Ctf Hotel Holdings, Inc. v. Marriott Intern., Inc.

• Decision Date: 23 August 2004
• Docket Number: No. 02-2898.,No. 02-2732.,02-2732.,02-2898.
• Citation: 381 F.3d 131
• Parties: CTF HOTEL HOLDINGS, INC., v. MARRIOTT INTERNATIONAL, INC.; Renaissance Hotel Operating Company; Avendra L.L.C. Marriott International, Inc., Renaissance Hotel Operating Company, Appellants CTF Hotel Holdings, Inc., Cross-Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 131

381 F.3d 131

CTF HOTEL HOLDINGS, INC., v. MARRIOTT INTERNATIONAL, INC.; Renaissance Hotel Operating Company; Avendra L.L.C. Marriott International, Inc., Renaissance Hotel Operating Company, Appellants CTF Hotel Holdings, Inc., Cross-Appellant.

No. 02-2732.

No. 02-2898.

United States Court of Appeals, Third Circuit.

Argued November 3, 2003.

Opinion Filed August 23, 2004.

Appeal from the United States District Court for the District of Delaware, Sue L. Robinson, Chief Judge.

COPYRIGHT MATERIAL OMITTED

Emmet T. Flood, (Argued), Gregory B. Craig, Kenneth C. Smurzynski, Brendan V. Sullivan, Jr., Williams & Connelly LLP, Washington, DC, Daniel A. Dreisbach, Jesse A. Finkelstein, Richards, Layton & Finger, P.A., Wilmington, DE, for Appellants and Cross-Appellees, Marriott International, Inc., and Renaissance Hotel Operating Co.

Jonathan J. Lerner, (Argued), Maura B. Grinalds, Timothy G. Nelson, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, Edward P. Welch, Stephen D. Dargitz, Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, DE, for Appellee and Cross-Appellant, CTF Hotel Holdings, Inc.

Before McKEE, SMITH and WEIS, Circuit Judges.

OPINION OF THE COURT

McKEE, Circuit Judge.

We are asked to determine if the District Court erred in ruling that CTF Holdings, Inc., was not obligated to arbitrate its breach of contract dispute with Marriott International and Renaissance Hotels (together "Marriott"). We are also asked to determine if the court erred in staying that litigation pending resolution of related arbitration between Marriott and Hotel Property Investments Ltd. ("HPI"). For the reasons that follow, we will affirm the court's ruling that CTF was not required to go to arbitration, but we will reverse the District Court's decision to stay CTF's suit against Marriott for breach of contract pending resolution of Marriott's arbitration with HPI.

I. FACTS AND PROCEDURAL HISTORY

In 1993, Renaissance signed an agreement with CTF to manage the 20 CTF hotels at issue here ("the CTF Master Agreement").¹ In 1995, Renaissance signed an agreement with HPI to manage 44 other hotels ("the HPI Master Agreement"). Marriott International purchased Renaissance in 1997 and continued to operate it as a wholly-owned subsidiary. In 1999, Marriott, HPI and CTF entered into an agreement governing all of the aforementioned 64 hotels and incorporating the CTF and HPI Master Agreements ("the 1999 Agreement").²

Section IX.K of the 1999 Agreement addresses dispute resolution and states:

Governing Law; Dispute Resolution.... In the event of any dispute or difference arising out of or relating to this Agreement, if such dispute or difference relates to or arises out of a Hotel owned or leased by CTF (or otherwise governed by the CTF Master Agreement), then such dispute or difference shall be subject to the dispute resolution provisions in the CTF Master Agreement;³ and if such dispute or difference relates to or arises out of a Hotel owned or leased by HPI (or otherwise governed by the HPI Master Agreement), then such dispute or difference shall be subject to the dispute resolution provisions in the HPI Master Agreement.⁴ Nothing herein is intended to require arbitration of any dispute under the CTF Master Agreement or to limit any right any party may have to proceed in federal or state court on any dispute under the CTF Master Agreement.⁵

The CTF Master Agreement is silent as to the duty to arbitrate and therefore imposes no such obligation. However, the HPI Master Agreement contains the following section requiring arbitration:

9.6 Governing Law: Arbitration: Consent to Jurisdiction. The parties hereto shall use their best efforts to settle any disputes or differences arising out of or relating to this Agreement.... If they do not reach [a] solution within a period of thirty (30) days, then the dispute or difference shall be finally settled by arbitration in accordance with the rules of the American Arbitration Association.

In 2001 and 2002, CTF and HPI began questioning Marriott's performance under the 1999 Agreement, and in March 2002, CTF notified Marriott that it was in default under that Agreement.⁶ Marriott thereafter initiated arbitration against CTF and HPI seeking declaratory relief regarding the issues that had been identified in the default notice. One such issue involved proceeds from an audiovisual program conducted in certain hotels operated by Marriott (the "Molloy dispute"). Another issue involved the scope of CTF's and HPI's rights to review and audit the amount of unrestricted allowances Marriott received under its management agreements (the "audit dispute").

HPI did not dispute that it was obligated to arbitrate the Molloy and audit disputes with Marriott under the 1999 Agreement. However, CTF maintained that it was not obligated to arbitrate. It filed a 21-count complaint against Marriott and a third defendant, Avendra LLC,⁷ in the District Court. The complaint included issues involving the Molloy and audit disputes as well as other claims for relief.⁸ CTF also petitioned the District Court to enjoin Marriott's attempt to require it to arbitrate its disputes, and Marriott moved to compel CTF to arbitrate pursuant to the Federal Arbitration Act, 9 U.S.C. § 4.

As noted earlier, the District Court granted CTF's motion to enjoin arbitration of its claims and denied Marriott's motion to compel CTF to arbitrate. However, the court then stayed litigation of CTF's breach of contract suit pending the resolution of Marriott's arbitration with HPI. The court explained that it was doing so "in order to promote some efficiencies of judicial administration and in light of the participation in this litigation of defendant Avendra (a non-party to the Master and 1999 Agreements)."

Thereafter, Marriott appealed the court's refusal to compel CTF to arbitrate, and CTF cross-appealed the court's order staying CTF's breach of contract suit pending resolution of the arbitration between Marriott and HPI.⁹

II. JURISDICTION

We may review the denial of Marriott's motion to compel arbitration under 9 U.S.C. § 16(a)(1)(B), which provides for jurisdiction over appeals from orders "denying a petition under [9 U.S.C. § 4] to order arbitration to proceed[.]"

Marriott questions whether we have jurisdiction over CTF's cross-appeal of the District Court's stay, and has moved to dismiss CTF's appeal for lack of subject-matter jurisdiction. Marriott argues that the stay is not a final order and is therefore not appealable. We agree that a stay is usually not a final order because it provides only a temporary respite from litigation. Marcus v. Twp. of Abington, 38 F.3d 1367, 1370 (3d Cir.1994). However, when a stay amounts to an effective dismissal of the underlying suit, it may be subjected to appellate review. Cheyney State Coll. Faculty v. Hufstedler, 703 F.2d 732, 735 (3d Cir.1983) (citing Moses H. Cone Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)); see also United States v. Spears, 859 F.2d 284, 287 (3d Cir.1988) (holding that appellate review was effectively foreclosed unless we exercised pendent jurisdiction because the issues would become moot and untouchable because of the procedural limbo in which the decision placed the case). We have also recognized that an indefinite stay order that unreasonably delays a plaintiff's right to have its case heard is appealable. Hufstedler, 703 F.2d at 735; see also Haberern v. Lehigh & New England Ry., 554 F.2d 581, 584 (3d Cir.1977) (holding that a stay order of indefinite length which singles out a claim for extended delay, while others of a similar nature proceed, is appealable).

Here, the District Court decided two important legal issues. First, it found the 1999 agreement did not require CTF to arbitrate the Molloy and audit disputes in CTF's complaint. Second, it delayed CTF's litigation so that it would not proceed until after the arbitration between HPI and Marriott was resolved. In a very practical sense, CTF—which admittedly has the right to bring suit in the federal court—has been blocked from proceeding in that forum until the issues are resolved in the arbitration.

The stay order at issue here is not "indefinite" per se because the District Court stated that it would "reconsider [the stay] if it appears that the arbitration is not proceeding apace." There is, however, no way of foretelling how long CTF's suit must remain in limbo. Moreover, we see no way for CTF to attempt to expedite HPI's arbitration with Marriott because CTF is not a party to it.

If CTF's suit must suffer indeterminate delay pending the outcome of HPI's arbitration with Marriott, CTF will be without any way of challenging the propriety of the District Court's stay or the procedural limbo that inevitably results from it. CTF will certainly not be able to challenge the order at the conclusion of that arbitration because the stay will become moot and unreviewable. Time only runs in one direction. Accordingly, we can not correct any error the District Court may have made in staying CTF's suit unless we review it now.

We have recognized the concept of pendent appellate jurisdiction where a case is "rife with special circumstances which bring it outside the general rule and so limit its precedential value as to not measurably weaken our continued aversion to piecemeal appeals." Haberern, 554 F.2d at 584. However, in Swint v. Chambers Cty. Comm'n., 514 U.S. 35, 48, 115 S.Ct. 1203, 131 L.Ed.2d 60 (1995), the Supreme Court "counsel[ed] resistance to expansion of appellate jurisdiction . . .". In doing so, however, the Court noted that it had "not universally required courts of appeals to confine review to the precise decision independently subject to appeal." Id. at 50, 115 S.Ct. 1203 (citing Thornburgh v. American College of Obstetricians and Gynecologists, 476 U.S. 747, 755-57, 106 S.Ct. 2169, 90 L.Ed.2d 779 (1986)). Swint did not resolve "whether or when it...