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A Word to the Wise
A party moves to compel arbitration. The court grants the motion. Should the court dismiss the action or stay the proceeding? If the court dismisses the action, should the dismissal be with or without prejudice? I was always under the impression that it did not much matter, as a party seeking to affirm or challenge the subsequent arbitration award could always re-file the action after the arbitration. Whether this judge or another heard the subsequent proceeding seemed of little consequence. It turns out that whether a court dismisses the action or merely stays the court proceeding after compelling arbitration does in fact matter, but for quite different reasons, as highlighted by the Second Circuit's recent decision in Cap Gemini v. Nackel, 346 F.3d 360 (2d Cir. 10/14/03) (Meskill, Miner, and Straub, Cir. Judges)
In Cap Gemini, the employer moved in the Southern District to compel arbitration and to stay a California court action brought by a former employee, Nackel. The district court granted the employer's motion to compel, and stayed the California court action. The district court also stayed the action pending before it, placing it on the court's suspense calendar. The district court explained in a later order that it chose to stay rather than dismiss the case “to allow the parties the opportunity to seek confirmation of any arbitral award without filing a second action in federal court.” The district court further explained that it was the court's intent that its order be final and dispositive of the entire case.
On appeal, a preliminary question for the appellate court was whether the district court's order constituted a “final decision” within the meaning of Section 16 of the Federal Arbitration Act. This was important because immediate appeals may only be taken from a final decision. The appellate court noted that the basis for its jurisdiction, at least based on the district court's initial order, was unclear because the court did not dismiss the action but rather stayed it. The appellate court concluded, however, following clarification by the district court of its own order, that the lower court's order was in fact final.
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