University Life Ins. Co. of America v. Unimarc Ltd.

Decision Date10 February 1983
Docket NumberNo. 82-1891,82-1891
Citation699 F.2d 846
Parties1982-83 Trade Cases 65,139 UNIVERSITY LIFE INSURANCE COMPANY OF AMERICA, Plaintiff-Appellee, v. UNIMARC LTD. and George C. Huff, Defendants-Appellants.
CourtU.S. Court of Appeals — Seventh Circuit

Alan H. Lobley, Ice, Miller, Donadio & Ryan, Indianapolis, Ind., for defendants-appellants.

James A. McDermott, Barnes & Thornburg, Indianapolis, Ind., for plaintiff-appellee.

Before PELL and POSNER, Circuit Judges, and BONSAL, * Senior District Judge.

POSNER, Circuit Judge.

This appeal from an order compelling arbitration requires us to decide two principal questions relating to the United States Arbitration Act of 1925, as amended, 9 U.S.C. Secs. 1-14. Is an order under 9 U.S.C. Sec. 4 to arbitrate appealable if the district court, after issuing it, retains jurisdiction of the case in order to be able to provide any additional relief that may later become appropriate? If it is appealable, was the district court in this case right to enter such an order when a pending lawsuit between the parties raised antitrust issues, which are not arbitrable?

In 1975 Unimarc Ltd., a California company, agreed to market life insurance for University Life Insurance Company of America, an Indiana company. Two years later University Life signed a coinsurance agreement with Unimarc's president and major stockholder, George Huff, designed to compensate him for his services to University Life by setting up a life insurance company in Huff's name that University Life would support in various ways. This agreement, like the marketing agreement, required arbitration of any dispute arising under it.

University Life and Unimarc entered into a second marketing agreement in 1980 under which all rights created by the first agreement were terminated unless expressly preserved. The agreement provided for arbitration in Indianapolis, Indiana of any disputes arising under the agreement. At about this time Huff and University Life had a dispute over the coinsurance agreement. Huff demanded arbitration and arbitrators were appointed, but Huff refused to submit his claims to arbitration.

On September 1, 1981, University Life gave Unimarc notice that it was terminating the second marketing agreement effective December 31. In November it demanded arbitration of seven issues having to do with its rights under the agreement, such as whether it could hire more marketing agents without having to pay Unimarc commissions.

On December 2 Unimarc and Huff filed a diversity suit in California against University Life and related entities, alleging that the defendants had made false representations between 1975 and 1980 and had wrongfully interfered with the two marketing agreements. University Life responded to the suit by appointing its arbitrator, by moving to stay the California action pending arbitration, and, on December 29, by filing the present case, a petition in federal district court in Indiana to compel arbitration.

Unimarc and Huff promptly amended their complaint in the California suit to add antitrust counts. On January 12, 1982, University Life appointed Unimarc's arbitrator, as it was entitled to do under the arbitration clause in the second marketing agreement because Unimarc had failed to do so within the period allowed by the clause. The next day, the district court in California granted University Life's application for a stay. Unimarc and Huff have appealed that order to the Ninth Circuit.

After an evidentiary hearing, the district court in Indiana granted University Life's petition for arbitration and entered the order from which Unimarc and Huff have appealed to us. The order (1) requires University Life and Huff to file with the clerk of the court a list of the disputes they want to arbitrate relating to the coinsurance agreement, and then proceed to arbitration before the panel already selected for that arbitration; (2) requires University Life and Unimarc to file a similar list relating to disputes under the second marketing agreement, and then proceed to arbitration in Indianapolis before the two arbitrators already selected (by University Life) plus a third arbitrator to be selected by the two in accordance with the arbitration clause of the agreement; and (3) "retain[s] jurisdiction of this matter pursuant to 9 U.S.C. Sec. 4 (1976) to resolve any further disputes between the parties arising under or relating to provisions of the Coinsurance Agreement or the Second Marketing Agreement governing arbitration of disputes and to enforce any and all decisions and awards arising out of the arbitration proceedings to be conducted in accordance with paragraphs 1 and 2 of this Order."

If all the court had done was to order the parties to arbitrate, its order clearly would have been final, and therefore appealable under 28 U.S.C. Sec. 1291. Gavlik Constr. Co. v. H.F. Campbell Co., 526 F.2d 777, 782 (3d Cir.1975); N.V. Maatschappij voor Industriele Waarden v. A.O. Smith Corp., 532 F.2d 874, 875-76 (2d Cir.1976). True, the order would not have resolved the underlying dispute between the parties but merely have decided who should resolve it. But it would have been final so far as the proceeding before the court, a proceeding to compel arbitration, was concerned, just as an order dismissing a complaint because the parties are in the wrong forum is final. And it should make no difference if in addition the court, as it did here, orders the parties to file with it a list of the issues to be arbitrated, so that there will be a judicial record of the scope of the order.

It is equally clear that if University Life were seeking some other judicial remedy against Unimarc and Huff besides an order to arbitrate, the order would not be appealable. Whyte v. THinc Consulting Group Int'l, 659 F.2d 817, 818 (7th Cir.1981). As with any complaint that contains multiple claims, the disposition of one is not a final judgment and is therefore not appealable unless the district court certifies it for a direct appeal under Rule 54(b) of the Federal Rules of Civil Procedure, which was not done here.

This case is in between the two we have put. University Life was proceeding only under 9 U.S.C. Sec. 4, but the district court, besides issuing an order to arbitrate, retained jurisdiction of the case both to resolve any further disputes over arbitrability that might arise and to enforce any awards that might be made in the arbitration proceedings. We must decide whether the retention of jurisdiction for either purpose made the order nonappealable. Robbins v. George W. Prescott Publishing Co., 614 F.2d 3, 5 (1st Cir.1980), is authority that it did not ("nothing was left for the court but supervision, so that there was, in effect, a final order under section 1291"), but the passage we have quoted is the entire discussion of the issue.

A court that issues a permanent injunction will often retain jurisdiction lest the defendant violate the injunction or changed circumstances require its modification at some future date. Since injunctions are appealable regardless of finality, 28 U.S.C. Sec. 1292(a)(1), it is not important whether retaining jurisdiction deprives a permanent injunction of its finality. It may not be important here either. True, interlocutory orders issued under 9 U.S.C. Sec. 4 have been held not to be mandatory injunctions, on the practical ground emphasized in Lummus Co. v. Commonwealth Oil Ref. Co., 297 F.2d 80, 84-85 (2d Cir.1961), that otherwise section 1292(a)(1) would allow piecemeal appeals, which would impair one of the principal advantages claimed for arbitration--speed. Presumably the same conclusion would be reached if the order concluded the section 4 proceeding but left other claims still pending; otherwise the holding in THinc would be circumvented. But these considerations are inapplicable to an order to arbitrate when no other claims remain in the case. The courts have described such orders in other contexts as mandatory injunctions. Sinclair Ref. Co. v. Atkinson, 370 U.S. 195, 212, 82 S.Ct. 1328, 1337, 8 L.Ed.2d 440 (1962); Local 344 Leather Goods Union v. Singer Co. Piecework Control Systems, 84 F.R.D. 424 (N.D.Ill.1979). The description is apt; and it is hard to see why retention of jurisdiction following entry of an order to do something--a mandatory injunction--should have any greater impact on appealability than in the case of an order not to do something.

But it is not critical whether the order to arbitrate in this case is appealable under section 1292(a)(1). Retaining jurisdiction would not affect the finality of a permanent injunction, and neither should it affect the finality of an order to arbitrate. Therefore, even if there were no section 1292(a)(1) both types of order would be appealable under 28 U.S.C. Sec. 1291 as final judgments. The purpose of the final-judgment rule is to determine the best time for an appeal. If the appeal is postponed too long, the appellant may be deprived of a meaningful appellate review and the parties and the trial court harrowed by lengthy proceedings that could have been averted if the error on which they were founded had been corrected by the appellate court earlier. Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225, 93 L.Ed. 1528 (1949). An order is therefore ripe for appeal as soon as it is apparent that subsequent rulings of the trial court are not going to moot the issues that the appellant would like to present, or raise new issues that the appellate court could most efficiently decide when reviewing the earlier ruling. Williams v. Mumford, 167 U.S.App.D.C. 125, 511 F.2d 363, 366 (1975); United States v. Mississippi Light & Power Co., 638 F.2d 899, 903 (5th Cir.1981). These considerations explain why a defendant who loses in the liability phase of a bifurcated trial has no right to appeal until the damages have been fixed, at...

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