
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                                 ____________________        No. 94-2251                            HEWLETT-PACKARD COMPANY, INC.,                                Plaintiff, Appellant,                                          v.                               HELGE BERG, ETC., ET AL.                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. Joseph L. Tauro, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                                Boudin, Circuit Judge,                                        _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Stahl, Circuit Judge.                                         _____________                                 ____________________            Richard Allan Horning with whom Horning,  Janin & Harvey, Kevin P.            _____________________           ________________________  ________        Light, Choate,  Hall & Stewart and  Robert W. Sutis were  on brief for        _____  _______________________      _______________        appellant.            David A. Burman for appellees.            _______________                                 ____________________                                    August 3, 1995                                 ____________________                 BOUDIN, Circuit Judge.  Hewlett-Packard  appeals from an                         _____________            order of  the district court confirming  an arbitration award            rendered in a business dispute  with appellees Helge Berg and            Lars Skoog  and rejecting  Hewlett-Packard's  requests for  a            stay of the confirmation proceeding  or a declaration that it            is entitled to  a set-off for the  award.  The case  presents            several difficult  legal issues which can  be understood only            after a brief description of the facts and prior proceedings.                                    I.  BACKGROUND                                    I.  BACKGROUND                 In March  1982, Apollo  Computer, now owned  by Hewlett-            Packard, entered  into  a two-year  distributorship  contract            with a Swedish company  called Dicoscan Distributed  Computer            Scandinavia  to  sell  Hewlett-Packard  products  in  several            Nordic countries.  The 1982 contract included an agreement to            submit any dispute under the contract to binding arbitration.            In  March 1984,  the parties  executed a  new distributorship            contract, which also contained an arbitration clause.                 In  the  meantime,   during  1983  and   1984,  Dicoscan            experienced financial  problems.  In mid-1984, Apollo claimed            that  Dicoscan was far behind in its payments.  In September,            Apollo terminated  the 1984 agreement.   The following month,            Dicoscan filed for bankruptcy.  The bankruptcy court assigned            to Berg  and Skoog, directors  and officers of  Dicoscan, the            right to bring claims against Apollo based on the contracts.                                         -2-                                         -2-                 Berg and Skoog filed a request  for arbitration with the            International  Chamber  of  Commerce  Court  of  Arbitration,            claiming  millions  of  dollars  of damages  arising  out  of            Apollo's   unilateral  termination  of  the  1984  agreement.            Apollo counterclaimed  in the  arbitration by asserting  that            the  Swedish company had failed  to pay about  $10,000 due on            the  1984  contract and  about  $207,000 due  under  the 1982            contract.   After a dispute  about Berg and  Skoog's right to            invoke arbitration, see   Apollo Computer, Inc. v. Berg,  886                                ___   _____________________    ____            F.2d 469, 473 (1st Cir. 1989),  an arbitration proceeding was            begun.                 The arbitrators  were required by the parties' contracts            to  apply Massachusetts  law.    Ultimately, the  arbitrators            awarded around $700,000 plus interest  to Berg and Skoog, but            allowed a  set-off for the  $10,000 that Dicoscan  still owed            Apollo  under the 1984 contract.   To both parties' surprise,            the tribunal held that it was without  jurisdiction to decide            Apollo's more  substantial claim based on  the 1982 contract,            ruling that the  1982 contract  was not within  the Terms  of            Reference issued by  the arbitrators at the beginning  of the            proceeding.                 As a  result, Apollo was left with  a sizable obligation            to  Berg   and  Skoog   on  the   1984  contract   without  a            determination of its claim for more than $207,000 on the 1982            contract.  Apollo unilaterally decided to pay the arbitration                                         -3-                                         -3-            award  amount  but  subtracted  the  $207,000  plus  interest            (together,  about  $300,000)  as  a  "setoff in  recoupment,"            which,  it  said,  is  a  time-honored  common  law  doctrine            embraced  in  Massachusetts  courts.   Apollo  also  filed  a            request with the tribunal  for a second arbitration regarding            the  1982 contract.  That tribunal has indicated that it will            hear the arbitration.                 In  January  1993,   Apollo  (later  succeeded  as   the            plaintiff by  Hewlett-Packard)  filed the  complaint in  this            action  with  the  Massachusetts  district  court.   Hewlett-            Packard requested  that the  district court (1)  declare that            Hewlett-Packard was entitled to the $207,000 set-off and that            the arbitration award is fully satisfied, and (2) vacate  the            tribunal's  award  and  correct it.    Hewlett-Packard  later            withdrew its second claim for relief.                 Berg and  Skoog moved to dismiss  the complaint, arguing            that  such declaratory  relief is  unavailable as  to foreign            arbitration  awards.    Later,   Berg  and  Skoog  moved  for            confirmation  of  the  arbitration  award.    Hewlett-Packard            opposed  confirmation of  the award  on  the ground  that, by            failing to include  its 1982 set-off, the  award was contrary            to public policy.   In the alternative, Hewlett-Packard moved            to  stay  confirmation, pending  the  outcome  of the  second            arbitration.  Hewlett-Packard also  asked the court to compel            arbitration as to its 1982 claim.                                         -4-                                         -4-                 On  November  7,  1994,   the  district  judge  filed  a            memorandum, together with a  separate order, disposing of all            of these  motions.   The court's order  compelled arbitration            under the 1982 contract but it confirmed the award previously            made by the  tribunal on the 1984  contract.  The  court said            that  it   was  without   power  to  stay   the  confirmation            proceeding, as  Hewlett-Packard had  requested, and  that the            request for a set-off  was an improper attempt to  modify the            tribunal's award.                   Apparently   ready   to   enforce    the   now-confirmed            arbitration award, Berg  and Skoog moved the court  for entry            of  final  judgment,  and   proffered  a  detailed   judgment            specifying  the award,  interest and  attorney's fees.   Four            days later,  Hewlett-Packard filed  its notice of  appeal and            thereafter filed a response  disputing certain aspects of the            proposed judgment.  The  district court has not acted  on the            motion  for entry of final judgment; and no such judgment has            been entered.                                   II.  DISCUSSION                                   II.  DISCUSSION                 Hewlett-Packard  purports to  appeal  all  three of  the            district court's  adverse actions:   the confirmation  of the            arbitration  award,  the refusal  to  stay  that confirmation            proceeding pending the outcome of the second arbitration; and            the rejection of Hewlett-Packard's set-off claim declaration.            Commendably, Hewlett-Packard  has alerted  us  to a  possible                                         -5-                                         -5-            jurisdiction  problem,  which   this  court  is  obliged   to            consider.   We  do  so but  caution  future panels  that  the            jurisdictional problems have not been briefed in this case.                 Nothing  in the  record in  this case  purports to  be a            "final  judgment,"  set  forth  in  a  separate  document  as            required  by Fed.  R. Civ.  P. 58,  disposing of  all claims.            Thus,  in formal  terms there  is  no basis  for appeal  of a            "final  decision" under 28 U.S.C.    1291, even  if the court            actually  resolved all of the  claims before it.   Indeed, as            already  noted, the  defendants  have pending  a motion  that            requests entry of a "final judgment."                 Nevertheless,  the  November  7  order,  insofar  as  it            confirms  the arbitration  award, is  appealable now  because            Congress  directed  in  the  statute  governing  arbitration-            related  appeals that  such  an "order"  confirming an  award            should be  immediately appealable.   9 U.S.C.    16(a)(1)(D).            The reason  is a pro-arbitration policy  designed to expedite            confirmation  of  arbitration awards.    This  is clear  from            precedent  and  scholarly  commentary.   See,  e.g.,  15B  C.                                                     __________            Wright, A. Miller & E. Cooper, Federal Practice and Procedure                                           ______________________________              3914.17, at 9-12, 32-34 (2d ed. 1992).                 There  is one  technical  hitch.   Seemingly, the  order            confirming the  award is not  itself a judgment   that can be            collected through court processes until it is entered  on the            docket as a judgment.  See  9 U.S.C.   13.  This has  nothing                                   ___                                         -6-                                         -6-            to  do with the final judgment rule; rather, the statute that            governs  confirmations provides that  after a confirmation is            ordered, a separate "entry of judgment" must be made pursuant            to that  order, and  it  is only  at that  stage that  "[t]he            judgment  so entered . . . may be  enforced as if it had been            rendered in an action  in the court in which it  is entered."            Id.            ___                 Nevertheless, the Federal  Rules of  Civil Procedure  do            not say that appeals can only be taken from judgments; on the            contrary, they contemplate that, subject to the complex rules            that determine  what is immediately appealable,  there may be            such a thing as an "appealable order" that is not a judgment.            Fed. R. Civ. P. 79(b).   And, as already noted,  Congress has            designated  as  immediately  appealable   "an  order  .  .  .            confirming  .  .  . an  [arbitration]  award."    9 U.S.C.               16(a)(1)(D).                 Our position  is  not at  odds  with Middleby  Corp.  v.                                                      _______________            Hussmann  Corp., 962 F.2d 614 (7th Cir. 1992).  Middleby held            _______________                                 ________            that no immediate  appeal could be  taken where the  district            court issued an  order of confirmation but declined  to enter            judgment  after  making  a specific  determination  to  delay            giving  effect  to  the  confirmation   order  until  further            proceedings were concluded.   Here, by contrast, the district            court denied  the requested stay, and  the confirmation order            is  immediately  effective,  requiring  only  the  filing  of                                         -7-                                         -7-            specified  papers  with the  clerk  to permit  "the  entry of            judgment thereon."  9 U.S.C.   13.                 Because the  confirmation order is  appealable, we think            that there is also before us Hewlett-Packard's claim that the            confirmation proceeding should have  been stayed.  The reason            is simply that the underlying argument for  a stay is also an            objection to the  confirmation order itself.  To this extent,            it is effectively an interlocutory ruling made in the process            of approving the confirmation request and like any other such            interlocutory ruling it  is reviewable at  the time that  the            confirmation order  itself  is brought  up  on appeal.    Cf.                                                                      ___            Stringfellow v. Concerned Neighbors  in Action, 480 U.S. 370,            ____________    ______________________________            375  (1987); 15A Wright, Miller & Cooper, supra,   3905.1, at                                                      _____            249-63.                 A  similar argument  might  also be  made to  justify an            appeal  now based on the  district court's refusal to declare            Hewlett-Packard's  right to  the  set-off it  asserted.   The            problem is complicated,  but we  see no need  to resolve  the            complexities.  Whether or  not the refusal to allow  the set-            off  is an appealable issue,  the refusal at  this time turns            out not to be a legal error, so the jurisdictional issue need            not be decided.  See Norton v. Matthews, 427 U.S. 524, 530-32                             ___ ______    ________            (1976);  In re Pioneer Ford Sales,  729 F.2d 27, 31 (1st Cir.                     ________________________            1984).                                         -8-                                         -8-                 We turn now  to the  merits.   Hewlett-Packard does  not            object to the confirmation  of the award in all  respects; it            says  it  has  paid  the award  except  the  disputed  amount            including  interest.    But  Hewlett-Packard  says  that  the            district court erred by confirming  the award in full instead            of  either allowing  a  set-off or  granting  a stay  of  the            confirmation pending the results of the new arbitration.                 We  agree with  the district  court's rejection  at this            time of the first alternative.  Whether Hewlett-Packard has a            valid   claim  under   the  1982   contract  is   subject  to            arbitration; we agree  with the district  court--and Hewlett-            Packard--that the  tribunal has never resolved  the merits of            that claim.  Whatever the Massachusetts law on set-offs,  the            district court could not allow the set-off at present without            determining that Hewlett-Packard had  a valid claim, which is            the very subject of the arbitration.                 It  is hard  to  imagine  a  step  that  would  be  more            offensive  to  the   pro-arbitration  policies  reflected  in            Congress'  endorsement   of  the   1958  Convention  on   the            Recognition and Enforcement of Foreign Arbitral Awards, often            called  the New York Convention.  The New York Convention was            approved   by  Congress,  and  implementing  legislation  was            codified at 9 U.S.C.    201-08.  The statute  enlists the aid            of federal courts to compel arbitration.  9 U.S.C.   206.  By            contrast,   the   judicial  set-off   requested   here  would                                         -9-                                         -9-            circumvent the 1982 contract to arbitrate and the now-pending            arbitration under that contract.                 The request to defer confirmation of the award under the            1984  contract stands  on a different  footing.   However the            case might stand absent the bankruptcy, Dicoscan's bankruptcy            gives Hewlett-Packard a very substantial prudential argument.            If the existing award  were confirmed in full and  reduced to            judgment, Hewlett-Packard would have to pay the full award to            the  defendants  as  successors-in-interest of  an  insolvent            company.  If in due course  Hewlett-Packard then prevailed on            its claims against the insolvent company on a closely related            transaction,  it   would  have  no  assurance  of  collecting            anything.                 Further,  Hewlett-Packard  cannot  be  blamed   for  the            discrepant timing in the resolution of its claim, or at least            no argument to that effect has been made.  After  it was told            that the  defendants did  have arbitration rights  despite an            anti-assignment  clause  in  the  contracts,  Hewlett-Packard            apparently  made  a  reasonable   effort  to  have  both  the            defendants' claim  and its  own counterclaim resolved  in one            proceeding  at   the  same  time.     Only  the  arbitrators'            surprising  interpretation  of their mandate frustrated  this            attempt.                 Under these  circumstances, the seemingly  fair solution            would be  to  confirm  the award  in  its  uncontested  part,                                         -10-                                         -10-            reserving confirmation of the balance until the 1982 contract            dispute  is  arbitrated.    The  district  court  refused  to            consider a stay  of confirmation  on the ground  that it  was            without power to  do so.   We fully understand the  basis for            the  district  court's  doubt  about its  authority,  but  we            conclude that it  does have the power to issue  a stay in the            peculiar circumstances of this case.                 Ordinarily  there  could  be  no  doubt  that  a  court,            although obliged  to decide a claim,  would retain discretion            to  defer  proceedings for  prudential  reasons.   Indeed,  a            typical reason  is the  pendency of a  related proceeding  in            another  tribunal.    "[T]he  power to  stay  proceedings  is            incidental to the  power inherent in  every court to  control            the disposition of the  causes on its docket with  economy of            time and effort for itself, for counsel, and  for litigants."            Landis v. North Amer. Co., 299 U.S. 248, 254 (1936).            ______    _______________                 The question here is whether this traditional  authority            is curtailed  by the New York Convention and its implementing            legislation.  The statute provides that,  upon a petition for            confirmation,  a  district  court "shall  confirm  the  award                                               _____            unless it finds one of the grounds for refusal or deferral of            recognition or enforcement of the award specified in the said            Convention."  9 U.S.C.   207 (emphasis added).  Article VI of            the Convention is the only provision that deals  with staying            confirmation.  Article VI states:                                         -11-                                         -11-                 If  an  application   for  the  setting  aside   or                 suspension  of  the  award   has  been  made  to  a                 competent authority [in the country where the award                 has  been made],  the  authority  before which  the                 award  is  sought to  be  relied  upon may,  if  it                 considers it  proper, adjourn  the decision  on the                 enforcement of the award [and require a security].            The circumstances  outlined in  Article VI  do not  appear to            exist in this case.  The question is whether a district court            may grant a stay in circumstances other than those authorized            in Article VI.                 The fact that section  207 uses the word "shall"  is not            decisive, because a stay  is a deferral rather  than refusal.            But  the fact that the  statute refers to  the Convention and            the  Convention lists  a single  ground for  a stay  could be            taken  to exclude  all other grounds  under the  principle of            expressio  unius  est  exclusio   alterius.    That  was,  in            __________________________________________            substance,  the reasoning  of the  district court.   However,            expressio  unius  is  an  aid  to  construction  and  not  an            ________________            inflexible rule.   See, e.g., United  States v. Massachusetts                               _________  ______________    _____________            Bay  Transport.  Auth.,  614 F.2d  27,  28  (1st  Cir. 1980).            ______________________            Whatever we might think  if the question were  entirely open,            precedent  informs  our  decision  in this  case.    Domestic            arbitrations are  governed by  the United  States Arbitration            Act (chapter 1 of Title 9) but not by the Convention (chapter            2  of Title 9).  The  Act states that, upon application, "the            court  must grant [a confirmation] order  unless the award is                   ____            vacated, modified, or corrected  as prescribed in sections 10                                         -12-                                         -12-            and 11 of this title."  9  U.S.C.   9 (emphasis added).   But            courts  routinely grant  stays in  such cases  for prudential            reasons  not listed in sections  10 and 11.   E.g., Middleby,                                                          ____  ________            962 F.2d at 615-16.                 Similarly, this court has held that district courts have            discretion to  stay an  action to compel  arbitration pending                                              ______            the outcome of related litigation, even though the Act states            that on a motion to compel the court "shall hear the parties"            and  "shall proceed summarily  to trial."  9  U.S.C.   4; see                                                                      ___            Acton  Corp. v.  Borden, Inc.,  670 F.2d  377, 383  (1st Cir.            ____________     ____________            1982).   In Acton,  then-Judge Breyer held  that, in drafting                        _____            the  statute, Congress  did not  "intend[] a  major departure            from  the ordinary  rule allowing one  federal court  to stay            litigation when  another federal court  is on the  process of            deciding the same issue."  We take the same view of Congress'            intentions in implementing the Convention.                 Of course, a stay of confirmation should  not be lightly            granted.      A  central   purpose   of  the   Convention--an            international agreement  to which  the United States  is only            one of approximately one hundred signatories--was to expedite            the recognition of foreign arbitral  awards with a minimum of            judicial interference.  But  the risk that the power  to stay            could  be abused by  disgruntled litigants--real  though that            risk is, see Spier  v. Calzaturificio, 663 F. Supp.  871, 875                     ___ _____     ______________                                         -13-                                         -13-            (S.D.N.Y.  1987)--argues  more  for  a cautious  and  prudent            exercise of the power than for its elimination.                 Because the district court acted under a misapprehension            of its authority, we vacate the confirmation order and remand            for further  proceedings.  Whether confirmation or collection            of  the  award  should  be  partially  deferred  pending  the            resolution  of the 1982 contract  arbitration is a matter for            the  district  court  to  determine in  the  first  instance.            Still,  we think it would require some explanation if, in the            face  of  the  equities  of  this case,  the  district  court            concluded  that  the  full  award  should  be  confirmed  and            collected now.                 The  confirmation order  is  vacated and  the matter  is                                              _______            remanded  to  the  district  court  for  further  proceedings            ________            consistent with this opinion.                                         -14-                                         -14-
