Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co.
| Decision Date | 10 February 1989 |
| Docket Number | Nos. 88-3512,88-3823,s. 88-3512 |
| Citation | 867 F.2d 809 |
| Parties | , RICO Bus.Disp.Guide 7142 PEOPLES SECURITY LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. MONUMENTAL LIFE INSURANCE COMPANY; B. Larry Jenkins; Ronald J. Brittingham; Thomas R. Jenkins, Defendants-Appellants. (Two Cases) |
| Court | U.S. Court of Appeals — Fourth Circuit |
Donald E. Sharpe (Donna Hill Staton, Sheila M. Vidmar, Elizabeth C. Kelley, Piper & Marbury, Baltimore, Md., on brief), for defendants-appellants.
Alan Mitchell Wiseman (Gaspare J. Bono, Lisa J. Saks, Charles H. Samel, Howrey & Simon, Washington, D.C., Lillard H. Mount, James H. Hughes, Mount, White, Hutson & Carden, P.A., Durham, N.C., on brief), for plaintiff-appellee.
Before RUSSELL, WIDENER and CHAPMAN, Circuit Judges.
Plaintiff Peoples Security Life Insurance Company filed this action against defendants Monumental Life Insurance Company, B. Larry Jenkins, Thomas R. Jenkins, and Ronald J. Brittingham seeking injunctive relief and damages for certain of defendants' business practices as well as recision of an agreement entered into by the two insurance companies. The defendants, in turn, (1) moved to compel arbitration under the parties' arbitration agreement and (2) moved for a stay of proceedings pending arbitration. These motions were denied by the district court. For the reasons set forth below, we reverse the district court's decision and grant defendants' motion to compel arbitration and defendants' motion for a stay of proceedings pending arbitration.
Monumental Life Insurance Company ("Monumental") is an insurance company organized under Maryland law with its principal place of business in Baltimore. Peoples Security Life Insurance Company ("Peoples Security") is an insurance company organized under North Carolina law with its principal place of business in that state. It represents a merger of Peoples Life Insurance Company ("Peoples Life") into Home Security Life Insurance Company ("Home Security"), with the merged company taking the corporate name, Peoples Security. Peoples Life and Home Security had been wholly-owned subsidiaries of Capital Holding and, as a result of the merger, Peoples Security was a subsidiary of Capital Holding.
Defendant Larry B. Jenkins ("L. Jenkins") resigned from his position as president of Peoples Life in August 1982 and became the president of Monumental. Defendant Ronald J. Brittingham ("Brittingham") resigned from his position as regional vice president of Peoples Life in September 1982 and became an officer of Monumental. Peoples Life became concerned with the loss of top employees to Monumental, and on January 17, 1984, at the request of Capital Holding, Peoples Life and Monumental entered into an agreement imposing a reciprocal hiring moratorium on the two companies. Specifically, Peoples Life and Monumental each agreed not to employ the other's "active agents, sales managers or home office employees" commencing February 1, 1984 through July 1, 1984.
Defendant Thomas R. Jenkins ("T. Jenkins") resigned from his position as field vice president of Home Security in August 1984 and was hired by Monumental. Shortly thereafter, Capital Holding requested the execution of another moratorium agreement between Peoples Life and Monumental. Following negotiations, the parties entered into a settlement agreement which is the centerpiece of the litigation (the "Settlement Agreement") and which (1) permitted the insurance companies to complete those employment discussions already in progress as of September 1, 1984, and (2) instituted a hiring freeze from September 13, 1984 through September 30, 1985. The parties further agreed not to appropriate or use the other's proprietary information and agreed to refrain from making material misrepresentations of fact to employees of the other company. Finally, the Settlement Agreement provided for arbitration of "[a]ny question, charge, complaint, or grievance believed to constitute a breach or violation" of the Agreement. 1 In July 1985, Peoples Life agreed on an extension of the 1984 agreement between the parties by agreeing that the hiring freeze would continue through September 30, 1985 and the Settlement Agreement itself would remain in effect until September 30, 1987.
On August 1, 1986, Peoples Security filed this lawsuit against Monumental and L. Jenkins, Brittingham, and T. Jenkins, alleging that Monumental had entered into the Settlement Agreement in bad faith, and requesting that the Settlement Agreement be rescinded. The lawsuit also alleged breaches of fiduciary duty by L. Jenkins, Brittingham, and T. Jenkins, the unlawful appropriation of trade secrets and confidential information, tortious interference with contract, tortious interference with business relationships, unfair and deceptive trade practices, unjust enrichment, civil RICO violations, and defamation in violation of the Settlement Agreement.
The defendants, after denying the allegations in their answer, moved for arbitration and for a stay of proceedings pending arbitration. Plaintiff opposed the motion to arbitrate. After hearing oral argument on the motion, the district court denied arbitration and entered orders relating to future trial of the issues by the court.
The defendants filed a formal second motion to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. Sec. 4, and for a stay pending arbitration. Defendants requested at the same time that the court stay discovery pending its ruling on defendants' motion to compel arbitration.
Plaintiff responded to this motion by seeking court-imposed sanctions on defendants and their counsel for renewing their motion to arbitrate, contending that precise issue had been previously decided against them. The district court issued a Memorandum and Order which again denied arbitration. In so ruling, the court construed the arbitration clause in the Settlement Agreement as not encompassing the arbitration of the issue of fraud in the inducement of the Settlement Agreement. The court, however, declined to impose sanctions on defendants as requested by the plaintiff but ordered that discovery proceed according to its November 25, 1987 scheduling order.
The defendants then moved to compel arbitration pursuant to Rule 59, Fed.R.Civ.P. Defendants also requested that the district court certify the question regarding arbitration pursuant to 28 U.S.C. Sec. 1292(b). Defendants argued that the court's interpretation of the arbitration clause was a controlling question of law as to which there was a substantial ground for difference of opinion and that an immediate appeal from the Order would materially advance the ultimate termination of the litigation. After hearing motions between the parties, the court finally ruled on the request of the defendants for a certification of the action for appeal under Section 1292(b). It entered the certification, and this court granted the appeal under Section 1292(b). While defendants' motion for Section 1292(b) certification was pending before the district court, defendants filed within time a notice of appeal of right under Section 1292(a)(1). 2 Plaintiff moved in this court to dismiss defendants' appeal for lack of jurisdiction. Defendants, in turn, filed their opposition to plaintiff's motion to dismiss. Consideration of this motion was deferred until oral argument.
The status of the appeal herein thus was that there was pending a timely appeal of right by the defendants under Section 1292(a) and an appeal under Section 1292(b) on the petition for an interlocutory appeal. In short, this appeal is before us both as one of right and by petition under both (a) and (b), respectively of Section 1292. Since we find that the defendants had an appeal of right under Section 1292(a), we find it unnecessary to consider the appeal under Section 1292(b).
It is the position of the plaintiff that an appeal from a denial of arbitration is not appealable under section 1292(a). Whatever may have been the rule to be followed under the so-called Enelow-Ettelson doctrine, 3 plaintiff argues that such rule had been overruled by the recent case of Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988). In that case, the Supreme Court held that "orders granting or denying stays of 'legal' proceedings on 'equitable' grounds are not automatically appealable under section 1292(a)(1)," adding in explication:
[t]his holding will not prevent interlocutory review of district court orders when such review is truly needed.... As for orders that were appealable under section 1292(a)(1) solely by virtue of the Enelow-Ettelson doctrine, they may, in appropriate circumstances, be reviewed under the collateral-order doctrine of section 1291, see Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), and the permissive appeal provisions of section 1292(b), as well as by application for writ of mandamus. 108 S.Ct. at 1142-43 (footnote omitted).
It will be noted, however, that the Supreme Court in Gulfstream was careful to point out that its decision did not apply to cases such as Moses H. Cone. Moses H. Cone was entered in an appeal from this circuit. We expressly held in that case that there was an appeal of right from a denial of arbitration under an arbitration clause qualifying under the Federal Arbitration Act. In re Mercury Construction Corp., 656 F.2d 933, 937 (4th Cir.1981). The Supreme Court addressed the appealability issue in its opinion and held that the order denying arbitration was "appealable [of right] within the exception to the finality rule under Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949)." See 460 U.S. at 11-12, 103 S.Ct. at 934-35. It, therefore, follows that the denial of arbitration was appealable of right under Section 1292(a).
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