Filed: Aug. 23, 2004
Latest Update: Apr. 11, 2017
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 8-23-2004 CTF Hotel Holdings v. Marriott Intl Inc Precedential or Non-Precedential: Precedential Docket No. 02-2732 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "CTF Hotel Holdings v. Marriott Intl Inc" (2004). 2004 Decisions. Paper 359. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/359 This decision is brought to you for free and
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 8-23-2004 CTF Hotel Holdings v. Marriott Intl Inc Precedential or Non-Precedential: Precedential Docket No. 02-2732 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "CTF Hotel Holdings v. Marriott Intl Inc" (2004). 2004 Decisions. Paper 359. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/359 This decision is brought to you for free and o..
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Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
8-23-2004
CTF Hotel Holdings v. Marriott Intl Inc
Precedential or Non-Precedential: Precedential
Docket No. 02-2732
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation
"CTF Hotel Holdings v. Marriott Intl Inc" (2004). 2004 Decisions. Paper 359.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/359
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PRECEDENTIAL Before: McKEE, SMITH and WEIS,
Circuit Judges.
UNITED STATES COURT OF
APPEALS (Opinion Filed: August 23, 2004)
FOR THE THIRD CIRCUIT
EMM ET T. FLOOD, ESQ. (Argued)
No. 02-2732 and 02-2898 GREGORY B. CRAIG, ESQ.
KENNETH C. SMURZYNSKI, ESQ.
BRENDAN V. SULLIVAN, JR., ESQ.
Williams & Connelly LLP
CTF HOTEL HOLDINGS, INC., 725 12th Street, N.W.
Washington, DC 20005
v.
DANIEL A. DREISBACH, ESQ.
MARRIOTT INTERNATIONAL, INC.; JESSE A. FINKELSTEIN, ESQ.
RENAISSANCE HOTEL OPERATING Richards, Layton & Finger, P.A.
COMPANY; P.O. Box 551
AVENDRA L.L.C. Wilmington, DE 19899
Marriott International, Inc., Attorneys for Appellants and Cross-
Renaissance Hotel Operating Appellees,
Company, Marriott International, Inc., and
Appellants No. 02-2732 Renaissance Hotel Operating Co.
CTF Hotel Holdings, Inc., JONATHAN J. LERNER, ESQ.
Cross-Appellant No. 02-2898 (Argued)
MAURA B. GRINALDS, ESQ.
TIMOTHY G. NELSON, ESQ.
On Appeal from the United States Skadden, Arps, Slate, Meagher & Flom
District Court LLP
for the District of Delaware 4 Times Square
(Civil Action No. 02-CV-271) New York, NY 10036
District Judge: Hon. Sue L. Robinson
EDWARD P. WELCH, ESQ.
STEPHEN D. DARGITZ, ESQ.
Skadden, Arps, Slate, Meagher & Flom
Argued: November 3, 2003 LLP
1 Rodney Square
P.O. Box 636
Wilmington, DE 19899
Attorneys for Appellee and Cross- signed an agreement with HPI to manage
Appellant, 44 other hotels (“the HPI Master
CTF Hotel Holdings, Inc. Agreement”). Marriott International
purchased Renaissance in 1997 and
continued to operate it as a wholly-owned
subsidiary. In 1999, Marriott, HPI and
OPINION OF THE COURT CTF entered into an agreement governing
all of the aforementioned 64 hotels and
incorporating the CTF and HPI Master
Agreements (“the 1999 Agreement”).2
Section IX.K of the 1999
McKEE, Circuit Judge.
Agreement addresses dispute resolution
We are asked to determine if the and states:
District Court erred in ruling that CTF
Governing Law ; Dispute
Holdings, Inc., was not obligated to
Resolution. . . . In the event
arbitrate its breach of contract dispute with
of any dispute or difference
Marriott International and Renaissance
arising out of or relating to
Hotels (together “Marriott”). We are also
this Agreement, if such
asked to determine if the court erred in
dispute or difference relates
staying that litigation pending resolution of
to or arises out of a Hotel
related arbitration between Marriott and
owned or leased by CTF (or
Hotel Property Investments Ltd. (“HPI”).
otherwise governed by the
For the reasons that follow, we will affirm
CTF Master Agreement),
the court’s ruling that CTF was not
then such dispute or
required to go to arbitration, but we will
difference shall be subject to
reverse the District Court’s decision to stay
the dispute resolution
CTF’s suit against Marriott for breach of
provisions in the CTF
contract pending resolution of Marriott’s
arbitration with HPI.
I. FACTS AND PROCEDURAL
HISTORY
In 1993, Renaissance signed an CTF was then known as “Stouffer Hotel
agreement with CTF to manage the 20 Holdings, Inc.” JA 211.
CTF hotels at issue here (“the CTF Master
Agreement”).1 In 1995, Renaissance 2
The 1999 Agreement was produced
after CTF notified Marriott that Marriott
had breached the CTF Master Agreement
1
Renaissance Hotel was then known as in 1998, and gave Marriott a final notice of
“Ramada Hotel Operating Company” and default in April 1999.
2
Master Agreement; 3 The CTF Master Agreement is
and if such dispute or silent as to the duty to arbitrate and
difference relates to therefore imposes no such obligation.
or arises out of a However, the HPI Master Agreement
Hotel owned o r contains the following section requiring
leased by HPI (or arbitration:
otherwise governed
9.6 Governing Law :
by the HPI Master
Arbitration: Consent to
Agreemen t), then
Jurisdiction. The parties
such dispute or
hereto shall use their best
difference shall be
efforts to settle any disputes
subject to the dispute
or differences arising out of
resolution provisions
o r r e l a ti n g t o th i s
in the HPI Master
Agreement. . . . If they do
A g reeme n t.4
not reach [a] solution within
Nothing herein is
a period of thirty (30) days,
intended to require
t h e n t h e d i s p u t e or
arbitration of any
difference shall be finally
dispute under the
settled by arbitration in
CTF M aster
accordance with the rules of
Agreement or to
the American Arbitration
limit any right any
Association.
party may have to
proceed in federal or
state court on any
In 2001 and 2002, CTF and HPI
dispute under the
began questioning Marriott’s performance
CTF M aster
under the 1999 Agreement, and in March
Agreement. 5
2002, CTF notified Marriott that it was in
default under that Agreement. 6 Marriott
3 thereafter initiated arbitration against CTF
We shall refer to the portion of
and HPI seeking declaratory relief
Section IX.K up to this footnote as
regarding the issues that had been
“Clause 1."
identified in the default notice. One such
4
We shall refer to the portion of issue involved proceeds from an audio-
Section IX.K from the end of Clause 1 to visual program conducted in certain hotels
this footnote as “Clause 2.”
5 6
We shall refer to the portion of This was the second notice of default
Section IX.K from the end of Clause 2 to that CTF had issued Marriott. See supra
this footnote as “Clause 3.” note 2.
3
operated by Marriott (the “Molloy CTF also petitioned the District Court to
dispute”). Another issue involved the enjoin Marriott’s attempt to require it to
scope of CTF’s and HPI’s rights to review arbitrate its disputes, and Marriott moved
and audit the amount of unrestricted to compel CTF to arbitrate pursuant to the
allowances Marriott received under its Federal Arbitration Act, 9 U.S.C. § 4.
management agreements (the “audit
As noted earlier, the District Court
dispute”).
granted CTF’s motion to enjoin arbitration
HPI did not dispute that it was of its claims and denied Marriott’s motion
obligated to arbitrate the Molloy and audit to compel CTF to arbitrate. However, the
disputes with Marriott under the 1999 court then stayed litigation of CTF’s
Agreement. However, CTF maintained breach of contract suit pending the
that it was not obligated to arbitrate. It resolution of Marriott’s arbitration with
filed a 21-count complaint against Marriott HPI. The court explained that it was doing
and a third defendant, Avendra LLC,7 in so “in order to promote some efficiencies
the District Court. The complaint included of judicial administration and in light of
issues involving the Molloy and audit the participation in this litigation of
disputes as well as other claims for relief.8 defendant Avendra (a non-party to the
Master and 1999 Agreements).”
7
Thereafter, Marriott appealed the
Marriott describes Avendra as “an court’s refusal to compel CTF to arbitrate,
independent company founded by Marriott and CTF cross-appealed the court’s order
International, Inc., Hyatt Corporation, Bass staying CTF’s breach of contract suit
Hotels & Resorts, Inc., Fairmont Hotels pending resolution of the arbitration
Inc., and Club-Corp., Inc. to provide between Marriott and HPI.9
centralized procurement services with
improved quality and pricing of goods and
services through the aggregation of
purchasing power.” Appellant’s Br. at 6. and Avendra of aiding and abetting breach
of fiduciary duty and tortious interference
8
Count 2 of the complaint raises the with contract, and state claims against all
disputes over both the audit provision and three defendants for unjust enrichment,
the returns from the Molloy program. civil RICO violations, and Robinson-
CTF’s complaint also states the following Patman Act violations.
claims against Marriott: breach of contract,
9
breach of fiduciary duty, intentional Marriott also filed a motion to dismiss
mis representation, ne g l i g en t CTF’s appeal arguing that the District
misrepresentation, fraud, conversion, and Court’s stay was not a final order. We
breach of the covenant of good faith and consider Marriott’s motion to dismiss the
fair dealing. The other counts in the appeal together with the merits.
complaint accuse Marriott International
4
II. JURISDICTION singles out a claim for extended delay,
while others of a similar nature proceed, is
We may review the denial of
appealable).
Marriott’s motion to compel arbitration
under 9 U.S.C. § 16(a)(1)(B), which Here, the District Court decided
provides for jurisdiction over appeals from two important legal issues. First, it found
orders “denying a petition under [9 U.S.C. the 1999 agreement did not require CTF to
§ 4] to order arbitration to proceed[.]” arbitrate the Molloy and audit disputes in
CTF’s complaint. Second, it delayed
Marriott questions whether we have
CTF’s litigation so that it would not
jurisdiction over CTF’s cross-appeal of the
proceed until after the arbitration between
District Court’s stay, and has moved to
HPI and Marriott was resolved. In a very
dismiss CTF’s appeal for lack of subject-
practical sense, CTF – which admittedly
matter jurisdiction. Marriott argues that
has the right to bring suit in the federal
the stay is not a final order and is therefore
court – has been blocked from proceeding
not appealable. We agree that a stay is
in that forum until the issues are resolved
usually not a final order because it
in the arbitration.
provides only a temporary respite from
litigation. Marcus v. Twp. of Abington, 38 The stay order at issue here is not
F.3d 1367, 1370 (3d Cir. 1994). However, “indefinite” per se because the District
when a stay amounts to an effective Court stated that it would “reconsider [the
dismissal of the underlying suit, it may be stay] if it appears that the arbitration is not
subjected to appellate review. Cheyney proceeding apace.” There is, however, no
State Coll. Faculty v. Hufstedler, 703 F.2d way of foretelling how long CTF’s suit
732, 735 (3d Cir. 1983) (citing Moses H. must remain in limbo. Moreover, we see
Cone Hosp. v. Mercury Constr. Corp., 460 no way for CTF to attempt to expedite
U.S. 1 (1983)); see also United States v. HPI’s arbitration with Marriott because
Spears, 859 F.2d 284, 287 (3d Cir. 1988) CTF is not a party to it.
(holding that appellate review was
If CTF’s suit must suffer
effectively foreclosed unless we exercised
indeterminate delay pending the outcome
pendent jurisdiction because the issues
of HPI’s arbitration with Marriott, CTF
would become moot and untouchable
will be without any way of challenging the
because of the procedural limbo in which
propriety of the District Court’s stay or the
the decision placed the case). We have
procedural limbo that inevitably results
also recognized that an indefinite stay
from it. CTF will certainly not be able to
order that unreasonably delays a plaintiff’s
challenge the order at the conclusion of
right to have its case heard is appealable.
that arbitration because the stay will
Hufstedler, 703 F.2d at 735; see also
become moot and unreviewable. Time
Haberern v. Lehigh & New England Ry.,
only runs in one direction. Accordingly,
554 F.2d 581, 584 (3d Cir. 1977) (holding
we can not correct any error the District
that a stay order of indefinite length which
5
Court may have made in staying CTF’s District Court’s stay order here involve
suit unless we review it now. “consideration of myriad factors affecting
judicial economy, the ‘hardship or
We have recognized the concept of
inequity’ that Marriott would face in going
pendent appellate jurisdiction where a case
forward with the litigation, and the injury
is “rife with special circumstances which
that a stay would inflict on CTF. ”
bring it outside the general rule and so
Concurring and Dissenting Op. at 2 (citing
limit its precedential value as to not
Landis v. N. Am. Co., 299 U.S. 248, 254-
measurably weaken our continued
55 (1936)). As our colleague also points
aversion to piecemeal appeals.” Haberern,
out, those “considerations are distinct
554 F.2d at 584. However, in Swint v.
from the question s of contract
Chambers Cty. Comm’n., 514 U.S. 35, 48
interpretation presented in Marriott’s
(1995), the Supreme Court “counsel[ed]
appeal.” Id. The fact that they are
resistance to expansion of appellate
“distinct” does not mean, however, that
jurisdiction . . . ”. In doing so, however,
they are not “intertwined.”
the Court noted that it had “not universally
required courts of appeals to confine Since the District Court’s stay order
review to the precise decision would be unreviewable and moot at the
independently subject to appeal.” Id. at 50 conclusion of HPI’s arbitration with
(citing Thornburgh v. American College Marriott, the umbilical connection
of Obstetricians and Gynecologists, 476 between it and the District Court’s stay is
U.S. 747, 755-57 (1986)). Swint did not not neatly severed. As will be evident
resolve “whether or when it may be proper from our discussion below, “there is
for a court of appeals, with jurisdiction sufficient overlap in the facts relevant to
over one ruling, to review, conjunctively, both the appealable and non-appealable
related rulings that are not themselves issues to warrant plenary review.” Palcko
independently appealable.” 514 U.S. at v. Airborne Express, Inc., 372 F.3d 588,
50-51. 594 (3d Cir. 2004) (emphasis in original)
(quoting E.I. Dupont de Nemours & Co.,
Following Swint, we concluded that
269 F.3d at 203). The case is therefore
the Supreme Court had limited the
“rife with special circumstances” allowing
doctrine of pendent appellate jurisdiction
for appellate review without running afoul
to two circumstances: “inextricably
of this court’s “continued aversion to
intertwined orders or review of the non-
piecemeal appeals[,]” Haberern, 554 F.2d
appealable order where it is necessary to
at 584, or the Supreme Court’s holding in
ensure meaningful review of the
Swint. In addition, at this point of the
appealable order.” E.I. Dupont de
proceedings, we are unable to determine
Nemours & Co. v. Rhone Poulenc Fiber &
what preclusive effect, if any, the
Resin Intermediates, S.A.S., 269 F.3d 187,
arbitration may have on CTF’s suit in the
203 (3d Cir. 2001). As Judge Smith
District Court. Accordingly, we hold that
correctly points out, the merits of the
6
we may properly exercise pendent Thus, Section IX.K of the 1999
appellate jurisdiction over the District Agreement controls our analysis. Marriott
Court’s order staying that suit while HPI argues that Clause 2, which states that a
proceeds with its arbitration against dispute relating to a Hotel owned or leased
Marriott. by HPI must be resolved under the HPI
Master Agreement, governs the disputes at
III. DISCUSSION
issue. According to Marriott, the instant
A. Marriott’s Appeal10 disputes relate to both HPI hotels and CTF
h o tels a s is evident from th e
Marriott appeals the District
litigation/arbitration involving M arriott,
Court’s conclusion that the Agreements
CTF, and HPI. Therefore, argues M arriott,
allow CTF to litigate its claims and do not
its dispute with CTF has to be governed by
require arbitration. Marriott argues that
Clause 2 and the HPI Master Agreement
t h e d i s p u t e s a t is su e i n v ol v ed
controls. As noted above, the HPI Master
interpretation of provisions of the 1999
Agreement contains a dispute resolution
Agreement, and that CTF must arbitrate
clause requiring “the parties [thereto]” to
any disputes relating both to CTF and HPI
arbitrate disputes that can not be settled by
hotels under the dispute resolution
the good faith efforts of those parties.
provision in that agreement.
However, CTF was not a party to
“Arbitration is strictly a matter of
that agreement. Moreover, Marriott’s
contract. If a party has not agreed to
interpretation ignores that Clause 1 of
arbitrate, the courts have no authority to
Section IX.K is also relevant to the
mandate that [it] do so.” Bel-Ray Co. v.
disputes at issue here because they relate
Chemrite, 181 F.3d 435, 444 (3d Cir.
to CTF hotels as well as HPI hotels and
1999). Principles of contract law therefore
thus implicate the CTF Master Agreement.
govern our inquiry. When interpreting
As noted above, the CTF Master
contracts, we are required to read contract
Agreement does not require arbitration of
language in a way that allows all the
disputes between CTF and Marriott. As
language to be read together, reconciling
also noted above, we are obligated to
conflicts in the language without rendering
interpret contracts in a manner that gives
any of it nugatory if possible. New Castle
meaning to every word. If we read
Cty. v. National Union Fire Ins. Co., 174
Clauses 1 (“such dispute . . . relates to . . .
F.3d 338, 349 (3d Cir. 1999).
a Hotel owned or leased by CTF”) and 2
(“such dispute . . . relates to . . . a Hotel
owned or leased by HPI”) as mutually
10
We exercise plenary review over the exclusive, the confusion disappears along
District Court’s legal conclusions about with the c onflict. Under this
contract provisions for arbitration. Harris interpretation, where a dispute relates to
v. Green Tree Fin. Corp., 183 F.3d 173, CTF, the CTF Master Agreement governs
176 (3d Cir. 1999).
7
and there is no duty to arbitrate pursuant to Agreement. No such language appears,
Clause 1; but where a dispute relates to and Clause 3 is precisely to the contrary.
HPI, the HPI Master Agreement governs That Clause clearly provides for certain
and there is a duty to arbitrate pursuant to disputes arising under the 1999 Agreement
Clause 2. Accordingly, under New Castle to be excepted from arbitration. It
County, we read Clauses 1 and 2 as therefore vitiates Marriott’s argument that
mutually exclusive in order to eliminate Clause 2 gives rise to a presumption that
the conflict and give meaning to every all disputes arising under the 1999
word in the relevant clauses of the 1999 Agreement must be arbitrated. Such a
Agreement. presumption is applicable only in “the
absence of any express provision
Moreover, the resulting
excluding a particular grievance from
interpretation is eminently reasonable.
arbitration. . . .” AT & T Tech., Inc. v.
The 1999 Agreement maintained the
Comm. Workers of America, 475 U.S. 643,
separate CTF and HPI Master Agreements
650 (1986) (internal citation and quotation
with their corresponding dispute resolution
marks omitted). Moreover, even if the
provisions. As CTF observes, “the lack of
disputes regarding CTF hotels are identical
a unitary arbitration provision for disputes
to those regarding HPI hotels, CTF’s claim
common to CTF and HPI in Section IX.K
pertains only to its hotels. Such disputes
is no accident . . . .” Brief at 21. Clause 3
are subject to the CTF Master Agreement,
makes this crystal clear. As noted above,
and CTF is therefore not required to
Clause 3 provides that: “Nothing herein is
arbitrate.
intended to require arbitration of any
dispute under the CTF Master Agreement Marriott argues that evidence
or to limit any right any party may have to outside the parties’ contracts establishes
proceed in federal or state court on any that CTF and HPI have an identity of
d ispute u n de r t he C TF M aste r interests that makes them functionally the
Agreement.” Marriott’s interpretation same corporation, thus binding CTF to
requires that we strike Clause 3 from the HPI’s contractual obligation to arbitrate
1999 Master Agreement. Of course, we disputes. Marriott also argues that, even if
can not do that. CTF is not actually contractually obligated
to arbitrate these disputes, CTF should be
If the parties really intended the
estopped from litigating its claim because
result Marriott urges upon us here, they
the parties’ correspondence indicates that
could easily have provided for it by simply
it relied on the HPI Master Agreement to
requiring that any dispute that similarly
assert its rights. Both arguments require
involves Marriott’s operation of both CTF
us to consider evidence extrinsic to the
and HPI hotels be governed by the HPI
written contract. Such evidence is
Master Agreement or be subject to
admissible to explain the terms of a written
arbitration, notwithstanding anything to
contract when there is ambiguity in the
the contrary in the CTF Master
8
contract. 58 N.Y. J UR. 2d Evidence and The District Court identified two
Witnesses §586 (2003). 11 The contracts grounds for staying the litigation,
here leave no ambiguity regarding the Avendra’s participation and judicial
t er m s of the dispute resolutio n efficiency. Neither justifies the stay.
mechanisms. Therefore, extrinsic
Judicial efficiency does not, by
e v i d e n c e s u c h a s t h e p a rt i e s’
itself, allow a federal court to refuse to
correspondence can not properly be
exercise its jurisdiction in favor of
considered. This leaves these arguments
proceedings in an alternative forum. The
without any foundation.
Supreme Court has stated: “[g]enerally, as
Thus, the District Court correctly between state and federal courts, the rule is
held that CTF is not required to arbitrate that the pendency of an action in the state
its dispute with Marriott, and it properly court is no bar to proceedings concerning
denied Marriott’s motion to compel the same matter in the Federal court
arbitration and enjoined the arbitration of having jurisdiction,” noting that federal
CTF’s disputes. courts have a “virtually unflagging
obligation . . . to exercise the jurisdiction
B. The Cross-Appeal
given them.” Colorado River Water
As we noted earlier, CTF cross- Conservation Dist. v. United States, 424
appeals the District Court’s stay of its U.S. 800, 817 (1976) (internal citations
claim against Marriott and Avendra. It and quotation marks omitted); see
argues that the District Court abused its genera lly E RWIN C HEMERINSKY ,
discretion by staying litigation pending F EDERAL J URISDICTION § 14.2 (3d ed.
resolution of the separate arbitration 1999). The Court later reaffirmed this
proceeding between Marriott and HPI. holding, stating that its task as a reviewing
CTF claims that the stay abrogated its right court was “not to find some substantial
to resolve its disputes through litigation, a reason for the exercise of federal
right that the District Court acknowledged jurisdiction by the District Court; rather,
in denying Marriott’s motion to compel the task is to ascertain whether there exist
arbitration. According to CTF, the District ‘exceptional’ circumstances, the ‘clearest
Court took away with one hand the very of justifications,’ that can suffice under
thing it awarded with the other. We Colorado River to justify the surrender of
agree.12 that jurisdiction.” Moses H. Cone Hospital
v. Mercury Const. Corp., 460 U.S. 1, 25-
26 (1983) (citing to Colorado River).
11
The parties agreed that disputes will Indeed, if the reverse were true, federal
be governed by New York law in Section
IX.K of the 1999 Agreement.
Moses H. Cone Memorial Hosp. v.
12
We review to see if the District Court Mercury Construction Corp., 460 U.S. 1,
abused its discretion in issuing the stay. 19 (1983).
9
courts would be able to rely upon judicial right to litigate. Marriott argues that it can
economy and stay litigation whenever make out the clear hardship or inequity
plaintiffs elected to file state actions needed to support the District Court’s stay
related to their pending federal claims. See and, unlike Avendra, it filed a formal
F EDERAL J URISDICTION, supra, at § 14.2 motion in support of this argument.
(“[R]equiring federal court dismissal However, the District Court did not stay
would give litigants a powerful tool to the litigation based on any hardship to
keep cases out of federal court or remove Marriott; it stayed the litigation based on
cases to state court simply by filing a Avendra’s presence in the litigation and
parallel suit in state court.”) considerations of judicial efficiency.
Accordingly, any hardship Marriott may
We recognize the potential for
now claim is not before us.
judicial efficiency that lies in possible
collateral estoppel because the arbitrator Nor is there any evidence to support
could make determinations relevant to a finding of hardship or inequity to
CTF’s federal claims. However, we have Avendra in the record. Avendra stated “a
already explained that staying litigation for preference” that the arbitration proceed
that reason effectively denies CTF its first when it spoke briefly to the District
contracted for day in court. The right to Court at a hearing on Marriott’s motion to
litigate would mean little if the substance compel arbitration and CTF’s motion for
of the litigation, when CTF’s day in court preliminary injunction. The basis for its
finally dawns, may be driven by something preference was that it would be forced to
that may have occurred during arbitration. defend itself twice – once in arbitration,
once in litigation – unless the litigation
was stayed in favor of the arbitration. It
Similarly, Avendra’s presence does
believed that the arbitration was likely to
not provide a satisfactory basis for the
settle claims relating to it and this would
stay. The Supreme Court has said that,
prevent it from ever having to deal with
when a District Court decides whether to
CTF or defend in the litigation. However,
stay a suit pending the outcome of another
Avendra’s convenience can not defeat
suit in the same forum, “the suppliant for
CTF’s contractual right to litigate.
a stay must make out a clear case of
Moreover, it is not at all clear that it would
hardship or inequity in being required to
actually be inequitable to expect Avendra
go forward. . . .” Landis v. North Am. Co.,
to defend itself against two claims brought
299 U.S. 248, 255 (1936). Although the
by two separate corporations.
situation here differs because the District
Court had to decide whether to stay this IV. CONCLUSION
litigation pending the outcome of an
For all of the above reasons, we
arbitration, the same logic applies. The
will affirm the order of the District Court
opposing party must state a clear
denying Marriott’s request to compel
countervailing interest to abridge a party’s
10
arbitration against CTF, and we will arbitration and denying Marriott’s motion
reverse the District Court’s order staying to compel arbitration, I respectfully
CTF’s litigation against M arriott. dissent. E.I. Dupont De Nemours & Co. v.
R hone P o u l e n c F i b e r & R e s i n
Intermediaries, S.A.S., 269 F.3d 187, 203
(3d Cir. 2001) (quoting Swint v. Chambers
County Comm’n, 514 U.S. 35, 50-51
(1995)).
CTF HOTEL HOLDINGS, INC. V.
The question whether the District
MARRIOTT INTERNATIONAL, INC.
Court abused its discretion in granting the
(NOS. 02-2732 & 02-2898)
stay involves the District Court’s
consideration of myriad factors affecting
judicial economy, the “hardship or
SMITH, Circuit Judge, Concurring in Part
inequity” that Marriott would face in going
and Dissenting in Part:
forward with the litigation, and the injury
that a stay would inflict on CTF. Landis v.
N. Am. Co., 299 U.S. 248, 254-55 (1936).
I agree with the majority that the
These considerations are distinct from the
contract between the parties is “crystal
questions of contract interpretation
clear” that disputes between CTF Hotel
presented in Marriott’s appeal. Indeed, the
Holdings, Inc. (“CTF”) and M arriott
majority has no difficulty extricating
International, Inc. (“M arriott”) are not
Marriott’s appeal from CTF’s cross-
subject to mandatory arbitration. Slip Op.
appeal. The majority first interprets the
at 13. I part company with my colleagues
contract between the parties (correctly, I
in their decision to exercise jurisdiction
may add), and then proceeds to the
over CTF’s cross-appeal from the District
factually and analytically distinct question
Court’s discretionary stay order. The
presented in the cross-appeal. The
majority correctly observes that “a stay is
majority’s opinion demonstrates that it
usually not a final order because it
“can readily decide” the meaning of the
provides only a temporary respite from
parties’ contract “ w ithout at all
litigation.” Slip Op. at 7 (citing Marcus v.
considering” whether the stay order was a
Twp. of Abington, 38 F.3d 1367, 1370 (3d
valid exercise of the District Court’s
Cir. 1994)). Nevertheless, the majority
discretion. E.I. Dupont De Nemours, 269
concludes that the District Court’s order is
F.3d at 204 (quoting Rein v. Socialist
reviewable under the doctrine of pendent
People’s Libyan Arab Jamahiriya, 162
appellate jurisdiction. Because the stay
F.3d 748, 759 (2d Cir. 1998)); see also In
order in this case is neither “inextricably
re Montgomery County, 215 F.3d 367,
intertwined with” nor “necessary to ensure
375-76 (3d Cir. 2000). Accordingly, the
meaningful review of” the District Court’s
issues raised in the appeal and the
order granting CTF’s motion to enjoin
11
cross-appeal are not “inextricably exempted from the coverage of the Federal
intertwined.” Arbitration Act such that arbitration could
not be compelled under Federal law; and
Nor is it necessary to exercise
(2) because this FAA exem ption
jurisdiction over the cross-appeal in order
preempted enforcement of the arbitration
to meaningfully adjudicate Marriott’s
agreement under state law. Id. at 591.
appeal. I am sympathetic to the majority’s
This Court affirmed the district court’s
concern that staying CTF’s litigation
ruling that the arbitration agreement was
pending the arbitration between Hotel
exempted from enforcement under the
Property Investments Ltd. (“HPI”) and
FAA, exercising jurisdiction under 9
Marriott effectively denies CTF the benefit
U.S.C. § 16(a). Palcko, 372 F.3d at 591,
of its bargain with Marriott. We have
594. We exercised pendent appellate
determined that the parties bargained for a
jurisdiction over the district court’s second
two-track dispute resolution procedure,
ruling—that t he F AA e x em ption
with HPI subject to mandatory arbitration
preempted enforcement of the arbitration
and CTF free to go to court. Nevertheless,
agreement under state law—holding that
the freedom from arbitration that CTF
review of both issues was “necessary to
bargained for is not unqualified. Instead,
ensure meaningful review of the District
CTF’s right to litigate its disputes with
Court’s order in its entirety.” Id. at 595.13
Marriott is necessarily subject to the
District Court’s “pow er to sta y In Palcko, the appealable and non-
proceedings [which] is incidental to the appealable issues were both necessary
power inherent in every court to control conditions to the same order— the denial
the disposition of the causes on its docket of the motion to dismiss. Resolving either
with economy of time and effort for itself, issue in defendant’s favor would have
for counsel, and for litigants.” Landis, 299 required reversal of the order, triggering
U.S. at 254. Returning the case to the arbitration proceedings. Id. at 596
District Court without disturbing the stay (reversing the district court’s preemption
puts CTF in precisely the position it ruling and remanding for enforcement of
bargained for, i.e., that of any other litigant the arbitration agreement under state law).
subject to the ordinary incidents of Had we not exercised jurisdiction over the
litigation, including the court’s inherent district court’s preemption ruling,
power to control its docket. defendant would have been required to
defend the discrimination action in federal
This case is t h e r e fo re
district court. If, on a subsequent appeal
distinguishable from Palcko v. Airborne
Express, Inc., 372 F.3d 588 (3d Cir. 2004),
decided after oral argument in this case. In 13
9 U.S.C. § 16(a) only covers motions
Palcko, the district court denied a motion
to compel under the FAA, and does not
to compel arbitration on two grounds: (1)
cover motions to compel under state law.
because the arbitration agreement was
Palcko, 372 F.3d at 594.
12
from a final order in that action, we were every stay order, and therefore does not
to reverse the district court’s preemption support jurisdiction by itself. E.g.,
ruling, the right to arbitration would Marcus, 38 F.3d at 1370 (stay pending
already have been lost. A victory at that completion of parallel state court criminal
stage would be meaningless because the proceedings not appealable). Ordinarily,
defendant employer would have already we guard against the danger of a stay order
been subjected to the protracted litigation becoming “effectively unreviewable” by
that it sought to avoid through the applying the collateral order doctrine. See
arbitration agreement. Moses H. Cone Memorial Hospital v.
Mercury Constr. Corp., 460 U.S. 1, 11-12
In this case, the District Court’s
(1983) (citing Cohen v. Beneficial Indus.
stay order is independent of its order on
Loan Corp., 337 U.S. 541 (1949)). An
Marriott’s motion to compel, and was not
order staying litigation pending other
a necessary condition to its refusal to
proceedings may be an appealable
compel arbitration. Thus, unlike the
collateral order where it puts a litigant
situation in Palcko, resolution of the non-
“effectively out of court.” Moses H. Cone,
appealable issue does not necessitate a
460 U.S. at 10 & n.11. But where those
particular ruling on the appealable order.
other proceedings will have no preclusive
And as discussed above, the stay order
effect on the federal litigation, the litigant
does not threaten to destroy CTF’s right to
cannot be said to be “effectively out of
litigate. CTF is not a party to the HPI
court,” and the stay order is not
arbitration, and the stay order does not
appealable. Id. at 10, 12; Marcus, 38 F.3d
force CTF into arbitration. Although
at 1371; Trent v. Dial Med. of Fla., Inc.,
CTF’s lawsuit has been delayed, CTF’s
33 F.3d 217, 221 (3d Cir. 1994).
right to litigate remains intact, subject to
CTF— the party invoking pendent
the District Court’s inherent power to
appellate jurisdiction—insists that the HPI
manage its docket.
arbitration will have no preclusive effect
I am also sympathetic to the against CTF in its lawsuit against Marriott.
majority’s concern that the District Court’s Accordingly, CTF cannot suggest that the
stay order may expire and become moot stay order has put it “effectively out of
before an appealable final order can issue. court.” Instead, the effect of the stay is
Slip Op. at 8.14 This, however, is true of “delay, and delay alone.” Marcus, 38 F.3d
14
Of course, it is also possible that the
stay order will be vacated by the District
Court prior to the termination of the HPI expiration of the stay must therefore be
arbitration, or that CTF and M arriott will balanced against the possibility that the
settle their dispute. The potential that stay may terminate under circumstances
CTF’s cross-appeal will be mooted by the acceptable to CTF.
13
at 1371.15
Because the District Court’s stay
order is not an appealable final or
interlocutory order, and because I believe
that review of the stay order is not
“necessary to ensure meaningful review
of” the order enjoining arbitration, I would
dismiss CTF’s cross-appeal for lack of
jurisdiction.
15
While a stay of indefinite and
unreasonable duration may be appealable,
we are not confronted with such an order
in this case. See Haberern v. Lehigh &
New England Ry., 554 F.2d 581, 584 (3d
Cir. 1977) (vacating stay pending
proceedings that had been ongoing for ten
years and whose “expected longevity . . .
exceed[ed] that of the plaintiff”).
14
