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D.R.I. Notes Split Re Automatic Divestiture of Jurisdiction Following Interlocutory Appeal of the Denial of a Motion to Stay & Compel Arbitration

In this case Judge Woodcock reviewed the authority regarding interlocutory appeals of the denial of a motion to stay and compel arbitration under the FAA, and concluded that such an appeal "divests the district court of the power to proceed with the aspects of the case on appeal." Id. at 142. Therefore, he granted the defendant's motion to stay discovery pending appeal of its motion to stay and to compel arbitration. Id.

As Judge Woodcock noted, on this issue, a split exists among the circuits. Id. at 143; see Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 215 n. 6 (3d Cir.2007) (expressing agreement with "the majority rule of automatic divestiture where the Section 16(a) appeal is neither frivolous nor forfeited"); McCauley v. Halliburton Energy Servs., Inc., 413 F.3d 1158, 1162-63 (10th Cir.2005) (finding automatic divestiture of trial court jurisdiction unless appeal is frivolous or forfeited); Blinco v. Green Tree Servicing, LLC, 366 F.3d 1249, 1251 (11th Cir.2004) (finding automatic divestiture unless appeal is frivolous); Bombardier Corp. v. Nat'l R.R. Passenger Corp., No. 02-7125, 2002 WL 31818924, at *1, 2002 U.S.App. LEXIS 25858, at *2 (D.C.Cir. Dec. 12, 2002) (denying a motion to stay as unnecessary because the circuit court has "exclusive jurisdiction to resolve the threshold issue whether the dispute is arbitrable, and the district court may not proceed until the appeal is resolved"); Bradford-Scott, 128 F.3d at 505 (endorsing automatic divestiture rule, reasoning that "[c]ontinuation of proceedings in the district court largely defeats the point of the appeal and creates a risk of inconsistent handling of the case by two tribunals"); but see Motorola Credit Corp. v. Uzan, 388 F.3d 39, 65 (2d Cir.2004) (finding no automatic stay); Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir.1990) (finding no automatic stay).

Judge Woodcock concluded, based on his reading of the First Circuit's decision in Lummus Co. v. Commonwealth Oil Refining Co., 273 F.2d 613 (1st Cir.1959), that the majority view favoring an automatic stay of those issues involved in the appeal is the better view.

Full post as published by Split Circuits on July 15, 2008 (boomark / email).