Olson v. Paine, Webber, Jackson & Curtis, Inc.

• Citation: 806 F.2d 731
• Decision Date: 21 November 1986
• Docket Number: No. 86-1334,86-1334
• Parties: Martha OLSON, Plaintiff-Appellant, v. PAINE, WEBBER, JACKSON & CURTIS, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 731

806 F.2d 731

Martha OLSON, Plaintiff-Appellant, v. PAINE, WEBBER, JACKSON & CURTIS, INC., Defendant-Appellee.

No. 86-1334.

United States Court of Appeals Seventh Circuit.

Argued Sept. 9, 1986.

Decided Nov. 21, 1986.

James J. Shea, Rothberg, Gallmeyer, Fruechtenicht & Logan, Ft. Wayne, Ind., for plaintiff-appellant.

J. Timothy McCaulay, Helmke, Beams, Boyer & Wagner, Ft. Wayne, Ind., for defendant-appellee.

Before POSNER and FLAUM, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

POSNER, Circuit Judge.

Martha Olson had a commodity-trading account with Paine Webber, a brokerage house. She incurred a loss of some $18,000 in trading silver futures and, attributing the loss to a failure by her account executive at Paine Webber to follow her instructions, brought this suit for damages under the Commodity Exchange Act, 7 U.S.C. Secs. 1 et seq. Paine Webber moved the district judge to stay the case pending arbitration of the dispute and to order arbitration, forms of relief expressly authorized by sections 3 and 4, respectively, of the United States Arbitration Act, 9 U.S.C. Secs. 3, 4. The motion was based on a clause in the brokerage agreement between Olson and Paine Webber requiring arbitration of disputes. Olson opposed the motion on the ground that the clause was invalid because it violated regulations of the Commodity Futures Trading Commission. The district judge reformed the agreement to make it comply with the regulations and then enforced it by granting Paine Webber's motion to stay proceedings in the district court and by ordering arbitration. 627 F.Supp. 1317. The arbitration has not been conducted, however. Olson has appealed to this court, and Paine Webber has not pressed for arbitration before the appeal is decided.

The first question we take up is whether we have jurisdiction of this interlocutory appeal. The general rule in the federal as in virtually all state court systems is that only final judgments can be appealed. 28 U.S.C. Sec. 1291. The reason is to conserve the time of litigants and appellate judges by limiting the parties, so far as possible, to one appeal per case and by ensuring the fullest possible ventilation of issues in the trial court before that appeal is taken, in the hope that maybe none will be taken, or, if one is, that the appellate court will only have to worry about dispositive issues. Neither of the orders that Olson is trying to appeal at this time (the order staying proceedings and the order to arbitrate) is a final, dispositive order. Her lawsuit remains pending in the district court. Should she lose the arbitration and fail to persuade the district court to set aside the arbitration award, and should her damage suit be dismissed as a result, there would then be a final judgment in the district court from which she unquestionably could appeal, raising among other issues the question whether the arbitration clause was valid. Of course, she might not appeal. The facts brought out at the arbitration hearing might convince her that Paine Webber had not violated the brokerage agreement after all. Or she might prevail in the arbitration, in which event her complaint that the dispute was not arbitrable would be moot. The fact that interlocutory orders in a litigation are frequently rendered moot by the final judgment in the trial court is powerful support for the final judgment rule. And however we decide this interlocutory appeal, we can't be sure it will be the last time we see this case.

The only basis for this appeal is the Enelow-Ettelson doctrine. Under this doctrine, named after Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440 (1935), and Ettelson v. Metropolitan Life Ins. Co., 317 U.S. 188, 63 S.Ct. 163, 87 L.Ed. 176 (1942), an equitable stay (and a stay to permit arbitration to proceed is deemed equitable) of a suit at law (ordinarily, and here, a suit for damages) is deemed a preliminary injunction, and is therefore appealable under 28 U.S.C. Sec. 1292(a)(1), an exception to the final judgment rule. Matterhorn, Inc. v. NCR Corp., 763 F.2d 866, 870 (7th Cir.1985). It might seem that the order to arbitrate would be independently appealable as a mandatory injunction, but at least in this circuit it is not. See id. at 870-71, and cases cited there. It is not appealable as a final order, either, since Olson's lawsuit remains pending in the district court. The stay, however, is appealable, if the Enelow-Ettelson doctrine is still authoritative. We reluctantly conclude that it is.

Section 1292(a)(1), materially unchanged since its original enactment as part of the Evarts Act of 1891, 26 Stat. 828, which created the federal courts of appeals, creates a right of appeal from "interlocutory orders of the district courts ... granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions...." The key word is "injunction," and no one just looking at it would suppose that when a judge stays further proceedings in a matter before him he is issuing an injunction. However, the Enelow-Ettelson doctrine deems such a stay an injunction, provided the ground for the stay is equitable and the suit in which it is issued is a suit at law.

Ordinarily a lower court has no authority to reject a doctrine developed by a higher one. See, e.g., Thurston Motor Lines, Inc. v. Jordan K. Rand, Ltd., 460 U.S. 533, 535, 103 S.Ct. 1343, 1344, 75 L.Ed.2d 260 (1983) (per curiam). If, however, events subsequent to the last decision by the higher court approving the doctrine--especially later decisions by that court, or statutory changes--make it almost certain that the higher court would repudiate the doctrine if given a chance to do so, the lower court is not required to adhere to the doctrine. See, e.g., United States v. Burke, 781 F.2d 1234, 1239 n. 2 (7th Cir.1985); Norris v. United States, 687 F.2d 899, 902-04 (7th Cir.1982); In re Korman, 449 F.2d 32, 39 (7th Cir.1971) (per curiam) (dictum), rev'd, 406 U.S. 952, 92 S.Ct. 2055, 32 L.Ed.2d 340 (1972) (per curiam); Spector Motor Service, Inc. v. Walsh, 139 F.2d 809, 814 (2d Cir.), vacated, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101 (1944); Perkins v. Endicott Johnson Corp., 128 F.2d 208, 217-18 (2d Cir.1942), aff'd, 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424 (1943); Healy v. Edwards, 363 F.Supp. 1110, 1117 (E.D.La.1973) (three-judge district court), vacated, 421 U.S. 772, 95 S.Ct. 2410, 44 L.Ed.2d 571 (1975) (per curiam); Browder v. Gayle, 142 F.Supp. 707, 716-17 (M.D.Ala.) (three-judge district court), aff'd, 352 U.S. 903, 77 S.Ct. 145, 1 L.Ed.2d 114 (1956) (per curiam); United States v. Girouard, 149 F.2d 760, 765-67 (1st Cir.1945) (dissenting opinion), rev'd, 328 U.S. 61 (1946). But we take seriously Judge Hand's warning against a lower court's "embrac[ing] the exhilarating opportunity of anticipating a doctrine which may be in the womb of time, but whose birth is distant." Spector Motor Service, Inc. v. Walsh, supra, 139 F.2d at 823 (dissenting opinion).

Experience since the cases establishing the Enelow-Ettelson doctrine were decided, coupled with later decisions by the Supreme Court concerning related issues of appealability, and a statutory change in the jurisdiction of the courts of appeals--all occurring against a background of extraordinarily rapid growth in the workload of those courts--have made clear that the doctrine is arbitrary, mischievous, and devoid of contemporary utility. We must consider therefore whether this is one of those rare cases where circumstances "have created a near certainty that only the occasion is needed for the pronouncement [by the Supreme Court] of the doom" of an obsolete doctrine. Salerno v. American League of Professional Baseball Clubs, 429 F.2d 1003, 1005 (2d Cir.1970) (Friendly, J.); see also Buzynski v. Oliver, 538 F.2d 6, 7 (1st Cir.1976).

In 1891 law and equity were still separate jurisprudential systems in the federal courts, even though administered by the same judges; a federal district judge was both a law judge and a chancellor. Historically, a chancellor could enjoin the plaintiff in a suit in a law court from proceeding further with the suit, to allow the chancellor to decide an equitable defense to it. Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440 (1935), was a diversity suit at law for the proceeds of a life insurance contract. The insurance company pleaded the affirmative defense that the contract had been procured by fraud, and moved the district judge to try this defense, which the company contended was equitable in character, in advance of jury trial on the legal issues raised by the plaintiff's claim. The judge granted the motion, and the plaintiff appealed. The Supreme Court held that the order granting the motion was appealable because it was equivalent to the grant of an injunction "restraining proceedings at law precisely as if the court had acted upon a bill of complaint in a separate suit for the same purpose." Id. at 383, 55 S.Ct. at 311. Apart from the oddity of describing as an injunction an order regulating the sequence of trial before the judge issuing the order, the Court overlooked the fact that law judges were authorized to stay proceedings before them pending resort to equity. See, e.g., North Chicago Rolling Mill Co. v. St. Louis Ore & Steel Co., 152 U.S. 596, 604, 14 S.Ct. 710, 713, 38 L.Ed. 565 (1894); Abraham v. North German Fire Ins. Co., 37 Fed. 731 (C.C.N.D.Ia.1889); Hurst v. Hurst, 3 U.S. (3 Dall.) 512, 1 L.Ed. 700, 12 Fed.Cas. 1028 (C.C.D.Pa.1799). There was no need to get an injunction. The order issued by the district judge in Enelow could just as accurately have been described as the stay by a law judge of the plaintiff's suit rather than as a chancellor's injunction against that suit; and a stay as such--a stay that is not also an injunction--is not appealable.

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