Baltimore Contractors v. Bodinger, No. 31

• Court: United States Supreme Court
• Writing for the Court: REED
• Citation: 75 S.Ct. 249,99 L.Ed. 233,348 U.S. 176
• Parties: BALTIMORE CONTRACTORS, Inc., Petitioner, v. Jacob H. BODINGER
• Docket Number: No. 31
• Decision Date: 10 January 1955

348 U.S. 176 75 S.Ct. 249 99 L.Ed. 233 BALTIMORE CONTRACTORS, Inc., Petitioner,

v.

Jacob H. BODINGER.

No. 31. Argued Nov. 9, 1954. Decided Jan. 10, 1955.

Mr.

Morris Rosenberg, Baltimore, Md., for petitioner.

Mr. Charles Wilson, for respondent.

Mr. Justice REED delivered opinion of the Court.

The question in this case is whether an appeal may be taken to a court of appeals from a district court order refusing to stay an action for an accounting pending arbitration.

This equitable action was brought in a state court for an accounting of the profits of a joint venture in construction under the National Housing Act, 12 U.S.C.A. § 1701 et seq., and was removed to a federal district court on the basis of diversity of citizenship. Under the joint venture agreement, Baltimore

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Contractors agreed to pay the respondent twenty-five percent of the net profits on its construction contracts. The provision under which arbitration was sought reads as follows:

'In the event of any dispute in the calculation of the net profits under this Paragraph, Frenkil shall select either Wooden and Benson or Haskins and Sells or an accountant or auditor named by either of them whose determination of all such disputes shall be final and binding upon all parties to the dispute.'

The complaint alleged a number of improper practices on the part of Contractors: the use of 'dummy' corporations to inflate costs; charges for machinery and material purchases without credits for value or surpluses after completion of the job; receipt of undisclosed rebates; excessive charges and rental for equipment; padded insurance costs, etc.

The petitioner moved for a stay of the action pursuant to § 3 of the United States Arbitration Act, 9 U.S.C. § 3, 9 U.S.C.A. § 3, which authorizes a stay by a federal court when an issue is 'referable to arbitration under an agreement in writing for such arbitration'. The District Court refused the stay on the ground that the agreement between the parties did not constitute an agreement to arbitrate. The court apparently construed the quoted provision as limited to mathematical disputes. Petitioner appealed to the Court of Appeals for the Second Circuit. 216 F.2d 192. On respondent's motion the Court of Appeals dismissed the appeal, citing City of Morgantown v. Royal Ins. Co., 337 U.S. 254, 69 S.Ct. 1067, 93 L.Ed. 1347. Certiorari was sought on the following question:

'Whether in an action for an accounting an interlocutory order denying a stay under Section 3 of the United States Arbitration Act should be regarded as a denial of an injunction from which an appeal lies.'

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In view of the conflict between the decision below and Hudson Lumber Co. v. United States Plywood Corp., 9 Cir., 181 F.2d 929, we granted the petition, 347 U.S. 942, 74 S.Ct. 640.¹

Congress has long expressed a policy against piecemeal appeals. The reasons for such a policy were stated as follows:

'From the very foundation of our judicial system the object and policy of the acts of congress in relation to appeals and writs of error, (with the single exception of a provision in the act of 1875 in relation to cases of removal, which was repealed by the act of 1887) have been to save the expense and delays of repeated appeals in the same suit, and to have the whole case and every matter in controversy in it decided in a single appeal.' McLish v. Roff, 141 U.S. 661, 665—666, 12 S.Ct. 118, 120, 35 L.Ed. 893.²

Section 22 of the Judiciary Act of 1789, 1 Stat. 73, 84, provided that appeals in civil actions could be taken to the circuit courts only from final decrees and judgments.³

That requirement of finality has remained a part of our

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law ever since, and now appears as § 1291 of the Judicial Code.⁴

The trial court's interpretation of the quoted contract clause and its order denying a stay could not be called a final decision under § 1291. It was as surely an interlocutory order as the District Court's order in Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 451, 55 S.Ct. 313, 314, 79 L.Ed. 583.⁵

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The question here presented involves the interpretation of 28 U.S.C. § 1292(1), 28 U.S.C.A. § 1292(1), which makes an exception to the requirement of finality, permitting appeals from 'interlocutory orders * * * granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court'. Appealability here turns on whether the District Court's refusal to stay this trial for arbitration was the refusal of an 'injunction' under § 1292.

The provision for interlocutory appeals was first introduced in 1891 when the circuit courts of appeals were established as intermediate appellate courts. 26 Stat. 826. Section 7 of that Act allowed appeals from interlocutory orders in equity 'granting or continuing' injunctions, but from those only. Additions to the class of appealable interlocutory orders were made from time to time until the enactment of § 1292 in its present form.⁶

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No discussion of the underlying reasons for modifying the rule of finality appears in the legislative history, authough the changes seem plainly to spring from a developing need to permit litigants to effectually challenge interlocutory orders of serious, perhaps irreparable consequence.⁷ When the pressure rises to a point that influences Congress, legislative remedies are enacted. The Congress is in a position to weigh the competing interests of the dockets of the trial and appellate courts, to consider the practicability of savings in time and expense, and to give proper weight to the effect on litigants. When countervailing considerations arise, interested parties and organizations become active in efforts to modify the appellate jurisdiction.⁸ This Court, however, is not authorized to approve or declare judicial modification. It is the responsibility of all courts to see that no unauthorized extension or reduction of jurisdiction, direct or indirect, occurs in the federal system. Shanferoke Coal & Supply Corp. of Delaware v. Westchester Service Corp., 293 U.S. 449, 451, 55 S.Ct. 313, 79 L.Ed. 583. Any such ad hoc decisions disorganize practice by encouraging attempts to secure or oppose appeals with a consequent waste of time and money. The

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choices fall in the legislative domain. They are enlargement of the allowable list of appealable interlocutory orders; abandonment of fragmentary appeals; or a general allowance of such appeals in the discretion of the trial judge upon findings of need, with or without the consent or approval of the appellate court.

A series of decisions of this Court has developed the rationale for determining the appealability of such an interlocutory order as this under § 1292 and its predecessors. The appealability of routine interlocutory injunctive orders raised few questions. See George v. Victor Talking Machine Co., 293 U.S. 377, 55 S.Ct. 229, 79 L.Ed. 439. There the statute was clear. It was when stays of proceedings, in distinction to injunctions, were appealed that the issue of jurisdiction became sharp. In Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440, a case arising when federal courts had actions at law and proceedings in equity, a complaint at common law on a life insurance policy was met by an answer alleging fraud in the policy's procurement with a prayer for its cancellation and a motion to try the equitable issue first. The motion was granted, and jurisdiction on appeal from that order was approved on this reasoning:

'The power to stay proceedings in another court appertains distinctively to equity in the enforcement of equitable principles, and the grant or refusal of such a stay by a court of equity of proceedings at law is a grant or refusal of an injunction within the meaning of § 129 (§ 1292). And, in this aspect, it makes no difference that the two cases, the suit in equity for an injunction and the action at law in which proceedings are stayed, are both pending in the same court, in view of the established distinction between 'proceedings at law and proceedings in equity in the

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national courts and between the powers of those courts when sitting as courts of law and when sitting as courts of equity.' Per Van Devanter, J., in Griesa v. Mutual Life Ins. Co., (of New York), 8 Cir., 165 F. 48, 50, 51.' 293 U.S. at page 382, 55 S.Ct. at page 311. ⁹

After the adoption of the one form of action by the Fed.Rules Civ.Proc., rule 2, we reiterated this ruling in a like case. Ettelson v. Metropolitan Ins. Co., 317 U.S. 188, 63 S.Ct. 163, 164, 87 L.Ed. 176. We said a stay of the complaint until disposition of the fraud issue 'is as effective * * * as an injunction * * *. The statute looks to the substantial effect of the order made.'

The point was made in the Enelow case that power to stay mere steps within the framework of the litigation before a court differs as to appealability from an injunction prohibiting proceedings in another court. This distinction was applied in City of Morgantown v. Royal Ins. Co., ...