Llp v. Spreng

• Citation: 32 IER Cases 385,647 F.3d 72
• Decision Date: 27 May 2011
• Docket Number: Docket No. 11–222.
• Parties: ACCENTURE LLP and Leslie Alan Bailey, Plaintiffs–Appellants,v.Jim L. SPRENG, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

647 F.3d 72

32 IER Cases 385

ACCENTURE LLP and Leslie Alan Bailey, Plaintiffs–Appellants,

v.Jim L. SPRENG, Defendant–Appellee.

Docket No. 11–222.

United States Court of Appeals, Second Circuit.

Argued: May 5, 2011.Decided: May 27, 2011.

Brian D. Murphy (Peter A. Walker, on the brief), Seyfarth Shaw LLP, New York, NY, for Plaintiffs–Appellants.Theodore R. Snyder, Krebsbach & Snyder, P.C., New York, N.Y. (Anthony J. LaCerva, Collins & Scanlon LLP, Cleveland, OH, on the brief), for Defendant–Appellee.Before: FEINBERG, MINER, and WESLEY, Circuit Judges.WESLEY, Circuit Judge:

Plaintiff–Appellant Accenture LLP (“Accenture”) provides global management and technology consulting services. Accenture employed Defendant–Appellee Jim L. Spreng (“Spreng”) from August 2006 to March 31, 2009. Before Spreng joined Accenture, he owned two companies: Advantium and XPAN. Advantium prevented clients from overpaying vendors by using software applications, while XPAN recouped clients' overpayments through an audit recovery process. Plaintiff–Appellant Leslie Alan Bailey (“Bailey”) co-owned Meridian, a business that cooperated with XPAN.

In July 2006, Spreng and Bailey sold their companies to Accenture. In exchange, Accenture paid Spreng a lump sum and a retention bonus, offered Spreng employment with Accenture, and provided Spreng an opportunity to earn a performance bonus. Accenture and Spreng memorialized their specific agreements in an Asset Purchase and Framework Agreement and an Employment Agreement. Each agreement included an arbitration clause.

Spreng would earn the performance bonus if his companies met certain revenue targets. Accenture agreed to make “commercially reasonable efforts” to include Spreng's products as service offerings within its invoice-to-pay offerings, but Accenture reserved discretion to operate its business in the manner that it saw fit, notwithstanding a negative impact on Spreng's prospective income. By November 2008, Spreng's companies had fallen short of the revenue threshold necessary to trigger any performance bonus for Spreng, so Accenture notified him that it would terminate his employment as of March 31, 2009.

A. Arbitration Proceedings

On June 10, 2009, Spreng filed an arbitration demand. He alleged claims for wrongful termination and breach of contract based on Accenture's failure to pay a performance bonus. Accenture attended a full-day mediation and engaged in nearly seven months of settlement negotiations before Accenture determined that the dispute would require an actual arbitration hearing. Accenture and Spreng agreed on an arbitrator and commenced discovery.

On September 16, 2010, after the arbitrator compelled Accenture to produce various documents, Spreng discovered several emails between senior Accenture executives that allegedly suggested that Accenture had padded estimated revenues for Spreng's companies by $17 million. On October 12, 2010, Spreng moved for leave to amend his statement of claims in order to allege fraudulent inducement. On October 13, 2010, the arbitrator denied the motion to amend (the “October Order”), thus foreclosing Spreng's ability to present his fraudulent inducement claim at the October 19, 2010 hearing.

On October 14, 2010, Spreng filed a new demand for arbitration that included his original claims, plus claims of fraud and breach of contract. Later that day, Spreng withdrew his first demand for arbitration, styling the withdrawal as “without prejudice.” Accenture disputed this characterization and asked the arbitrator to deem Spreng's withdrawal as “with prejudice.” The arbitrator denied the motion, finding that the American Arbitration Association (“AAA”) had accepted Spreng's withdrawal and, as a result, that he was “without jurisdiction or authority” to address Accenture's request. Thereafter, Accenture repeatedly requested that the AAA reject Spreng's new arbitration demand. The AAA, however, responded that it was without power to stay the second arbitration absent the parties' agreement or a court order.

B. District Court Proceedings

Two months after Spreng withdrew his first arbitration request, Accenture brought the underlying action. In that action, Accenture moved to enjoin the second arbitration pending the district court's determination of Accenture's claims that: (1) Spreng's withdrawal from the first arbitration waived his right to a second arbitration; (2) the October Order was an enforceable arbitration award; (3) Spreng had breached his contractual obligation to arbitrate; and (4) the dispute should be remanded to the first arbitrator.

Following oral argument, the district court denied Accenture's motions. The court found that “Accenture's requests can be appropriately addressed within the context of the arbitration and should be directed to the arbitrator administering the Second Arbitration.” Accenture LLP, et al. v. Spreng, No. 10–cv–9393, 2010 WL 5538384, at *2 (S.D.N.Y. Dec. 23, 2010). The court concluded that Accenture faced no irreparable harm because it alleged a financial loss and could recover damages. Thus, it denied Accenture's motion for a preliminary injunction and temporary restraining order.

The district court inquired as to whether Accenture contemplated any further proceedings. Accenture responded that it intended to pursue its claims for a permanent injunction, enforcement of the October Order, and breach of contract. Accenture requested permission to file a motion for a stay pending appeal, which the court denied. Nevertheless, on February 14, 2011, with Accenture's consent, the court stayed all proceedings pending appeal.

Before this Court, Accenture moved for an injunction pending appeal and requested an expedited briefing schedule. We denied an injunction, but granted an expedited appeal. On appeal, Accenture argues: (1) that the district court erred by not granting its motion for a preliminary injunction and temporary restraining order; (2) that Spreng's withdrawal from the first arbitration waived his right to a second arbitration; and (3) that the first arbitration's October Order (denying Spreng leave to amend) was an enforceable arbitration award.

I. DISCUSSION

Congress enacted the Federal Arbitration Act (“FAA”) “to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). The FAA's provisions “manifest a ‘liberal federal policy favoring arbitration agreements.’ ” Id. at 25, 111 S.Ct. 1647(quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Section 16 of the FAA “furthers [the FAA's] aim of eliminating barriers to arbitration by promoting appeals from orders barring arbitration and limiting appeals from orders directing arbitration.” Ermenegildo Zegna Corp. v. Zegna, 133 F.3d 177, 180 (2d Cir.1998) (internal quotation marks and brackets omitted).

A. FAA § 16(b)(4) Restricts Appellate Jurisdiction Over District Court Orders that Refuse to Enjoin Arbitration.

We lack jurisdiction over this appeal because Accenture seeks review of a district court's order “refusing to enjoin an arbitration.” 9 U.S.C. § 16(b)(4). While 28 U.S.C. § 1292(a)(1) grants us broad appellate jurisdiction over district courts' interlocutory orders refusing injunctions, FAA § 16(b)(4) limits our review of interlocutory orders refusing to enjoin arbitration.¹ Our sister circuits agree.

In ConArt, Inc. v. Hellmuth, for example, the Eleventh Circuit held that § 16(b)(4) limits § 1292(a)(1)'s broad grant of appellate jurisdiction. 504 F.3d 1208, 1210 (11th Cir.2007). There, a general contractor assigned its rights against a subcontractor to an architectural firm supervising construction. The contract between the general contractor and the architectural firm included an arbitration provision, and after the subcontractor sued the architectural firm in federal court, the firm asserted its assigned counterclaims in a demand for arbitration. In response, the subcontractor moved to enjoin the arbitration, but the district court denied relief. Id. at 1209–10.

On appeal, the Eleventh Circuit rejected the subcontractor's claim that § 1292(a)(1) superceded § 16(b)(4):

That argument has too much throw weight. Accepting it would write out FAA § 16(b)(4)'s clear command, because all orders “refusing to enjoin an arbitration” are orders “refusing ... injunctions.” We don't have the authority to excise specific statutory provisions in favor of more general ones.

504 F.3d at 1210 (citations omitted).² The court applied two canons of statutory interpretation to conclude that § 16(b)(4) limited 28 U.S.C. § 1292(a)(1)'s broad grant of appellate jurisdiction. First, the court found that because § 16(b)(4) was narrow and specific, while § 1292(a)(1) was broad and general, the “specific [w]as an exception to the general.” 504 F.3d at 1210. Second, the court found that because Congress enacted § 1292(a)(1) before § 16(b)(4), § 1292(a)(1) must yield to § 16(b)(4) “to the extent necessary to prevent the conflict.” Id.

Accenture challenges an interlocutory order refusing to enjoin an arbitration. As such, Accenture's appeal clearly falls within § 16(b)(4)'s reach. Recognizing this jurisdictional bar respects the ongoing arbitration and is in accord with our well established view favoring arbitration. See Salim Oleochemicals v. M/V Shropshire, 278 F.3d 90, 93 (2d Cir.2002); Ermenegildo, 133 F.3d at 180.

B. This Court Also Lacks Jurisdiction Under FAA § 16(a)(3) Because the District Court's Order is Not Final.

Notwithstanding § 16(b)(4), Accenture claims that we have appellate jurisdiction because it appeals from “a final decision with respect to an arbitration.” See 9 U.S.C. § 16(a)(3). Accenture claims that while the district court did not dismiss the underlying proceedings, the “practical effect” of...