Dependable Highway Exp. v. Navigators Ins. Co., 05-56346.

Citation498 F.3d 1059
Decision Date22 August 2007
Docket NumberNo. 05-56346.,No. 05-75033.,05-56346.,05-75033.
PartiesDEPENDABLE HIGHWAY EXPRESS, INC., Plaintiff-Appellant, v. NAVIGATORS INS. CO., Defendant-Appellee. Dependable Highway Express, Inc., Petitioner, v. United States District Court for the Central District of California, Respondent, Navigators Ins. Co., Real Party in Interest.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

David E.R. Woolley, Los Angeles, CA, for the plaintiff-appellant.

Arthur A. Leonard, Santa Monica, CA, for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; Nora M. Manella, District Judge, Presiding. D.C. Nos. CV-05-01208-NM, CV-05-01208-NM(PLAx).

Petition for Writ of Mandamus.

Before: STEPHEN REINHARDT and RICHARD C. TALLMAN, Circuit Judges, and CLAUDIA WILKEN,* District Judge.

TALLMAN, Circuit Judge:

In this diversity action, Dependable Highway Express, Inc. ("Dependable") appeals from a district court order staying Dependable's domestic contract dispute against Navigators Insurance Company ("Navigators") pending resolution of arbitration proceedings in England. We hold that the district court abused its discretion, and we remand for further proceedings.

I

Dependable, a California company, operates a warehouse in Los Angeles and a fleet of trucks to service warehouse customers. Navigators, a New York insurance company, issued indemnity insurance to Dependable for the period of November 1999 to October 2001. As the result of two cargo thefts in 1999 and 2001, Dependable incurred expenses totaling approximately $245,000 (for third-party payments to the aggrieved customers, as well as claims defense costs), which it submitted to Navigators for indemnification. When Navigators refused to reimburse Dependable, Dependable filed a complaint in California superior court on January 8, 2005, alleging breach of the insurance contract.

Shortly thereafter, Navigators commenced proceedings in the High Court of Justice, Queen's Bench Division, Commercial Court, in London, England. Navigators sought a restraining order against Dependable to forbid Dependable from proceeding with litigation in the United States. Navigators asserted that Dependable's insurance policy was subject to the general terms and standard conditions of its "Columbus Wording" document, which designated English arbitration as the means for resolving disputes between the parties.1 After hearing ex parte testimony from Navigators' English lawyer on two occasions, the English court granted an injunction and assessed court fees of roughly $23,000 against Dependable on March 11, 2005. Despite Navigators' attempts to notify Dependable of the English proceedings, Dependable never appeared in England.

Around the same time, Navigators removed the California state case to federal court and answered Dependable's complaint. As an affirmative defense, Navigators raised the English arbitration provision found in its Columbus Wording document. In response, Dependable filed a motion for summary judgment, which the district court "vacated," reasoning that a motion for summary judgment was improper before discovery.

On May 20, 2005, Navigators filed a motion to dismiss or stay the federal action in light of the English proceedings. Dependable opposed Navigators' motion, claiming that the Columbus Wording (and specifically the arbitration provisions) were not part of Dependable's insurance policy because the schedules summarizing the policy's key terms referred only to "Transport Wording." Thus, in Dependable's view, the difference between the words "Transport" and "Columbus" established that the English arbitration provision was not part of its insurance policy.2 The district court granted Navigators' motion for a stay in a brief minute order that acknowledged the English court's injunction and stayed the federal proceedings "pending the resolution of the London proceedings, including arbitration." This timely appeal followed.

II

Before considering the merits, we must first decide whether we have jurisdiction under 28 U.S.C. § 1291 to review the district court's stay. Generally, interlocutory orders are not immediately appealable. See 28 U.S.C. § 1291 (restricting appellate jurisdiction to "final decisions"). However, in certain cases, an interlocutory order may be deemed "final" for jurisdictional purposes. See Lockyer v. Mirant Corp., 398 F.3d 1098, 1101-04 (9th Cir.2005). We hold that we have jurisdiction under § 1291 because the stay order puts Dependable "effectively out of court" under Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 9, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), and Idlewild Bon Voyage Liquor Corp. v. Epstein, 370 U.S. 713, 715 n. 2, 82 S.Ct. 1294, 8 L.Ed.2d 794 (1962), and because the stay is an appealable collateral order under Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949).3

A

In Moses H. Cone, a federal district court issued a stay so that the parties could resolve an arbitrability issue raised in a concurrent state court action. 460 U.S. at 7, 103 S.Ct. 927. Relying on its earlier decision in Idlewild, the Supreme Court concluded that the stay was appealable because there would be "no further litigation in the federal forum" and the state's decision would be res judicata, leaving the defendant "effectively out of court." Moses H. Cone, 460 U.S. at 10, 103 S.Ct. 927. In Idlewild, a federal district court stayed an action seeking to invalidate a New York law to allow the state court the opportunity to address the plaintiff's various claims. 370 U.S. at 714, 82 S.Ct. 1294. Notably, the Court held that the stay was appealable despite the fact that the state court decision might not moot the federal proceedings. Id. at 714, 715 n. 2, 82 S.Ct. 1294 (holding that Idlewild was "effectively out of court" where the district court's stay allowed the state court to address issues that would not necessarily dispose of the case); see also Lockyer, 398 F.3d at 1102 ("Even . . . where the case might well come back to federal district court, Idlewild Liquor was `effectively out of court' for purposes of appealability of the stay order.").

The stay in this case presents a strong likelihood that the English proceedings will leave one of the parties "effectively out of court." If the English arbitrators decide in Navigators' favor, Dependable will have little recourse back in the United States district court. See Ministry of Def. of the Islamic Republic of Iran v. Gould, Inc., 969 F.2d 764, 770 (9th Cir.1992) ("The district court's . . . review of a foreign arbitration award is quite circumscribed."); id. (noting that the party challenging a foreign award bears a substantial burden because "public policy in favor of international arbitration is strong" (internal quotation marks omitted)).4 On the other hand, were Dependable to prevail in England, its domestic suit would be mooted, "just as Idlewild's federal constitutional claims in the district court would have been mooted if the New York state courts had granted relief on state-law grounds." Lockyer, 398 F.3d at 1102 (citing Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213, 1219-21 (3d Cir.1989) (concluding that the possibility that a stay would render a claim moot was equivalent to res judicata for purposes of applying Moses H. Cone)). Similarly, if the district court were to enforce the English court's injunction against Dependable proceeding domestically, Dependable once again would be "effectively out of court."

Although the mooting of Dependable's federal suit is not a foregone conclusion, the stay order provides no indication that the district court "clearly [anticipated] and intend[ed] that proceedings [would] resume after the stay has expired." Lockyer, 398 F.3d at 1103 (emphasis added); see also Cofab, Inc. v. Phila. Joint Bd., 141 F.3d 105, 109 (3d Cir.1998) (holding that Moses H. Cone does not apply where district court had no intention to "`deep six' the suit"). Indeed, the stay order contains no detail as to what might occur back in the United States once English arbitration concluded. As a result, analysis under Moses H. Cone and Idlewild confirms that the stay in this case puts Dependable "effectively out of court," and we have appellate jurisdiction to determine the propriety of the stay — regardless of whether the foreign proceedings actually moot the domestic litigation. See Lockyer, 398 F.3d at 1102 (noting that "absolute certainty is not required in order to put a party `effectively out of court' within the meaning of the Moses H. Cone doctrine").

B

Even if the stay did not constitute a final order under Moses H. Cone, appellate jurisdiction is established under Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). In Cohen, the Supreme Court concluded that under certain conditions a small class of collateral orders of the district court is immediately appealable. To fall within Cohen's ambit, 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, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978) (internal quotation marks omitted).

Following the Supreme Court's lead in Moses H. Cone, the Lockyer court buttressed its jurisdictional holding with an alternative analysis under Cohen. 398 F.3d at 1103-04. The court held that the first Cohen criterion was satisfied "because, even though the stay order could theoretically be modified, the district court did not impose a time limit on the stay or note circumstances that might result in its modification." Id. at 1103 (citing Moses H. Cone, 460 U.S. at 13, 103 S.Ct. 927 ("[There is] no basis to suppose that the District Judge contemplated any...

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