Andrea J. Chiller | Bloomberg Law Weingarten Realty Investors v. Miller, No. 11-20676, 2011 BL 281972 (5th Cir. Nov. 1, 2011) Weingarten Realty Investors (WRI) and Miller Sheriden, LLC, entered into a joint venture, to which WRI lent $75 million. The loan agreement contained an arbitration clause, but a related guarantee on the loan executed by Stewart Miller did not. After WRI filed suit against Miller under the guarantee, Miller moved to compel arbitration, but the district court denied the motion. Miller appealed the denial to the U.S. Court of Appeals for the Fifth Circuit and argued that the Fifth Circuit should stay the district court proceedings pending appeal. The motion for a stay implicated a circuit split on the question of whether a party who appeals the denial of a motion to compel arbitration is entitled to an automatic stay of the proceedings in the district court. Of the circuit courts that have addressed the question, only the Second and Ninth Circuits have held that such a stay is not automatic. As a general matter, an appeal from a collateral order does not divest the district court of jurisdiction over the merits of the dispute. Relying on the U.S. Supreme Court's decision in Moses H. Cone Memorial Hospital, 460 U.S. 1 (1983), which held that the question of arbitrability of a dispute is severable from its merits, the Second and Ninth Circuits found that an arbitrability determination is a collateral issue and does not preclude the district court from addressing the merits. On the other hand, the Third, Fourth, Seventh, Tenth, and Eleventh Circuits rejected the notion that arbitrability was collateral to the merits of the appeal and therefore concluded that an appeal does preclude the district court from proceeding to the merits while the appeal is pending. Specifically, they reasoned that "the underlying claims before the district court are not collateral to the issue presented by an appeal, because the appeal is to determine whether the matter should be litigated in the district court at all." In so holding, they drew an analogy to appeals of determinations regarding double jeopardy, sovereign immunity, and qualified immunity, all of which automatically preclude a district court from adjudicating the merits. In the instant case, the Fifth Circuit took the minority position and held that a party appealing the district court's determination of a motion to compel arbitration was not entitled to an automatic stay. The bar against district courts addressing the merits of an issue being appealed is based on the danger of inconsistent simultaneous rulings from the district and appellate courts on the same legal questions. According to the Fifth Circuit, whether a dispute is subject to arbitration is separate and distinct from the underlying merits of that dispute. As it explained, "[a] determination of the arbitrability of a claim has an impact on what arbiter—judge or arbitrator—will decide the merits, but that determination does not itself decide the merits." The Court also rejected the analogies between arbitrability determinations and the issues of double jeopardy, sovereign immunity, and qualified immunity drawn by the courts that took the majority approach. Double jeopardy and sovereign immunity are constitutionally guaranteed protections from suit that are "different in character from rights fixed by private contracts." Similarly, qualified immunity reflects a public policy determination that certain individuals should be able to carry out their official duties without the threat of future lawsuits. In contrast, the Court observed that "[t]here is no public policy favoring arbitration agreements that is as powerful." Accordingly, the Court held that there was no right to an automatic stay and that it had to undergo the traditional stay analysis to determine if Miller was entitled to one. DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).