In the Second Circuit, as in other jurisdictions, only exceptional circumstances will justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment. A New York federal district court recently encountered such circumstances in connection with a motion to certify an interlocutory appeal of an order compelling arbitration.
Plaintiffs filed a demand for class arbitration and defendants filed a competing motion to compel individual arbitration of plaintiffs’ claims. The district court declined to issue an order denying or compelling class arbitration of plaintiffs’ claims, holding that whether an arbitration agreement permits claims to be brought on a classwide basis or instead dictates that they must be brought on an individual basis is a matter for the arbitrators to resolve, not the district court.
Defendants filed a motion seeking certification of an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) to resolve whether the arbitration panel or the district court should decide whether classwide arbitration is permitted. That provision permits a district court to certify an otherwise non-final order for interlocutory appeal if the district court is of the opinion that such order [1] involves a controlling question of law [2] as to which there is substantial ground for difference of opinion and [3] that an immediate appeal from the order may materially advance the ultimate termination of the litigation. The district court considered each of these three factors.
As to the first prong, the district court acknowledged that resolution of the certified question would not terminate the action, but reasoned that the issue was nevertheless a “controlling question” because its resolution would significantly affect the conduct of the action regardless of whether the court’s prior order was reversed or affirmed. If reversed, any arbitration proceedings to date would be vacated and the district court would decide whether the plaintiffs’ claims may proceed as a class in arbitration. If affirmed, the court would effectively be directing the arbitrators to decide whether the arbitration agreement permits class arbitration, and “any cloud hanging over the arbitration panel’s initial determination would be lifted, thereby removing a basis for vacating that determination” in the district court. In addition, the issue certified on interlocutory appeal was a pure question of law that the Second Circuit Court of Appeals could decide quickly and cleanly without having to study the record, and the Second Circuit’s resolution of that issue would have precedential value for a large number of cases.
The second prong was also satisfied. The district court stated that there was no controlling Second Circuit or Supreme Court precedent on the question and that both sides could draw support from competing opinions of the Supreme Court and lower courts across the country. While recognizing that the Third and Sixth Circuit had concluded that the district court should decide the issue, the court “remained convinced” that the plurality opinion in Green Tree Financial Corp. v. Bazzle provided “persuasive guidance on the question.” Surveying the lack of clear precedent and split of available authority, the district court easily found a substantial ground for dispute to exist.
As to the third prong, the district court considered whether granting an immediate appeal would materially advance the ultimate termination of the litigation. This, in turn, required consideration of whether the benefit to the district court of obviating needless trial time outweighed the inefficiency to the Second Circuit in hearing multiple appeals in the same case. In tackling this question, the district court observed that, regardless of whether it happened now or later, an appeal of the certified question to the Second Circuit was inevitable. The parties had made it clear that the losing party in arbitration would seek to vacate the arbitration award in the district court, and further, that the party adversely impacted by the district court’s confirmation or vacatur of the arbitration award would almost certainly take an appeal by right to the Second Circuit. Thus, the Second Circuit would be confronted with the certified question either way. Moreover, denying plaintiff’s motion to certify an interlocutory appeal would not avoid delay significantly because, even if allowed to proceed, the arbitration would eventually be stayed pending the district court’s decision to confirm or vacate the arbitration award. Resolving whether class arbitration was available would have a momentous effect on the action, but such resolution could not occur until there was a definitive determination of who—between the district court and the arbitrator—was the proper choice to resolve the question. By hastening this determination, the district court concluded that an immediate appeal would materially advance the ultimate termination of the litigation.
With all three § 1292(b) factors weighing in favor of granting the plaintiffs’ motion to certify an interlocutory appeal of its prior order compelling arbitration, the district court concluded that the motion presented exceptional circumstances justifying a departure from the basic policy of postponing appellate review until after the entry of a final judgment. As a result, the Second Circuit will be presented with an opportunity to determine as a matter of law who—the court or the arbitration panel—decides whether an arbitration agreement permits class arbitration.
In re: A2P SMS Antitrust Litig., No. 12-cv-02656-AJN (S.D.N.Y. Mar. 2, 2015).
