Arbitration — Stay vs. Dismissal of Action upon Granting of Motion to Compel (Circuit Split as to What FAA § 3 Mandates) — Dispositive Difference for Appellate Jurisdiction Purposes

Johnmohammadi v. Bloomingdale’s, Inc., 2014 U.S. App. LEXIS 11743 (9th Cir. June 23, 2014):

This is a class action brought by plaintiff Fatemeh Johnmohammadi to recover unpaid overtime wages from defendant Bloomingdale's, Inc., her former employer. All of Johnmohammadi's claims arise under state law and are asserted on behalf of similarly situated current and former California employees. Johnmohammadi initially filed the action in state court, but Bloomingdale's removed the action to federal court under the Class Action Fairness Act of 2005. See 28 U.S.C. §§ 1332(d)(2), 1453(b).

Once in federal court, Bloomingdale's moved to compel arbitration under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., and asked the district court to stay the action pending completion of arbitration. The court granted the motion to compel. It determined that shortly after being hired by Bloomingdale's, Johnmohammadi entered into a valid, written  [*4] arbitration agreement and that all of her claims fall within the scope of that agreement.

In these circumstances § 3 of the FAA, 9 U.S.C. § 3, seems to direct that the action "shall" be stayed pending completion of arbitration, as two other circuits have held. Lloyd v. Hovensa, LLC, 369 F.3d 263, 268-69 (3d Cir. 2004); Adair Bus Sales, Inc. v. Blue Bird Corp., 25 F.3d 953, 955 (10th Cir. 1994). We have held that, notwithstanding the language of § 3, a district court may either stay the action or dismiss it outright when, as here, the court determines that all of the claims raised in the action are subject to arbitration. Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988). The choice matters for purposes of appellate jurisdiction: An order compelling arbitration and staying the action isn't immediately appealable, 9 U.S.C. § 16(b)(1)-(2); Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 87 n.2 (2000), but an order compelling arbitration and dismissing the action is. § 16(a)(3); Green Tree, 531 U.S. at 89. The district court chose to dismiss Johnmohammadi's action without prejudice, so we have jurisdiction to hear this appeal. See Interactive Flight Techs., Inc. v. Swissair Swiss Air Transp. Co., 249 F.3d 1177, 1179 (9th Cir. 2001).

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