Commercial Litigation and Arbitration

Voluntary Dismissal — with or without Prejudice — Renders Order Compelling Arbitration Appealable; Stay of Action Does Not

In re Pharmacy Benefit Managers Antitrust Litig,, 2012 U.S. App. LEXIS 23432 (3d Cir. Nov. 15, 2012):

AdvancePCS questions our jurisdiction to hear this appeal. Under the FAA, a party may generally not appeal from an interlocutory order "compelling arbitration" or "granting a stay" pending arbitration. 9 U.S.C. § 16(b)(1) & (b)(3). Thus, Judge Robreno's order compelling arbitration was, at least initially, non-reviewable. In an effort to circumvent the nonappealabilty of Judge Robreno's order, Plaintiffs sought several times, and eventually obtained, an order lifting the stay and dismissing their complaint with prejudice.

The FAA provides that an "appeal may be taken from . . . a final decision with respect to an arbitration that is subject to this title." Id. § 16(a)(3). Where a district court compels arbitration and dismisses the federal lawsuit (rather than staying it), the Supreme Court has held that is a "final decision with respect to an arbitration," and an appeal may then be taken challenging the order compelling arbitration. Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 89, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000). This is true whether the dismissal of the case is with or without prejudice. Blair v. Scott Specialty Gases, 283 F.3d 595, 600-02 (3d Cir. 2002). The Supreme Court reasoned that the phrase "final decision with respect to an arbitration" has the same meaning as "final decision" in other contexts, and refers to a decision that "'ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.'" Randolph, 531 U.S. at 86 (quoting Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 867, 114 S. Ct. 1992, 128 L. Ed. 2d 842 (1994) and Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S. Ct. 2454, 57 L. Ed. 2d 351 (1978)). The "judgment" to be executed upon is not the underlying complaint, but a "new" and "separate" proceeding in the District Court to enter judgment on the arbitration award or vacate or modify that award.

AdvancePCS attempts to distinguish Randolph and Blair, arguing that those cases involved involuntary dismissals of the plaintiffs' claims simultaneous with the order compelling arbitration, whereas Plaintiffs sought a voluntary dismissal of their complaint after the fact. AdvancePCS contends that Plaintiffs are thus seeking an "end run" around the nonappealability of Judge Robreno's order. If Judge Robreno had dismissed Plaintiffs' claims at the same time he compelled arbitration, there would be no doubt as to our jurisdiction under Randolph and Blair.

In essence, though, Judge Jones' dismissal order modified Judge Robreno's order by substituting a dismissal for the stay, thus putting Plaintiffs in a functionally-identical position to the plaintiffs in Randolph and Blair. Just as in those cases, the ultimate dismissal was an order that ended the litigation on the merits and left nothing more for the District Court to do but execute the judgment. It is thus a "final decision with respect to an arbitration" within the meaning of 9 U.S.C. § 16(a)(3). The fact that Plaintiffs obtained the dismissal in a different manner is irrelevant because, as we have noted, "[t]he [Randolph] decision draws a distinction between dismissals and stays, but does not draw any distinctions within the universe of dismissals." Blair, 283 F.3d at 602. Accordingly, we have subject matter jurisdiction.

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