David Alan Pearl ("Pearl") filed a claim for uninsured motorist benefits with his insurer, Sentry Insurance ("Sentry"), for losses caused by an accident he claims occurred on May 15, 1985. Sentry alleges that Pearl's application for insurance coverage contained material misrepresentations, and that Pearl's accident report was false. Sentry filed a complaint seeking a judgment "declaring that . . . Sentry . . . is not obligated to defendant . . . in any amount, and that the uninsured motorist coverage of the policy . . . is suspended and is not available to this particular defendant in this cause."
In a motion to dismiss, Pearl argued, inter alia, that this dispute is subject to arbitration under the terms of the contract. We held oral argument on the motion to dismiss, and we agreed that the dispute is arbitrable. Treating this aspect of Pearl's motion to dismiss as a motion to stay this action pending arbitration, we granted a stay of this action pending contractual arbitration in an order dated February 9, 1987.
Sentry has appealed our February 9 order to the United States Court of Appeals for the Third Circuit, and has filed with this court a motion to stay the February 9 order pending disposition of the appeal. Under Fed. R. App. P. 8(a), it is proper for Sentry to initiate its request for a stay with this court.
We note as an initial matter that our February 9 order did not, by its own terms, compel arbitration. The order did no more than stay proceedings in the district court. A stay of such an order, it would seem, would require that proceedings in the district court go forward. But proceedings in the district court cannot, with narrow exceptions (application for relief under Rule 62 being one), go forward while this case is on appeal. But we doubt that Sentry now asks this court to stay the stay of proceedings in this court. Rather, we shall proceed on the assumption that Sentry has interpreted our February 9 order as both staying proceedings in this court and requiring Sentry to participate in arbitration proceedings -- an interpretation we find most reasonable. We understand Sentry to be requesting a modification of our February 9 order, suspending the requirement that arbitration proceedings go forward.
An order granting a stay pending arbitration is injunctive in nature. Kirschner v. West Company, 300 F.2d 133, 134 (3d Cir. 1962).
A party appealing an injunctive order is not entitled to a stay as of right upon posting a supersedeas bond. Cf. Fed. R. Civ. P. 62(d). Rather, Rule 62(c) provides that
When an appeal is taken from an interlocutory or final judgment granting, dissolving, or denying an injunction, the court in its discretion may suspend, modify, restore, or grant an injunction during the pendency of the appeal upon such terms as to bond or otherwise as it considers proper for the security of the rights of the adverse party.
The criteria to be considered by a court in exercising its discretion under Rule 62(c) to stay an injunctive order are generally taken to be similar to the criteria underlying the court's decision to grant or deny preliminary injunctive relief. The party seeking relief must show that it is likely to succeed on appeal, that irreparable injury will flow from a failure to grant the relief sought, and that other parties and the public will not be substantially injured if the relief is granted. See, e.g., Collin v. O'Malley, 452 F. Supp. 577, 579 (N.D. Ill. 1978); Bauer v. McLaren, 332 F. Supp. 723, 729 (S.D. Iowa 1971). See generally 11 Wright & Miller, Federal Practice and Procedure § 2904 at 316 (1973). See also 7 Moore's Federal Practice para. 62.05 at 62-28 & n.16 (discussing circumstances in which a district court might conclude that the party appealing an injunction is likely to prevail on the appeal).
The court in Graphic Communications Union v. Chicago Tribune Co., 779 F.2d 13 (7th Cir. 1985) applied these criteria to an application by an employer for a stay pending appeal of an order compelling labor arbitration. The court held that it did not need to consider likelihood of success of the appeal, because the requirement that the party seeking a stay will suffer irreparable harm if the stay is denied had not been met. The court stated:
We are not gifted with prevision, and therefore we decline to say that a party ordered to arbitrate can never show irreparable harm such as might support a request that the order be stayed pending appeal. But we are confident that such cases will be extraordinarily rare.