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Commonwealth Insurance Co. v. Underwriters Inc.

submitted: May 5, 1988.

COMMONWEALTH INSURANCE COMPANY
v.
THE UNDERWRITERS, INC., JOSEPH F. AMBRIANO JOHN A. KRAEUTLER, R. DONALD QUACKENBUSH, JOHN A. KRAEUTLER, INC., J.A.C.K. HOLDING COMPANY INC., RICHARD GREENE, JOSEPH L. KELLEY, J.D. KELLEY, INC., AMERICAN CENTENNIAL INSURANCE COMPANY, BENEFICIAL CORPORATION, RICHARD H. BATE, CECIL M. BENADOM, CHARLES W. BOWSER, ROBERT C. CANNADA, ELBERT N. CARVEL, FINN M. W. CASPERSEN, FREDA R. CASPERSEN, CHARLES H. DONOVAN, WILLIAM H., H. ELY, JR., GEORGE R. EVANS, DAVID J. FARRIS, LEON A. FULTS, JAMES H. GILLIAM, JR., J. THOMAS GURNEY, ANDREW C. HALVORSEN, CHARLES E. HANCE, J. ROBERT HILLIER, GERALD L. HOLM, KENNETH J. KIRCHER, THOMAS P. MCGOUGH, ROBERT R. MEYER, STEVEN MULLER, MICHAEL REGAN, SUSAN JULIA ROSS, ROBERT A. TUCKER, SUSAN M. WACHTER, RICHARD A. WAGNER, ARTHUR T. WARD, JR., CHARLES H. WATTS, II, RICHARD F. WHITE, RUSSELL W. WILLEY AND K. MARTIN WORTHY; COMMONWEALTH INSURANCE COMPANY V. BENEFICIAL CORPORATION, BARRETT TREATY CORPORATION, DENNIS J. VAUGHAN & CO., INC., R. DONALD QUACKENBUSH, WILLIAM P. BARRETT, DENNIS J. VAUGHAN, RICHARD H. BATE, CECIL M. BENADOM, CHARLES W. BOWSER, ROBERT C. CANNADA, ELBERT N. CARVEL, FINN M. W. CASPERSEN, FREDA R. CASPERSEN, CHARLES H. DONOVAN, WILLIAM H., H. ELY, JR., GEORGE R. EVANS, DAVID J. FARRIS, LEON A. FULTS, JAMES H. GILLIAM, JR., J. THOMAS GURNEY, ANDREW C. HALVORSEN, CHARLES E. HANCE, J. ROBERT HILLIER, GERALD L. HOLM, KENNETH J. KIRCHER, THOMAS P. MCGOUGH, ROBERT R. MEYER, STEVEN MULLER, SUSAN JULIA ROSS, ROBERT A. TUCKER, SUSAN M. WACHTER, RICHARD A. WAGNER, ARTHUR T. WARD, JR., CHARLES H. WATTS, II, RICHARD F. WHITE, RUSSELL W. WILLEY AND K. MARTIN WORTHY, COMMONWEALTH INSURANCE COMPANY ("COMMONWEALTH"), APPELLANT



Appeal from the United States District Court for the District of New Jersey -- Newark, D.C. Civil Nos. 87-3734, 87-3765.

Gibbons, Chief Judge, and Mansmann and Cowen, Circuit Judges.

Author: Mansmann

Opinion OF THE COURT

MANSMANN, Circuit Judge.

Commonwealth Insurance Company appeals from an order of the district court staying proceedings against all defendants in these consolidated actions pending the resolution of arbitration proceedings between Commonwealth and American Centennial Insurance Company, a defendant in one of the actions. We find that in light of the Supreme Court's recent decision in Gulfstream Aerospace Corporation v. Mayacamas Corp., 485 U.S. 271, 108 S. Ct. 1133, 99 L. Ed. 2d 296 (1988), we lack appellate jurisdiction. Therefore we will dismiss this appeal.

I.

This appeal arises out of two consolidated actions by plaintiff Commonwealth seeking to avoid allegedly fraudulently obtained contracts for the purchase of reinsurance from American Centennial Insurance Corporation through two of American Centennial's agents, The Underwriters Inc. and Barrett Treaty Corporation. Some of the challenged contracts contain clauses relegating to arbitration any disputes as to the construction or operation of the agreements. American Centennial, a defendant only in the action on the Underwriters' contracts, demanded arbitration pursuant to these clauses. All of the defendants in both actions moved for a stay of proceedings, pursuant to Section 3 of the Arbitration Act, 9 U.S.C. § 3, pending the Commonwealth-American Centennial arbitration.

In opposition to the stay, Commonwealth claimed that its managing general agent, Fordinbridge International Ltd., exceeded its authority in entering into the contract containing the arbitration clause. The district court found that Commonwealth was unable to raise an issue of material fact as to the apparent authority of its agent to bind it to the arbitration provision. Therefore the court found the provision valid and ordered the stay pending arbitration. Commonwealth appealed.

Commonwealth originally predicated appellate jurisdiction on the so-called Enelow-Ettelson doctrine which made a stay of an action at law pending arbitration automatically appealable as an injunction under 28 U.S.C. § 1292(a)(1)*fn1 the theory that the stay was analogous to an equitable restraint of legal proceedings. During the pendency of this appeal the Enelow-Ettelson doctrine was overruled by a unanimous Supreme Court in Gulfstream Aerospace Corp. v. Mayacamas Corp., (Gulfstream) 485 U.S. 271, 108 S. Ct. 1133, 1142, 99 L. Ed. 2d 296 (1988). In accordance with our continuing responsibility to make an independent determination of appellate jurisdiction, we ordered the parties to brief the issue of appellate jurisdiction in light of Gulfstream.

II.

Commonwealth asserts that we have appellate jurisdiction under 28 U.S.C. § 1291 pursuant to the collateral-order doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949). Alternatively, Commonwealth requests that we exercise our discretion either to grant a permissive appeal under 28 U.S.C. § 1292(b) or to treat the attempted appeal as a petition for a writ of mandamus. We examine these arguments in turn.

An order staying an action pending arbitration, entered as part of a continuing proceeding for other relief and not resulting in dismissal of the action, is not a "final decision" appealable under 28 U.S.C. § 1291.*fn2 Rogers v. Schering Corp., 262 F.2d 180 (3d Cir.), cert. denied, 359 U.S. 991, 79 S. Ct. 1121, 3 L. Ed. 2d 980 (1959). Commonwealth argues, however, that the stay order is appealable under the collateral-order doctrine of Cohen v. Beneficial Industrial Loan Corp. which allows an appeal from certain orders that finally determine claimed rights which are not ingredients of the cause of action and do not require consideration with it. 337 U.S. at 546-547. In order to satisfy the collateral-order exception an order must (1) conclusively determine the disputed question, (2) resolve an important issue completely separate from the merits of the action, and (3) be effectively unreviewable on appeal from a final judgment. Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 57 L. Ed. 2d 351, 98 S. Ct. 2454 (1978).

Commonwealth relies on analogy to the facts in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983), where a stay of federal litigation in favor of a parallel state court action was held to be appealable as a final order under § 1291 and also under the collateral-order doctrine. In Moses Cone, however, there was only one issue in both the state and federal actions -- arbitrability. Because the state court decision would be res judicata as to the question, there would be no further litigation in federal court. Therefore the stay also amounted to a dismissal. The order in Moses Cone met the Cohen criterion of "effective unreviewability except by immediate appeal" because the state court decision would finally determine the merits of the underlying dispute.

The requirement of effective unreviewability is unsatisfied by the order appealed here, however, because review of that order and the dispute resolved by it, i.e., the validity of the arbitration clause, will be available upon appeal from the final judgment after arbitration and the district court proceedings are concluded. See Rogers v. Schering Corp., 262 F.2d at 182. We find that ...


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