In an appeal from an order refusing to compel arbitration on all claims, the Fourth Circuit split on whether it could use pendent appellate jurisdiction to review the order insofar as it directed arbitration on some of the claims.
February 23, 2022
The general rule for appealing interlocutory arbitration orders is pretty straightforward. Under 9 U.S.C. § 16, orders that refuse to direct arbitration under the Federal Arbitration Act are immediately appealable. Orders that direct arbitration aren’t. But what if an order directs arbitration on some claims but not on others?
In Lyons v. PNC Bank, the Fourth Circuit split on whether it could use use pendent appellate jurisdiction to review an order insofar as it directed arbitration. Without much explanation, the court held that § 16 does not limit the use of pendent appellate jurisdiction. And extending pendent appellate jurisdiction in Lyons was appropriate, as the court’s resolution of the appealable issue meant meant that none of the claims were subject to arbitration. Judge Quattlebaum dissented, contending that § 16’s bar on appeals from orders directing arbitration prohibited the use of pendent appellate jurisdiction.
One twist that Lyons did not mention is § 16’s use of the word “order.” The Supreme Court recently said in B.P. P.L.C. v. Mayor & City Council of Baltimore that an appeal from a remand order under 28 U.S.C § 1447(d) encompasses all issues addressed in that order. I was no fan of that decision. And now it makes me wonder what to do with § 16, which permits appeals from “order[s]” that reject arbitration while prohibiting appeals from “order[s]” favorable to arbitration. If an order does both, BP suggests the absurd conclusion that the entire order is both appealable and not appealable.
The Lyons Litigation
Lyons involved claims against a bank under the Truth in Lending Act. The plaintiff held two deposit accounts—one opened in 2010 and one opened in 2014—with the bank. When the plaintiff did not pay the outstanding balance on a home equity loan, the bank withdrew funds from both of those accounts to satisfy the debt. The plaintiff sued. The bank then moved to compel arbitration, relying on the arbitration provision in the contract for the 2010 account.
The district court granted that request in part. It determined that the Dodd-Frank Act barred arbitration of any claims related to the plaintiff’s 2014 account. But the bank added an arbitration provision to the agreement for the 2010 account before the Act’s effective date. So claims related to the 2010 account were subject to arbitration. The district court accordingly ordered arbitration for claims related to withdrawals from the 2010 account but denied arbitration for claims related to withdrawals from the 2014 account.
The bank appealed the district court’s decision insofar as it denied arbitration. The plaintiff cross-appealed the order insofar as it required arbitration.
Arbitration Appeals & Pendent Appellate Jurisdiction
A majority of the Fourth Circuit held that it had jurisdiction over both appeals. Appellate jurisdiction over the denial of arbitration was straightforward. 9 U.S.C. § 16(a)(1) permits immediate appeals from orders that (among other things) refuse to order arbitration. The Fourth Circuit accordingly had jurisdiction under § 16 to review the refusal to order arbitration on claims related to the plaintiff’s 2014 account.
The court went on to hold that it could extend pendent appellate jurisdiction over the rest of the order. Pendent appellate jurisdiction allows courts of appeals to review a decision that would not normally be final or appealable when the court has jurisdiction over another, related decision. Most courts hold that they have discretion to extend pendent appellate jurisdiction under two conditions: (1) the two decisions are “inextricably intertwined,” or (2) review of the pendent decision is necessary to effectively review the appealable one.
Granted, § 16(b) prohibits appeals from interlocutory orders that (among other things) direct arbitration to proceed. But some courts of appeals have held that § 16(b) does not limit the use of pendent appellate jurisdiction. At least one court has held to the contrary, and others have avoided the issue. Without much explanation for why, the Fourth Circuit agreed with the first group and held that pendent appellate jurisdiction can be used in arbitration appeals.
As for the use of pendent appellate jurisdiction in Lyons, the Fourth Circuit determined that the two arbitration decisions were sufficiently intertwined. The details are a little complicated, but the bank essentially argued that the arbitration provision in the agreement for the 2010 account required arbitration of all claims. The Fourth Circuit held that the 2010 account agreement did not require arbitration at all. And that decision necessarily resolved whether any of the plaintiff’s claims needed to be arbitrated, whether related to the 2010 account or the 2014 account. The bank’s appeal thus resolved all issues, and pendent appellate jurisdiction was appropriate.
Judge Quattlebaum dissented on the extension of pendent appellate jurisdiction. As he saw things, § 16 squarely prohibits immediate review of decisions ordering arbitration. He also thought that the Fourth Circuit’s caselaw on both arbitration appeals and pendent appellate jurisdiction pointed towards disallowing the cross appeal. And while it might have been more efficient to review both aspects of the district court’s decision together, the court could not alter its appellate jurisdiction to reach that outcome.
Appealable & Non-Appealable Arbitration “Orders”
One point that neither opinion raised is the impact of the Supreme Court’s recent decision in B.P. P.L.C. v. Mayor & City Council of Baltimore, which addressed the scope of remand appeals under 28 U.S.C § 1447(d). That provision generally prohibits appeals from orders remanding an action to state court:
An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.
But as the quoted language shows, § 1447(d) contains two exceptions: when the defendant invokes the federal-officer removal statute (28 U.S.C. § 1442) or the civil-rights removal statute (28 U.S.C. § 1443). So parties that remove a case under either of those statutes can appeal an order remanding the case to state court.
In B.P., the Supreme Court held when a case is removed under § 1442 or § 1443, the court of appeals can review every proffered ground for removal, not just the expressly excepted grounds. In doing so, the Court emphasized § 1447(d)’s use of the word “orders.” An order is “a ‘written direction or command delivered by . . . a court or judge.’” Review of a remand order thus means review of the propriety of the remand, not just some of the proffered bases for removal. So the court of appeals can address every proffered ground for removal, not just those that § 1447(d) expressly excepts. In so holding, the Court also noted that it has given the same meaning to the word “order” in 28 U.S.C. § 1292(b).
How does B.P. impact arbitration appeals? One part of § 16 says appeals can be taken from an “an order” that (among other things) refuses to stay an action in favor of arbitration or denies a petition to order arbitration. B.P. suggests that the entirety of an order refusing to direct arbitration is appealable, not just the part that rejects arbitration. Applying that logic to Lyons would mean that the court could also review the part of the order that directed arbitration without needing to invoke pendent appellate jurisdiction.
But § 16 also says that parties cannot appeal “from an interlocutory order” that (among other things) stays an action in favor of arbitration or directs arbitration to proceed. B.P. suggests that this entire order is not appealable, not just the part of it that favors arbitration. Applying that logic to Lyons would mean that no aspect of the district court’s decision was appealable.
This is all silly, of course. It would be absurd for § 16 to simultaneously permit and prohibit an appeal from an order. But it’s the sort of absurdity that results from over-reliance on the word “order.”
Lyons v. PNC Bank, 2022 WL 453060 (4th Cir. Feb. 15, 2022), available at the Fourth Circuit and Westlaw.