surrender of
agree.12                                              that jurisdiction.” Moses H. Cone Hospital
                                                      v. Mercury Const. Corp., 460 U.S. 1, 25-
                                                      26 (1983) (citing to Colorado River).
   11
     The parties agreed that disputes will            Indeed, if the reverse were true, federal
be governed by New York law in Section
IX.K of the 1999 Agreement.
                                                      Moses H. Cone Memorial Hosp. v.
   12
    We review to see if the District Court            Mercury Construction Corp., 460 U.S. 1,
abused its discretion in issuing the stay.            19 (1983).

                                                  9
courts would be able to rely upon judicial           right to litigate. Marriott argues that it can
economy and stay litigation whenever                 make out the clear hardship or inequity
plaintiffs elected to file state actions             needed to support the District Court’s stay
related to their pending federal claims. See         and, unlike Avendra, it filed a formal
F EDERAL J URISDICTION, supra, at § 14.2             motion in support of this argument.
(“[R]equiring federal court dismissal                However, the District Court did not stay
would give litigants a powerful tool to              the litigation based on any hardship to
keep cases out of federal court or remove            Marriott; it stayed the litigation based on
cases to state court simply by filing a              Avendra’s presence in the litigation and
parallel suit in state court.”)                      considerations of judicial efficiency.
                                                     Accordingly, any hardship Marriott may
        We recognize the potential for
                                                     now claim is not before us.
judicial efficiency that lies in possible
collateral estoppel because the arbitrator                   Nor is there any evidence to support
could make determinations relevant to                a finding of hardship or inequity to
CTF’s federal claims. However, we have               Avendra in the record. Avendra stated “a
already explained that staying litigation for        preference” that the arbitration proceed
that reason effectively denies CTF its               first when it spoke briefly to the District
contracted for day in court. The right to            Court at a hearing on Marriott’s motion to
litigate would mean little if the substance          compel arbitration and CTF’s motion for
of the litigation, when CTF’s day in court           preliminary injunction. The basis for its
finally dawns, may be driven by something            preference was that it would be forced to
that may have occurred during arbitration.           defend itself twice – once in arbitration,
                                                     once in litigation – unless the litigation
                                                     was stayed in favor of the arbitration. It
        Similarly, Avendra’s presence does
                                                     believed that the arbitration was likely to
not provide a satisfactory basis for the
                                                     settle claims relating to it and this would
stay. The Supreme Court has said that,
                                                     prevent it from ever having to deal with
when a District Court decides whether to
                                                     CTF or defend in the litigation. However,
stay a suit pending the outcome of another
                                                     Avendra’s convenience can not defeat
suit in the same forum, “the suppliant for
                                                     CTF’s contractual right to litigate.
a stay must make out a clear case of
                                                     Moreover, it is not at all clear that it would
hardship or inequity in being required to
                                                     actually be inequitable to expect Avendra
go forward. . . .” Landis v. North Am. Co.,
                                                     to defend itself against two claims brought
299 U.S. 248, 255 (1936). Although the
                                                     by two separate corporations.
situation here differs because the District
Court had to decide whether to stay this                        IV. CONCLUSION
litigation pending the outcome of an
                                                            For all of the above reasons, we
arbitration, the same logic applies. The
                                                     will affirm the order of the District Court
opposing party must state a clear
                                                     denying Marriott’s request to compel
countervailing interest to abridge a party’s

                                                10
arbitration against CTF, and we will                arbitration and denying Marriott’s motion
reverse the District Court’s order staying          to compel arbitration, I respectfully
CTF’s litigation against M arriott.                 dissent. E.I. Dupont De Nemours & Co. v.
                                                    R hone P o u l e n c F i b e r & R e s i n
                                                    Intermediaries, S.A.S., 269 F.3d 187, 203
                                                    (3d Cir. 2001) (quoting Swint v. Chambers
                                                    County Comm’n, 514 U.S. 35, 50-51
                                                    (1995)).
CTF HOTEL HOLDINGS, INC. V.
                                                            The question whether the District
MARRIOTT INTERNATIONAL, INC.
                                                    Court abused its discretion in granting the
(NOS. 02-2732 & 02-2898)
                                                    stay involves the District Court’s
                                                    consideration of myriad factors affecting
                                                    judicial economy, the “hardship or
SMITH, Circuit Judge, Concurring in Part
                                                    inequity” that Marriott would face in going
and Dissenting in Part:
                                                    forward with the litigation, and the injury
                                                    that a stay would inflict on CTF. Landis v.
                                                    N. Am. Co., 299 U.S. 248, 254-55 (1936).
        I agree with the majority that the
                                                    These considerations are distinct from the
contract between the parties is “crystal
                                                    questions of contract interpretation
clear” that disputes between CTF Hotel
                                                    presented in Marriott’s appeal. Indeed, the
Holdings, Inc. (“CTF”) and M arriott
                                                    majority has no difficulty extricating
International, Inc. (“M arriott”) are not
                                                    Marriott’s appeal from CTF’s cross-
subject to mandatory arbitration. Slip Op.
                                                    appeal. The majority first interprets the
at 13. I part company with my colleagues
                                                    contract between the parties (correctly, I
in their decision to exercise jurisdiction
                                                    may add), and then proceeds to the
over CTF’s cross-appeal from the District
                                                    factually and analytically distinct question
Court’s discretionary stay order. The
                                                    presented in the cross-appeal.          The
majority correctly observes that “a stay is
                                                    majority’s opinion demonstrates that it
usually not a final order because it
                                                    “can readily decide” the meaning of the
provides only a temporary respite from
                                                    parties’ contract “ w ithout at all
litigation.” Slip Op. at 7 (citing Marcus v.
                                                    considering” whether the stay order was a
Twp. of Abington, 38 F.3d 1367, 1370 (3d
                                                    valid exercise of the District Court’s
Cir. 1994)). Nevertheless, the majority
                                                    discretion. E.I. Dupont De Nemours, 269
concludes that the District Court’s order is
                                                    F.3d at 204 (quoting Rein v. Socialist
reviewable under the doctrine of pendent
                                                    People’s Libyan Arab Jamahiriya, 162
appellate jurisdiction. Because the stay
                                                    F.3d 748, 759 (2d Cir. 1998)); see also In
order in this case is neither “inextricably
                                                    re Montgomery County, 215 F.3d 367,
intertwined with” nor “necessary to ensure
                                                    375-76 (3d Cir. 2000). Accordingly, the
meaningful review of” the District Court’s
                                                    issues raised in the appeal and the
order granting CTF’s motion to enjoin

                                               11
cross-appeal      are   not    “inextricably           exempted from the coverage of the Federal
intertwined.”                                          Arbitration Act such that arbitration could
                                                       not be compelled under Federal law; and
        Nor is it necessary to exercise
                                                       (2) because this FAA exem ption
jurisdiction over the cross-appeal in order
                                                       preempted enforcement of the arbitration
to meaningfully adjudicate Marriott’s
                                                       agreement under state law. Id. at 591.
appeal. I am sympathetic to the majority’s
                                                       This Court affirmed the district court’s
concern that staying CTF’s litigation
                                                       ruling that the arbitration agreement was
pending the arbitration between Hotel
                                                       exempted from enforcement under the
Property Investments Ltd. (“HPI”) and
                                                       FAA, exercising jurisdiction under 9
Marriott effectively denies CTF the benefit
                                                       U.S.C. § 16(a). Palcko, 372 F.3d at 591,
of its bargain with Marriott. We have
                                                       594. We exercised pendent appellate
determined that the parties bargained for a
                                                       jurisdiction over the district court’s second
two-track dispute resolution procedure,
                                                       ruling—that t he F AA e x em ption
with HPI subject to mandatory arbitration
                                                       preempted enforcement of the arbitration
and CTF free to go to court. Nevertheless,
                                                       agreement under state law—holding that
the freedom from arbitration that CTF
                                                       review of both issues was “necessary to
bargained for is not unqualified. Instead,
                                                       ensure meaningful review of the District
CTF’s right to litigate its disputes with
                                                       Court’s order in its entirety.” Id. at 595.13
Marriott is necessarily subject to the
District Court’s “pow er to sta y                              In Palcko, the appealable and non-
proceedings [which] is incidental to the               appealable issues were both necessary
power inherent in every court to control               conditions to the same order— the denial
the disposition of the causes on its docket            of the motion to dismiss. Resolving either
with economy of time and effort for itself,            issue in defendant’s favor would have
for counsel, and for litigants.” Landis, 299           required reversal of the order, triggering
U.S. at 254. Returning the case to the                 arbitration proceedings.       Id. at 596
District Court without disturbing the stay             (reversing the district court’s preemption
puts CTF in precisely the position it                  ruling and remanding for enforcement of
bargained for, i.e., that of any other litigant        the arbitration agreement under state law).
subject to the ordinary incidents of                   Had we not exercised jurisdiction over the
litigation, including the court’s inherent             district court’s preemption ruling,
power to control its docket.                           defendant would have been required to
                                                       defend the discrimination action in federal
       This      case     is    t h e r e fo re
                                                       district court. If, on a subsequent appeal
distinguishable from Palcko v. Airborne
Express, Inc., 372 F.3d 588 (3d Cir. 2004),
decided after oral argument in this case. In             13
                                                            9 U.S.C. § 16(a) only covers motions
Palcko, the district court denied a motion
                                                       to compel under the FAA, and does not
to compel arbitration on two grounds: (1)
                                                       cover motions to compel under state law.
because the arbitration agreement was
                                                       Palcko, 372 F.3d at 594.

                                                  12
from a final order in that action, we were           every stay order, and therefore does not
to reverse the district court’s preemption           support jurisdiction by itself.          E.g.,
ruling, the right to arbitration would               Marcus, 38 F.3d at 1370 (stay pending
already have been lost. A victory at that            completion of parallel state court criminal
stage would be meaningless because the               proceedings not appealable). Ordinarily,
defendant employer would have already                we guard against the danger of a stay order
been subjected to the protracted litigation          becoming “effectively unreviewable” by
that it sought to avoid through the                  applying the collateral order doctrine. See
arbitration agreement.                               Moses H. Cone Memorial Hospital v.
                                                     Mercury Constr. Corp., 460 U.S. 1, 11-12
        In this case, the District Court’s
                                                     (1983) (citing Cohen v. Beneficial Indus.
stay order is independent of its order on
                                                     Loan Corp., 337 U.S. 541 (1949)). An
Marriott’s motion to compel, and was not
                                                     order staying litigation pending other
a necessary condition to its refusal to
                                                     proceedings may be an appealable
compel arbitration. Thus, unlike the
                                                     collateral order where it puts a litigant
situation in Palcko, resolution of the non-
                                                     “effectively out of court.” Moses H. Cone,
appealable issue does not necessitate a
                                                     460 U.S. at 10 & n.11. But where those
particular ruling on the appealable order.
                                                     other proceedings will have no preclusive
And as discussed above, the stay order
                                                     effect on the federal litigation, the litigant
does not threaten to destroy CTF’s right to
                                                     cannot be said to be “effectively out of
litigate. CTF is not a party to the HPI
                                                     court,” and the stay order is not
arbitration, and the stay order does not
                                                     appealable. Id. at 10, 12; Marcus, 38 F.3d
force CTF into arbitration. Although
                                                     at 1371; Trent v. Dial Med. of Fla., Inc.,
CTF’s lawsuit has been delayed, CTF’s
                                                     33 F.3d 217, 221 (3d Cir. 1994).
right to litigate remains intact, subject to
                                                     CTF— the party invoking pendent
the District Court’s inherent power to
                                                     appellate jurisdiction—insists that the HPI
manage its docket.
                                                     arbitration will have no preclusive effect
       I am also sympathetic to the                  against CTF in its lawsuit against Marriott.
majority’s concern that the District Court’s         Accordingly, CTF cannot suggest that the
stay order may expire and become moot                stay order has put it “effectively out of
before an appealable final order can issue.          court.” Instead, the effect of the stay is
Slip Op. at 8.14 This, however, is true of           “delay, and delay alone.” Marcus, 38 F.3d



   14
      Of course, it is also possible that the
stay order will be vacated by the District
Court prior to the termination of the HPI            expiration of the stay must therefore be
arbitration, or that CTF and M arriott will          balanced against the possibility that the
settle their dispute. The potential that             stay may terminate under circumstances
CTF’s cross-appeal will be mooted by the             acceptable to CTF.

                                                13
at 1371.15
        Because the District Court’s stay
order is not an appealable final or
interlocutory order, and because I believe
that review of the stay order is not
“necessary to ensure meaningful review
of” the order enjoining arbitration, I would
dismiss CTF’s cross-appeal for lack of
jurisdiction.




     15
          While a stay of indefinite and
unreasonable duration may be appealable,
we are not confronted with such an order
in this case. See Haberern v. Lehigh &
New England Ry., 554 F.2d 581, 584 (3d
Cir. 1977) (vacating stay pending
proceedings that had been ongoing for ten
years and whose “expected longevity . . .
exceed[ed] that of the plaintiff”).

                                               14
