United States District Court, D. Massachusetts
OPTUM, INC. and OPTUM SERVICES, Inc., Plaintiffs,
DAVID WILLIAM SMITH, Defendant.
MEMORANDUM AND ORDER
Optum, Inc. and Optum Services, Inc. ("Optum") have
sued defendant David Smith for allegedly violating his
contractual obligations concerning unfair competition and
trade secrets, and the federal and Massachusetts statutes
that protect trade secrets as well. An Arbitration Policy
that is part of Smith's contract with Optum requires that
this dispute be resolved by binding arbitration. See Docket
No. 25-1 at 2 of 8. However, it also provides that:
[T]his Policy does not preclude either an employee or [Optum]
from seeking emergency or temporary injunctive relief in a
court of law in accordance with applicable law. However,
after the court has issued a ruling concerning the
emergency or temporary injunctive relief, the employee and
[Optum] are required to submit the dispute to arbitration
pursuant to this Policy.
Id. at 3 of 8 (emphasis added) . In addition, the
Arbitration Policy provides that disputes concerning its
interpretation and arbitrability are to be decided by an
moved for a temporary restraining order ("TRO")
that would, among other things, prohibit Smith from working
for a company known as "ABC," which Optum alleges
is a competitor, and from disclosing or using Optum's
confidential information to benefit ABC. Smith responded by
moving to have this case immediately ordered to arbitration
on all issues, including whether this court has the authority
to issue a TRO before compelling arbitration on the merits,
which Optum agrees will be required after the court decides
its request for temporary injunctive relief.
hearing on January 30, 2019, the court found that it had the
authority to issue a TRO before compelling arbitration.
See Jan. 30, 2019 Tr. at 18-21. Although no order
had entered, later that day Smith filed a notice of appeal
and a motion to stay proceedings in this court pending a
decision of its appeal. Optum opposed the request for a stay,
arguing in part that it will be irreparably harmed if the
court does not decide its motion for a TRO or at least impose
conditions on the stay that are comparable to the TRO it is
February 5, 2019, the court issued a Memorandum and Order
amplifying the reasons stated in court on January 30, 2019
for its finding that it has the authority to decide the
pending motion for a TRO. See Docket No. 48.
Accordingly, the court denied Smith's motion to compel
arbitration immediately. See id.
is, therefore, now an appealable order. See 9 U.S.C.
§16(a); Fed. R. App. P. 4(a)(2). For the reasons
explained below, the court is staying this case pending
appeal and not imposing any conditions on the stay. However,
in view of the contention that Optum will suffer ongoing
irreparable harm during the pendency of the appeal, the court
suggests that the First Circuit decide de novo
whether the stay should be continued or lifted, or attempt to
decide the appeal expeditiously.
Federal Arbitration Act ("FAA"), 9 U.S.C. §1
et sea;., authorizes a party to pursue an interlocutory
appeal of a district court's denial of a motion to compel
arbitration. See 9 U.S.C. §16 (a) (1) (B). However, the
FAA does not state whether a district court must stay
proceedings pending such an appeal. The First Circuit has not
addressed this question.
Griggs v. Provident Consumer Discount Co., 459 U.S.
56 (1982), the Supreme Court explained that "[t]he
filing of a notice of appeal is an event of jurisdictional
significance" that "confers jurisdiction on the
court of appeals and divests the district court of its
control over those aspects of the case involved in the
appeal," id. at 58.
Griggs to the FAA, the Fourth, Seventh, Tenth,
Eleventh, and D.C. Circuits, constituting a majority of
circuits to have considered the issue, have held that the
filing of a notice of appeal of a denial of a motion to
compel arbitration automatically stays proceedings in the
district court unless the appeal is
"frivolous." See, e.g., Levin v. Alms
& Assocs., Ltd., 634 F.3d 260, 264-66 (4th Cir.
2011); Bradford-Scott Data Corp. v. Physician Comput.
Network, 128 F.3d 504 (7th Cir. 1997); McCauley v.
Halliburton Energy Servs., Inc., 413 F.3d 1158, 1160-62
(10th Cir. 2005); Blinco v. Green Tree Servicing,
LLC, 366 F.3d 1249, 1251-52 (11th Cir. 2004);
Bombardier Corp. v. Nat'1 R.R. Passenger Corp.,
2002 WL 31818924, *1 (D.C. Cir. Dec. 12, 2002) (per curiam) .
These courts reason that whether a dispute is arbitrable is
necessarily an "aspect" of the underlying dispute.
For example, the Seventh Circuit wrote that "[w]nether
the case should be litigated in the district court is not an
issue collateral to the question presented by an appeal under
[the FAA]," but is rather "the mirror image of the
question presented on appeal." Bradford-Scott, 128 F.3d
at 505. Accordingly, "[c]ontinuation of proceedings in
the district court largely defeats the point of the appeal
and creates a risk of inconsistent handling of the case by
two tribunals." Id.
Second, Fifth, and Ninth Circuits have held that the filing
of a notice of appeal of a denial of a motion to compel
arbitration does not automatically stay proceedings in the
district court. See, e.g., Motorola Credit Corp.
v. Uzan, 388 F.3d 39, 53-54 (2d Cir. 2004);
Weingarten Realty Inv'rs v. Miller, 661 F.3d
904, 907-10 (5th Cir. 2011); Britton v. Co-Op Banking
Grp., 916 F.2d 1405, 1411-12 (9th Cir. 1990). These
courts reason that whether a dispute is arbitrable is not
necessarily an "aspect" of the underlying dispute.
For example, the Fifth Circuit wrote that an issue in the
district court is only an "aspect" of the case on
appeal if "the appeal and the claims before the district
court address the same legal question."
Weingarten, 661 F.3d at 909. "A determination
on the arbitrability of a claim has an impact on what
arbiter-judge or arbitrator-will decide the merits, but that
determination does not itself decide the merits."
indicated earlier, the First Circuit has not yet decided
whether a district court must stay proceedings pending an
interlocutory appeal under 9 U.S.C. §16(a). Two district
judges in the First Circuit have accepted the majority view.
See Combined Energies v. CCI, Inc., 495 F.Supp.2d
142 (D. Me. 2007) (Woodcock, j.); Intergen N.V. v.
Grina, 2003 WL 1562200 (D. Mass. Feb. 21, 2003) (Keeton,
none of the reported cases have involved what at least seven
Courts of Appeals, including the First Circuit, have found to
be the district court's equitable power to issue a
preliminary injunction to preserve the status quo pending
arbitration in order to protect the ability of the arbitrator
to provide meaningful relief if the plaintiff prevails in the
arbitration. See Teradyne, Inc. v. Mostek Corp., 797
F.2d 43, 51 (1st Cir. 1986); Blumenthal v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1053
(2d Cir. 1990); Ortho Pharm. Corp. v. Amgen, Inc.,
882 F.2d 806, 812 (3d Cir. 1989); Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Bradley, 756 F.2d 1048, 1050
(4th Cir. 1985); Performance Unlimited, Inc. v. Questar
Publishers, Inc., 52 F.3d 1373, 1380 (6th Cir. 1995);
Sauer-Getriebe KG v. White Hydraulics, Inc., 715
F.2d 348, 351 (7th Cir. 1983); Toyo Tire Holdings of
Americas Inc. v. Cont'l Tire N. Am., Inc., 609 F.3d
975, 981 (9th Cir. 2010); Merrill Lynch, Pierce, Fenner
& Smith, Inc. v. Dutton, 844 F.2d 726, 726-28 (10th
Cir. 1988); cf. Peabody Coalsales Co. v. Tampa Elec.
Co., 36 F.3d 46, ...