The Supreme Court granted certiorari last Friday in
one case of interest to the business community:
Federal Arbitration Act—Appellate Review of Motions to Stay by
Non-Signatories to Arbitration Agreement
Under the
Federal Arbitration Act ("FAA"), federal courts must grant a motion to stay
litigation if it is supported by a written agreement to arbitrate the issues
involved in the suit. See 9 U.S.C. § 3. The FAA allows appellate review
of an order denying such a motion, at least under certain circumstances.
See 9 U.S.C. § 16(a)(1)(i). The lower courts are divided, however, over
whether the federal circuits have appellate jurisdiction to review the denial of
a motion to stay litigation when the motion was brought by a party that is not a
signatory to the underlying arbitration agreement. The Supreme Court granted
certiorari in Arthur Anderson, LLP v. Carlisle, No. 08-146, to resolve
the lower-court disagreement.
The issue in
this case is of vital importance to businesses at risk of litigation from
indirect customers. The Court’s decision will determine whether such businesses
may stay litigation and compel arbitration as non-signatories to an otherwise
relevant and controlling arbitration agreement.
The
respondents entered into investment-management agreements with a financial
boutique firm in connection with tax shelters created for the respondents. After
those tax shelters failed, the respondents brought suit against the financial
boutique and the petitioners. The financial boutique thereafter filed for
bankruptcy, resulting in an automatic stay of the litigation as to it. The
petitioners also sought a stay, invoking an arbitration clause in the management
agreements. Even though the petitioners were not signatories to the agreement,
they claimed a right to stay the litigation under principles of equitable
estoppel. The district court denied the petitioners' motion. The Sixth Circuit,
relying on Tenth and D.C. Circuit reasoning, affirmed the district court's
denial on the narrow basis that federal circuit courts lack interlocutory
jurisdiction over denials of motions to stay by non-signatories of the
underlying arbitration agreement.
Absent
extensions, amicus briefs in support of the petitioners will be due on December
29, 2008, and amicus briefs in support of the respondent will be due on January
28, 2009. Any questions about this case should be directed to
Andrew Tauber
(+1 202 263 3324) in our Washington, DC office.
