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Jurisdiction over non-signatory's appeal from an order denying a stay pending arbitration

Arthur Anderson v. Carlisle, argued today at the US Supreme Court, is both factually complex and legally complex.

The gut issue is simple: Whether a federal court of appeals has jurisdiction over an appeal from an order denying a stay, when the application is made by a party who not a signatory to an arbitration agreement.

SCOTUSblog wiki provides the briefs, but does not attempt to explain the case.

The Legal Information Institute at Cornell has an extensive discussion, including this summary of the case:

Section 3 of the Federal Arbitration Act ("FAA") allows parties who have agreed to arbitrate to move for a stay of trial proceedings until they have had a chance to attempt arbitration. In addition, Section 16 of the FAA allows an immediate appeal of judgments denying stay under such circumstances. At issue in this case is whether these sections of the FAA extend to non-signing parties affected by an arbitration agreement. Petitioner Arthur Andersen advised Respondent Wayne Carlisle on a business transaction. As a result of this transaction, Carlisle eventually signed a contract, to which Andersen was a not party, that contained an arbitration agreement. After a dispute developed, Andersen sought a stay in the litigation proceedings in order to arbitrate with Carlisle, despite the fact that Andersen had not signed the arbitration agreement. After Andersen appealed the initial denial of its request for a stay, the United States Court of Appeals for the Sixth Circuit held that it did not have jurisdiction to hear Andersen's appeal because Sections 3 and 16 of the FAA only apply to signatories of arbitration agreements. The Supreme Court's decision in this case may clarify the scope of the FAA's application to non-signatories, including the availability of appellate review of denials of stays.

The formal question presented is:

Section 3 of the Federal Arbitration Act (?FAA?), 9 U.S.C. § 3, provides that "on application of one of the parties," a district court shall stay proceedings pending arbitration if the district court concludes that the "issue involved in such suit or proceeding is referable to arbitration" under "an agreement in writing for such arbitration." Section 16(a)(1)(A) of the FAA, 9 U.S.C. § 16(a)(1)(A), provides that "an appeal may be taken from an order" of a district court denying a stay application made under Section 3. The questions presented are:

(1) Whether Section 16(a)(l)(A) of the FAA provides appellate jurisdiction over an appeal from an order denying an application made under Section 3 to stay claims involving non-signatories to the arbitration agreement.

(2) Whether Section 3 of the FAA allows a district court to stay claims against nonsignatories to an arbitration agreement when the nonsignatories can otherwise enforce the arbitration agreement under principles of contract and agency law, including equitable estoppel.

The transcript of oral argument (61 pages, pdf) is available [here].

I'd rather not predict the outcome of this one.

Full post as published by Arbitration Blog on March 03, 2009 (boomark / email).