791 F.2d 850 (11th Cir. 1986), 85-5692, Miller v. Drexel Burnham Lambert, Inc.

• Docket Number: 85-5692.
• Citation: 791 F.2d 850
• Date: 17 June 1986
• Parties: David MILLER, Plaintiff-Appellant, v. DREXEL BURNHAM LAMBERT, INC., David Sullivan, Defendants-Appellees. Elliot VARON, Plaintiff, v. DREXEL BURNHAM LAMBERT, INC., David Sullivan, Defendants. Clint RAMSDEN, Plaintiff, v. DREXEL BURNHAM LAMBERT, INC., David Sullivan, Defendants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 850

791 F.2d 850 (11th Cir. 1986)

David MILLER, Plaintiff-Appellant,

v.

DREXEL BURNHAM LAMBERT, INC., David Sullivan, Defendants-Appellees.

Elliot VARON, Plaintiff,

v.

DREXEL BURNHAM LAMBERT, INC., David Sullivan, Defendants.

Clint RAMSDEN, Plaintiff,

v.

DREXEL BURNHAM LAMBERT, INC., David Sullivan, Defendants.

No. 85-5692.

United States Court of Appeals, Eleventh Circuit

June 17, 1986

Page 851

Russell L. Forkey, Cara L. Eisenberg, Fort Lauderdale, Fla., for plaintiff-appellant.

Page 852

Edward J. Marko, Fort Lauderdale, Fla., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before FAY, CLARK and NIES ^[*], Circuit Judges.

PER CURIAM:

Appellant-plaintiff David Miller brings this appeal from a district court order compelling arbitration of certain federal securities and state common law claims. Appellant had brought suit against his broker, appellee David Sullivan, and Sullivan's employer, appellee Drexel Burnham Lambert, Inc. for violations of the 1933 and 1934 Securities Acts ¹ as well as for breach of fiduciary duty. Appellant had accused his broker of diverting $50,000 from appellant's money market account to unauthorized margin purchases of speculative stock. When the case was fifteen months old, it was consolidated with two similar cases and appellant filed an amended complaint. In response, appellees filed motions to compel arbitration pursuant to the parties' brokerage agreements and to stay judicial proceedings pending arbitration. Those motions were denied with respect to appellant's claims, on the grounds that appellees had waived their rights to arbitrate. Several months later, however, the district court ordered sua sponte that the 1934 Act claim and the fiduciary duty claim should proceed to arbitration. Appellant contends that the district court erred in compelling arbitration and vacating its previous order.

Appellant's argument presents three issues for our consideration: first, whether the district court improperly ignored its previous finding that appellees had waived their rights to arbitration; second, whether the district court erred as a matter of law in ordering arbitration of claims under the Securities Exchange Act of 1934; and third, whether appellant's claim of unconscionability in the parties' brokerage agreement should prevent arbitration of any claims. Before discussing these issues, we raise a fourth: whether this court has jurisdiction to review a district court order compelling arbitration.

Ordinarily, this court's jurisdiction is confined to review of final judgments. Certain orders compelling arbitration are indeed final under 28 U.S.C. Sec. 1291 because they completely dispose of all issues before the district court. The classic example is that of an action brought solely to obtain an arbitration order pursuant to Sec. 4 of the Federal Arbitration Act, 9 U.S.C. Sec. 4. See, e.g., N.V. Maatschappij Voor Industriele Waarden v. A.O. Smith Corp., 532 F.2d 874 (2d Cir.1976). Also considered final are arbitration orders issued on motion of a defendant in a pending suit. So long as the motion directs all claims to arbitration, typically pursuant to a contractual agreement to arbitrate, the order is final under Sec. 1291 even if not issued in an independent Sec. 4 proceeding. See, e.g., Coastal Industries, Inc. v. Automatic Steam Products Corp., 654 F.2d 375 (5th Cir. Unit B 1981); City of Naples v. Prepakt Concrete, 494 F.2d 511 (5th Cir.1974). But see Matterhorn, Inc. v. NCR Corp., 763 F.2d 866 (7th Cir.1985) (order granting or denying arbitration is not final if made in a pending suit).

The case at hand does not fit into either of these categories, however, since the motion for arbitration arose in a pending suit but no order compelling arbitration could dispose of all the claims. Appellant's claim under Sec. 12(2) of the 1933 Act is clearly not arbitrable because Sec. 14 of that Act prohibits waiver of the right to litigate any claims arising under the 1933 Act. See Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953). Thus, the order in this case cannot be final under Sec. 1291 and the question remains whether it is reviewable

Page 853

under any exception to the finality requirement.

We believe that an order compelling arbitration of some, but not all, claims in a pending suit is nevertheless reviewable under Sec. 1292(a)(1). This section provides jurisdiction for appeals of interlocutory orders "granting, continuing, modifying, refusing or dissolving injunctions." An order compelling arbitration has the obvious practical effect of enjoining any further judicial proceedings on the arbitrable claims, regardless of whether non-arbitrable claims are also stayed. ² Yet, the practical effect of an injunction is not always enough to satisfy Sec. 1292(a)(1), for any order compelling an action functions as a mandatory injunction. An order compelling arbitration, however, is deemed to be an injunction whenever the order is granted in an action which would have been an action at law prior to the fusion of law and equity. See Sweater Bee By Banff v. Manhattan Industries, 754 F.2d 457, 460 n. 2 (2d Cir.), cert. denied, --- U.S. ---, 106 S.Ct. 68, 88 L.Ed.2d 55 (1985); Langley v. Colonial Leasing Co., 707 F.2d 1, 5 (1st Cir.1983).

This result derives from the much maligned but still controlling Enelow-Ettelson doctrine, ³ which holds that in actions at law, an order granting or denying a stay based on an "equitable defense" is immediately appealable as an order granting or denying an injunction. See Langley, supra at 2. Here the underlying action...