James J. Cook Christiane a.cook v. William C. Erbey Ocwen Financial Corp.

Citations: 207 F.3d 1104; 2000 Daily Journal DAR 2662; 2000 Cal. Daily Op. Serv. 1927; 2000 U.S. App. LEXIS 3598; 2000 WL 263381Docket: 98-55872

Court: Court of Appeals for the Ninth Circuit; March 10, 2000; Federal Appellate Court

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The United States Court of Appeals for the Ninth Circuit reviewed an appeal by James J. Cook and Christiane A. Cook against William C. Erbey and Ocwen Financial Corp. concerning a dispute over an Asset Purchase Agreement from 1996. The agreement mandated that disputes between the parties be resolved through binding arbitration. After a dispute arose regarding the dilution of their shares due to the issuance of additional stock by Ocwen Financial Services, the Cooks sought a temporary restraining order in the Central District of California, which was denied.

The defendants requested arbitration based on the Purchase Agreement, but the Cooks contested that the claims involved parties not subject to arbitration. Subsequently, the Cooks filed an amended complaint and a motion for a preliminary injunction. The district court granted the defendants' motion to dismiss, citing a valid arbitration agreement applicable to all claims and parties involved, thus making the motion for a preliminary injunction moot.

The Cooks later dismissed one defendant and demanded a jury trial, which the district court did not address in its ruling. They subsequently filed a motion for a new trial or relief from judgment, which was denied on April 1, 1998. The appellate court concluded it lacked jurisdiction over the appeal.

Congress has established specific rules regarding appeals from district court arbitration orders, as outlined in the Federal Arbitration Act (FAA), 9 U.S.C. § 16. Appeals are permitted for certain orders, including those refusing to stay an action, denying petitions to compel arbitration, or confirming awards. However, appeals are generally not allowed for orders that compel arbitration or allow it to proceed. This framework reflects Congress's intent to encourage arbitration and minimize judicial intervention.

In instances where the arbitration issue is the sole claim before the district court, an order compelling arbitration is deemed a "final decision" and is appealable. Conversely, when the motion to compel arbitration is part of a broader case with multiple claims, it is considered "embedded" within the substantive issues, rendering it non-appealable. The court referenced prior cases, including McCarthy v. Providential Corp., where it was determined that even if the district court dismisses the action rather than staying it, the order to compel arbitration remains non-appealable until after arbitration concludes.

In the case of the Cooks, their complaint included multiple claims such as breach of contract and fraud. Since the motion to compel arbitration was intertwined with these other claims, it was classified as "embedded," leading to a lack of appellate jurisdiction over the district court's dismissal based on the existence of a valid arbitration agreement.

Jurisdiction is not impacted by Cook's jury trial demand. According to 9 U.S.C. § 4, once a district court decides against arbitration, it must hear the case unless a jury trial is timely demanded by the party initiating the suit. The court lacks jurisdiction to review the decision to compel arbitration or dismiss the case, thus not addressing whether a jury trial should have been granted if the district court's conclusion had been different. The excerpt also notes that under 9 U.S.C. § 4, when a motion to compel arbitration is filed, the court must direct the parties to arbitration if the agreement's validity is not disputed. It highlights that multiple circuits find that orders compelling arbitration, even when dismissing a case, are generally unappealable as interlocutory. Conversely, some circuits view such orders as appealable final decisions when they dismiss remaining claims.