Tenth Circuit: Joins Circuits Holding that 16(a) Arbitrability Appeal Divests Court (Web)

Rodney McCauley v. Halliburton Energy Services, Inc., (Tenth Circuit, June 28, 2005).  The United States Court of Appeals ruled that when a non-frivolous 9 U.S.C. § 16(a) appeal is filed, the district court is divested of its jurisdiction pending appeal. 
 
Plaintiff, McCauley, was employed by the defendant, Halliburton; both signed an arbitration agreement that stated the parties would arbitrate “all claims that fall within the scope of Halliburton’s Dispute Resolution Program.”   McCauley injured himself while insulating a tank after work hours.  Insulating was not part of McCauley’s job description for Halliburton.  
 
Halliburton then terminated McCauley’s employment.  In response, McCauley sued based on sustained injuries and his termination under the theories of negligence, fraud, deceit, intentional infliction of emotional distress, and wrongful termination.  Members of McCauley’s family sued for loss of consortium. 
 
Halliburton moved to compel arbitration on all claims.  The district court partially granted the motion compelling arbitration for all claims except negligence and loss of consortium, stating those claims were not subject to the agreement because they arose out of work done as an independent contractor (insulating the tank).  Both parties agreed the fraud, intentional infliction of emotional distress, and wrongful termination claims were arbitrable under the agreement.  The negligence and consortium claims were in dispute. 
 
Halliburton appealed the portion of the ruling denying the motion to compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 16(a)(1)(c) and moved for a stay of further litigation in the district court pending appeal of the arbitrability issue.  The district court summarily denied the motion for a stay and Halliburton moved the Circuit Court for a stay, arguing that the 16(a) appeal divested the district court of jurisdiction.
 
Circuits disagree about whether a “§ 16(a) appeal divests the district court of jurisdiction.”  The “Second and Ninth Circuits refused to stay proceedings in the district court while an arbitrability issue is pending on appeal.”  However, the Seventh and Eleventh Circuits “have held that the appeal triggers the general divestiture principle and, so long as the appeal is not frivolous, warrants issuance of a stay.” 
 
The Tenth Circuit sided with the Seventh and Eleventh Circuits citing Stewart v. Donges, 915 F.2d 572 (10th Cir. 1990), holding that when a non-frivolous “interlocutory appeal is taken, the district court only retains jurisdiction to proceed with matters not involved in the appeal.”  The district court may retain jurisdiction by asserting that the appeal is frivolous.  Then, the appellant may move the appellate court “for a stay pending appeal, asserting that the district court’s finding of frivolousness is not supported by the record.” United States v. Hines, 689 F.3d 934 (10th Cir.1982).  This holding best supports the parties’ legal entitlement to avoidance of litigation due to a contractual entitlement to arbitration while mitigating the potential for abuse of interlocutory appeals.
 
Because McCauley did not assert the appeal was frivolous, Halliburton’s motion to stay the proceedings in the district court is granted and the district court is divested of its jurisdiction pending appeal of the arbitration issue. 
 
This opinion can be found at: http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=10th&navby=case&no=056011