Bradford-Scott Data Corp., Inc. v. Physician Computer Network, Inc.
| Decision Date | 14 October 1997 |
| Docket Number | 97-2568,Nos. 97-2415,BRADFORD-SCOTT,s. 97-2415 |
| Citation | 128 F.3d 504 |
| Parties | DATA CORPORATION, INC., Plaintiff-Appellee, v. PHYSICIAN COMPUTER NETWORK, INC., et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Robert L. Hartley, Jr. (submitted on briefs), Henderson, Daily, Withrow & Devoe, Indianapolis, IN, for Plaintiff-Appellee.
David E. Wright, Johnson, Smith, Pence, Densborn, Wright & Heath, Indianapolis, IN, Michael B. Reuben, Samuel L. Barkin, Gordon, Altman, Butowsky, Weitzen, Shalov & Wein, New York City, for Defendants-Appellants.
Before POSNER, Chief Judge, and FLAUM and EASTERBROOK, Circuit Judges.
Bradford-Scott Data Corporation agreed to sell some computer software written by VERSYSS Incorporated. The parties entered into two contracts, the Vertical Value-Added Reseller (VAR) Agreement and the Master License Agreement. Later VERSYSS was acquired by Physician Computer Network (PCN), which offers a software package competing with the VERSYSS package Bradford-Scott licensed. Bradford- Scott then filed this suit, contending that the acquisition and some of its subsequent conduct placed VERSYSS in violation of its obligations under the Master License Agreement. Bradford-Scott asked the district court to issue a preliminary injunction, which the judge declined to do; the court also held that Bradford-Scott is not required to arbitrate this dispute. The VAR Agreement contains a broad arbitration clause, covering "any dispute or controversy between the parties ... relating to this Agreement"; the Master License Agreement has a narrow arbitration clause covering only "payments dispute[s] concerning license or support fees". The district judge thought that the two clauses conflict, and he applied the clause in the Master License Agreement because Bradford-Scott's claims are based on that agreement rather than the VAR Agreement. The district court's conclusion that the dispute is not arbitrable led it to deny the request to stay the litigation under 9 U.S.C. § 3. PCN and VERSYSS immediately appealed on the authority of 9 U.S.C. § 16(a)(1)(A), which permits an appeal from any order "refusing a stay of any action under section 3 of this title". The district court refused to stay discovery and trial pending appeal; PCN and VERSYSS now ask us for that relief.
The district judge's only reason--that he need not stay proceedings pending appeal, because he had not entered an appealable order--is untenable. The judge did not mention § 16(a)(1)(A), which authorizes appellate review in cases of this kind. For their part, the parties have approached the issue as if appellants were seeking a stay of an injunction, rather than a delay in proceedings. To obtain a stay of a district court's judgment, the appellant must establish irreparable harm and a significant probability of success on the merits, against a background norm that appellate courts are reluctant to disturb decisions in advance of full review. Judged by this standard, appellants' request would fail at the outset, for the costs of litigation are not irreparable injury. FTC v. Standard Oil Co., 449 U.S. 232, 244, 101 S.Ct. 488, 495, 66 L.Ed.2d 416 (1980); Renegotiation Board v. Bannercraft Clothing Co., 415 U.S. 1, 24, 94 S.Ct. 1028, 1040, 39 L.Ed.2d 123 (1974); Petroleum Exploration, Inc. v. Public Service Commission, 304 U.S. 209, 222, 58 S.Ct. 834, 841, 82 L.Ed. 1294 (1938); PaineWebber Inc. v. Farnam, 843 F.2d 1050 (7th Cir.1988).
We approach the subject from a different perspective, however, asking not whether appellants have shown a powerful reason why the district court must halt proceedings, but whether there is any good reason why the district court may carry on once an appeal has been filed. For it is fundamental to a hierarchical judiciary that Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58, 103 S.Ct. 400, 402, 74 L.Ed.2d 225 (1982). See also, e.g., Berman v. United States, 302 U.S. 211, 214, 58 S.Ct. 164, 166, 82 L.Ed. 204 (1937); Hovey v. McDonald, 109 U.S. 150, 157, 3 S.Ct. 136, 140, 27 L.Ed. 888 (1883). The qualification "involved in the appeal" is essential--it is why the district court may award costs and attorneys' fees after the losing side has filed an appeal on the merits, why the court may conduct proceedings looking toward permanent injunctive relief while an appeal about the grant or denial of a preliminary injunction is pending. Whether the case should be litigated in the district court is not an issue collateral to the question presented by an appeal under § 16(a)(1)(A), however; it is the mirror image of the question presented on appeal. Continuation of proceedings in the district court largely defeats the point of the appeal and creates a risk of inconsistent handling of the case by two tribunals.
Section 16 of the Federal Arbitration Act replaces the unlamented Enelow-Ettelson doctrine, which was overruled by Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988), with a simpler approach under which anti-arbitration decisions are immediately appealable, while orders enforcing arbitration clauses may be appealed only following the close of the entire case. See generally Briggs & Stratton Corp. v. Local 232, Allied Industrial Workers, 36 F.3d 712 (7th Cir.1994). Arbitration clauses reflect the parties' preference for non-judicial dispute resolution, which may be faster and cheaper. These benefits are eroded, and may be lost or even turned into net losses, if it is necessary to proceed in both judicial and arbitral forums, or to do this sequentially. The worst possible outcome would be to litigate the dispute, to have the court of appeals reverse and order the dispute arbitrated, to arbitrate the dispute, and finally to return to court to have the award enforced. Immediate appeal under § 16(a) helps to cut the loss from duplication. Yet combining the costs of litigation and arbitration is what lies in store if a district court continues with the case while an appeal under § 16(a) is pending. Cases of...
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