462 F.3d 384 (5th Cir. 2006), 05-30090, Brown v. Pacific Life Ins. Co.

Docket Nº:05-30090.
Citation:462 F.3d 384
Party Name:Lonnie BROWN; et al., Plaintiffs, v. PACIFIC LIFE INSURANCE CO.; et al., Defendants. Citigroup Global Markets, Inc.; Smith Barney, Plaintiffs-Intervenor Defendants-Appellees, Pacific Life Insurance Co.; GE Life and Annuity Insurance Company, Intervenor-Plaintiffs-Appellees, v. Jerry O. Brown; Pat Brown, Defendants-Intervenor Defendants-Appellants,
Case Date:August 23, 2006
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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462 F.3d 384 (5th Cir. 2006)

Lonnie BROWN; et al., Plaintiffs,


PACIFIC LIFE INSURANCE CO.; et al., Defendants.

Citigroup Global Markets, Inc.; Smith Barney, Plaintiffs-Intervenor Defendants-Appellees,

Pacific Life Insurance Co.; GE Life and Annuity Insurance Company, Intervenor-Plaintiffs-Appellees,


Jerry O. Brown; Pat Brown, Defendants-Intervenor Defendants-Appellants,

Lonnie Brown; Nettie Brown, Intervenor Defendants-Appellants.

Citigroup Global Markets, Inc.; Smith Barney, Plaintiffs-Appellees,


Lonnie Brown; Nettie Brown, Defendants-Appellants.

No. 05-30090.

United States Court of Appeals, Fifth Circuit.

Aug. 23, 2006

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Thomas A. Roberts (argued), McGlinchey Stafford, New Orleans, LA, Gabriel A. Crowson, McGlinchey Stafford, Baton

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Rouge, LA, Allen K. Trial, McGlinchey Stafford, Houston, TX, for Citigroup Global Markets, Inc., Smith Barney, Pacific Life Ins. Co. and GE Life & Annuity Ins. Co.

Glen Scott Love (argued), Robert L. Graves, Guglielmo, Marks, Schutte, Terhoeve & Love, Baton Rouge, LA, for Jerry Brown, Pat Brown, Lonnie Brown and Nettie Brown.

Appeal from the United States District Court for the Middle District of Louisiana.

Before JOLLY, SMITH and GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Lonnie Brown, Nettie Brown, Jerry Brown, and Pat Brown ("the Browns") appeal from an order staying proceedings and compelling arbitration of their claims against Citigroup Global Markets, Inc., formerly Smith Barney ("Smith Barney"), G.E. Life & Annuity Insurance Company ("GE"), and Pacific Life Insurance Company ("Pacific") (collectively "Appellees").


The Browns are investors in, and beneficiaries of, Smith Barney securities brokerage accounts. Smith Barney's representative, Patrick Holt ("Holt"), managed these accounts, investing in variable annuities from GE and Pacific, as well as a variety of stocks.

Upset with Holt's investment decisions, the Browns sued Smith Barney, GE, Pacific, and Holt in Louisiana state court ("the State Action"), alleging fraud, negligence, and breach of various common law and statutory duties. The defendants removed the State Action to federal district court. Soon thereafter, Smith Barney, with intervenors GE and Pacific, filed two separate civil actions against the Browns in federal court ("the Federal Actions"): one against Lonnie and Nettie Brown, and one against Jerry and Pat Brown. Both lawsuits sought an order compelling arbitration of the Browns' claims pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16, based on arbitration clauses that were included in Smith Barney's client agreement with the Browns. Appellees also moved for a stay pending arbitration in the State Action pursuant to section 3 of the FAA. 1

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Soon thereafter, Smith Barney and Pacific moved to compel arbitration under the FAA in the Federal Actions. Around this time, the district court consolidated the State Action with the Federal Actions. Smith Barney, with Pacific joining, then filed a reply in support of the motions to compel arbitration and to stay the consolidated action, arguing for a stay based upon section 3.

Contemporaneously with this flurry of activity, the Browns moved to remand the State Action as untimely removed. They also moved to dismiss the Federal Actions and the complaints in intervention on jurisdictional grounds, asserting that Holt, a non-party to the Federal Actions, is an indispensable party under Federal Rule of Civil Procedure 19 whose joinder would destroy diversity of citizenship. They also argued that the court should abstain from exercising jurisdiction. The district court remanded the State Action but denied the motion to dismiss the Federal Actions. Rather than consider the issue of arbitrability, however, the court stayed the Federal Actions pending the outcome in the remanded State Action because "[i]t would be a waste of judicial resources and of the parties' time and treasure if both federal and the state court were to proceed simultaneously in these cases...."

The Appellees moved in the Federal Actions to alter or amend the stay order, arguing that the policy favoring arbitration required lifting the stay and ordering arbitration despite the threat of piecemeal litigation in state and federal court. The district court agreed, vacating the stay as improvidently issued and ordering additional briefing addressing the issue of arbitrability.

After receiving briefing, the district court addressed the "sole issue to be decided" in the Federal Actions--arbitrability of the Browns' claims against the Appellees. The district court concluded that the Browns were bound by an arbitration clause in their client agreements and were compelled to arbitrate their claims against Smith Barney. It also concluded that the actions of Smith Barney, intervenors GE and Pacific, and Holt were "inextricably intertwined" because "[t]here is no way to bring actions against either [GE or Pacific] without considering the actions of Smith Barney and its employee, Patrick Holt." Applying equitable estoppel, the court then ordered arbitration of the claims against Pacific and GE as well. Without offering a basis for its authority, the district court then "stay[ed] the Browns' actions against all the defendants within its jurisdiction, to include Smith Barney, Pacific, and GE pending binding arbitration."


The Browns appeal from the district court's order compelling arbitration and staying proceedings. Appellees contend that this court does not have jurisdiction to hear the Browns' appeal. As always, we have "jurisdiction to determine our own jurisdiction." Cerveceria Cuauhtemoc Moctezuma S.A. de C.V. v. Mont. Beverage Co., 330 F.3d 284, 286 (5th Cir.2003).

Section 16(b) of the FAA forbids appeals of interlocutory orders granting a stay under section 3 or directing arbitration to proceed under section 4. 2 However,

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"a final decision with respect to an arbitration" is appealable under section 16(a)(3). A decision is considered final under the FAA if it "ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 86, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000).

In this case, the district court granted the sole remedy sought by the plaintiffs in the Federal Actions--an order compelling arbitration. Although the district court did not dismiss the case, there was nothing left for the court to do but execute the judgment. See Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702, 708 (5th Cir.2002) (holding that the district court's decision was final and appealable where it ordered arbitration, stayed proceedings, and closed the case). Under Green Tree, the order compelling arbitration in the Federal Actions ended the litigation in federal court on the merits and was a final appealable decision under 9 U.S.C. § 16(a)(3). See Sphere Drake Ins. PLC v. Marine Towing, Inc., 16 F.3d 666, 668 (5th Cir.1994) ("The civil action was an independent proceeding brought solely to test arbitrability and stay the various law suits. The arbitration order amounts to a final disposition in this context and ends the litigation."); McDermott Int'l, Inc. v. Underwriters at Lloyds, 981 F.2d 744, 746 (5th Cir.1993) ("Generally, if the only issue before the court is the dispute's arbitrability, ... a court's decision on that issue constitutes a final decision.").

Appellees argue that the stay in this case rendered the order non-appealable under 9 U.S.C. § 16(b)(1). See 9 U.S.C. § 16(b)(1) (specifying that an appeal may not be taken from an interlocutory order granting a stay under 9 U.S.C. § 3). That it stayed the Browns' actions within its jurisdiction is, however, of no moment unless the stay was of proceedings before the district court under 9 U.S.C. § 3. Here, the district court did not state the authority for its stay, and it is impossible to discern from the record whether the district court thought its stay was issued pursuant to section 3. Although the only authority cited in the parties' motions was section 3, the court's terse statement that it was staying "the Browns' actions against all the defendants within its jurisdiction" is subject to multiple plausible interpretations. 3

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We must speculate upon the authority for the stay based upon brief language in the order, the numerous overlapping and multifarious motions of the parties, and our interpretation of the voluminous district court filings in three separate cases--cases that have been consolidated and separated, removed and remanded. Under such circumstances, remand to the district court for clarification is often required. See, e.g., Joseph v. City of New Orleans, 110 F.3d 252, 253 (5th Cir.1997) (remanding to the district court to clarify its order where such clarification was needed to determine appellate jurisdiction).

Remand is unnecessary in this case. Based upon our independent review of the record, we conclude that the stay could not have been issued pursuant to 9 U.S.C. § 3. See Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins., 304 F.3d 476, 481-82 (5th Cir.2002) (reviewing the district court's arbitration order and the record to determine appellate jurisdiction); In the Matter of Legel, Braswell Gov't Sec. Corp., 648 F.2d 321, 326 n. 8 (5th Cir. Unit B 1981) ("Where a district court fails to make necessary findings, a remand for entry of such findings is the usual recourse for an appellate court; however, where all of the issues on appeal may be fairly resolved from the record presented, a remand...

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