IDS Life Ins. Co. v. SunAmerica, Inc.

Decision Date18 February 1997
Docket Number96-2871,Nos. 96-2314,s. 96-2314
Citation103 F.3d 524
PartiesIDS LIFE INSURANCE CO., Plaintiff-Appellee, Cross-Appellant, and American Express Financial Advisors, Inc., Plaintiff-Appellee, v. SUNAMERICA, INC., and Sun Life Insurance Co. of America, Defendants-Appellants, and Royal Alliance Associates, Inc., and Sunamerica Securities, Inc., Defendants-Appellants, Cross-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Gary M. Elden, argued, Gregory C. Jones, Eric D. Brandfonbrener, Margaret E. Rice, Patrick T. Nash, Grippo & Elden, Chicago, IL, for IDS Life Ins. Co., American Express Financial Advisors, Incorporated in No. 96-2314.

Ronald P. Kane, Chicago, IL, Thomas M. Campbell, argued, Pace Klein, Smith, Campbell & Paduano, New York City, Steven P. Gomberg, Gomberg, Kane & Fischer, Chicago, IL, for SunAmerica, Incorporated, Royal Alliance Associates, Incorporated, SunAmerica Securities, Incorporated, Sun Life Insurance Company of America in Nos. 96-2314 and 96-2871.

Gary M. Elden, argued, Gregory C. Jones, Eric D. Brandfonbrener, Margaret E. Rice, Patrick T. Nash, Grippo & Elden, Chicago, IL, for IDS Life Insurance Company in No. 96-2871.

Before POSNER, Chief Judge, and EASTERBROOK and RIPPLE, Circuit Judges.

POSNER, Chief Judge.

The plaintiffs, claiming that the defendants have been "raiding" their employees in violation of a host of federal and state laws, brought these two consolidated suits in February of 1995, seeking damages and injunctive relief. The plaintiffs are subsidiaries of American Express. Although one is also an insurance company, both are engaged in the securities business and are members of the National Association of Securities Dealers. The defendants are four affiliated corporations (one an insurance company) that compete with the plaintiffs. Two of the four, Royal Alliance and SunAmerica Securities, are, like the plaintiffs, members of the NASD.

Simultaneous with the filing of their complaints, the plaintiffs moved for a preliminary injunction to prevent what they contended would be a massive raid by the defendants scheduled for March 1. The judge issued a temporary restraining order, but it expired by its terms on March 10 and the judge refused to extend it. The defendants moved for a stay of the district court proceedings pending arbitration of the parties' dispute. While this motion was pending, the parties engaged in pretrial discovery in the district court with respect to the plaintiffs' motion for a preliminary injunction. A year passed before the district judge ruled, in April 1996, that the plaintiffs' claims against the two defendants that are members of the NASD are within the scope of a provision of the rules of that association that provides for arbitration of certain disputes among members, but that the plaintiffs' claims against the other two defendants are not; the judge rejected the defendants' argument that common ownership made the nonmember defendants "associated persons" within the meaning of the rules. He also ruled that the preliminary injunction proceeding would go forward on all claims. When the appeal was argued to us in October 1996, six months had passed since the judge had made these rulings and he had not yet decided whether to grant a preliminary injunction, even though the plaintiffs claim that they have already lost $10 million as a result of the defendants' raids and the hearing on the motion for a preliminary injunction had long been completed.

The defendants appeal from the denial of their motion for a stay of the proceedings in the district court pending arbitration. An order denying a motion for a stay pending arbitration is expressly made appealable by the Federal Arbitration Act. 9 U.S.C. § 16(a)(1)(A). But can all four defendants appeal, or just the two defendants who the judge held are not entitled to arbitrate their dispute with the plaintiffs? Have not the other two (the NASD members) gotten what they wanted--a stay pending arbitration? Actually, it is not altogether certain that the judge either denied the stay to the first pair of defendants (the nonmembers) or granted it to the second pair. Remember that the judge has ruled that the proceedings on the plaintiffs' motion for a preliminary injunction shall go forward on all claims against all defendants. Those proceedings are, so far as appears, the only proceedings in the district court in this litigation, so that it is arguable that the motion for a stay has not been ruled on, that at most the judge has indicated an intention, no doubt revisable as the case evolves, to stay further proceedings after he grants or denies the preliminary injunction--and an intention is not an appealable order. The judge invited the defendants that are not members of the NASD to renew their motion for a stay after the preliminary injunction hearing. Maybe the judge's intent was not to deny the stay to the nonmembers but merely to defer consideration of the motion till after the hearing, which was imminent.

But could not deferral be thought the equivalent of denial? The line between the denial of a motion and deferral of action on it is indeed a hazy one. On the one hand, when someone asks for something and is refused, the effect is that of denial, and a party's right to appeal a denial of relief must not be nullified by judicial inaction. On the other hand, a party cannot automatically treat as a denial, and appeal as if it were an outright denial, the inevitable delay in granting relief that is caused by the need to consider the party's request in an orderly fashion. Delay that is utterly unjustified and is causing irreparable harm is, it is true, a ground for mandamus. Hirsch v. Burke, 40 F.3d 900, 905-06 (7th Cir.1994); Johnson v. Rogers, 917 F.2d 1283 (10th Cir.1990). But mandamus is not appeal. The interesting question is at what point delay becomes constructive denial, activating whatever right to appeal from a denial the requester may have without his having to satisfy the twin conditions for mandamus--a clear right, in this case a clear right to a ruling, and irreparable harm from the denial of that clear right. In re Barnett, 97 F.3d 181 (7th Cir.1996); In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1295 (7th Cir.1995).

A showing of unjustifiable delay coupled with irreparable injury if an immediate appeal is not allowed is enough to make a constructive denial appealable, if a formal denial would be. Middleby Corp. v. Hussmann Corp., 962 F.2d 614, 616 (7th Cir.1992); Americans United for Separation of Church & State v. City of Grand Rapids, 922 F.2d 303, 306 (6th Cir.1990); Houseton v. Nimmo, 670 F.2d 1375, 1378 (9th Cir.1982). Maybe a showing of delay at once inordinate and unjustified, Public Citizen Health Research Group v. Commissioner, Food & Drug Administration, 740 F.2d 21, 32 (D.C.Cir.1984)--the kind of thing that would excuse a person challenging administrative action from having to exhaust his administrative remedies, e.g., McCarthy v. Madigan, 503 U.S. 140, 147, 112 S.Ct. 1081, 1087-88, 117 L.Ed.2d 291 (1992); Glisson v. U.S. Forest Service, 55 F.3d 1325, 1327 (7th Cir.1995), or an applicant for federal habeas corpus from having to exhaust his state remedies, see, e.g., Burris v. Parke, 95 F.3d 465, 468 (7th Cir.1996) (en banc); Burris v. Farley, 51 F.3d 655, 658 (7th Cir.1995); Harris v. Champion, 938 F.2d 1062, 1064-65 (10th Cir.1991)--is also enough. Otherwise the lower court or agency would have the judicial or administrative equivalent of a pocket veto.

But where, as in this case, the judicial decision poised between appealable denial and legitimate deferral is embodied in an order, it is better to disambiguate the order by interpretation than to fret over the meaning of constructive denial. Although Judge Andersen may have intended to grant the motion for a stay at some time in the future that apparently has not yet arrived, what he said was that the motion was granted in part and denied in part, and the most natural interpretation is that it was granted as to the NASD-member defendants and denied as to the nonmember defendants.

It is true that a conventional aid to the interpretation of a contract, and one equally helpful to the interpretation of other documents, including a judicial order, is the behavior of the author or authors. Sethness-Greenleaf, Inc. v. Green River Corp., 65 F.3d 64, 67 (7th Cir.1995); Nolte v. Hudson Navigation Co., 16 F.2d 182, 184 (2d Cir.1926)(L.Hand, J.); Navarro-Ayala v. Hernandez-Colon, 951 F.2d 1325, 1353-54 (1st Cir.1991) (separate opinion). If they behave as if an order meant X, X becomes a reasonable interpretation of the order. On this basis it can be argued, though not persuasively, that the judge has treated his order of April 25, 1996, as if it refused to stay the suits against the defendants, period. Discovery relating to the motion for a preliminary injunction continued; the preliminary injunction hearing has come and gone.

But proceedings incident to the motion for a preliminary injunction actually tell us nothing about whether the judge thought he had granted a stay for arbitration. The Federal Arbitration Act has been interpreted to allow preliminary injunction proceedings to go forward, even while all other judicial proceedings have been stayed pending arbitration, in order to preserve the status quo and prevent irreparable harm, Gateway Eastern Ry. v. Terminal Railroad Ass'n, 35 F.3d 1134, 1141 (7th Cir.1994); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Salvano, 999 F.2d 211, 215 (7th Cir.1993); Performance Unlimited, Inc. v. Questar Publishers, Inc., 52 F.3d 1373, 1377-80 (6th Cir.1995); but cf. Peabody Coalsales Co. v. Tampa Electric Co., 36 F.3d 46, 47 (8th Cir.1994). (This is provided that such relief is not excluded by the parties' arbitration agreement. Kowalski v. Chicago Tribune Co., 854 F.2d 168, 173 (...

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