decided: January 10, 1955.
BALTIMORE CONTRACTORS, INC
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.
Warren, Black, Reed, Frankfurter, Douglas, Burton, Clark, Minton, Harlan
[ 348 U.S. Page 176]
MR. JUSTICE REED delivered the opinion of the Court.
The question in this case is whether an appeal may be taken to a court of appeals from a district court order refusing to stay an action for an accounting pending arbitration.
This equitable action was brought in a state court for an accounting of the profits of a joint venture in construction under the National Housing Act, and was removed to a federal district court on the basis of diversity of citizenship. Under the joint venture agreement, Baltimore
[ 348 U.S. Page 177]
Contractors agreed to pay the respondent twenty-five percent of the net profits on its construction contracts. The provision under which arbitration was sought reads as follows:
"In the event of any dispute in the calculation of the net profits under this Paragraph, Frenkil shall select either Wooden and Benson or Haskins and Sells or an accountant or auditor named by either of them whose determination of all such disputes shall be final and binding upon all parties to the dispute."
The complaint alleged a number of improper practices on the part of Contractors: the use of "dummy" corporations to inflate costs; charges for machinery and material purchases without credits for value or surpluses after completion of the job; receipt of undisclosed rebates; excessive charges and rental for equipment; padded insurance costs, etc.
The petitioner moved for a stay of the action pursuant to § 3 of the United States Arbitration Act, 9 U. S. C. § 3, which authorizes a stay by a federal court when an issue is "referable to arbitration under an agreement in writing for such arbitration." The District Court refused the stay on the ground that the agreement between the parties did not constitute an agreement to arbitrate. The court apparently construed the quoted provision as limited to mathematical disputes. Petitioner appealed to the Court of Appeals for the Second Circuit. On respondent's motion the Court of Appeals dismissed the appeal, citing Morgantown v. Royal Ins. Co., 337 U.S. 254. Certiorari was sought on the following question:
"Whether in an action for an accounting an interlocutory order denying a stay under Section 3 of the United States Arbitration Act should be regarded as a denial of an injunction from which an appeal lies."
[ 348 U.S. Page 178]
In view of the conflict between the decision below and Hudson Lumber Co. v. United States Plywood Corp., 181 F.2d 929, we granted the petition, 347 U.S. 942.*fn1
Congress has long expressed a policy against piecemeal appeals. The reasons for such a policy were stated as follows:
"From the very foundation of our judicial system the object and policy of the acts of Congress in relation to appeals and writs of error, (with the single exception of a provision in the act of 1875 in relation to cases of removal, which was repealed by the act of 1887,) have been to save the expense and delays of repeated appeals in the same suit, and to have the whole case and every matter in controversy in it decided in a single appeal." McLish v. Roff, 141 U.S. 661, 665-666.*fn2
Section 22 of the Judiciary Act of 1789, 1 Stat. 73, 84, provided that appeals in civil actions could be taken to the circuit courts only from final decrees and judgments.*fn3 That requirement of finality has remained a part of our
[ 348 U.S. Page 179]
law ever since, and now appears as § 1291 of the Judicial Code.*fn4
The trial court's interpretation of the quoted contract clause and its order denying a stay could not be called a final decision under § 1291. It was as surely an interlocutory order as the District Court's order in Shanferoke Corp. v. Westchester Corp., 293 U.S. 449, 451.*fn5
[ 348 U.S. Page 180]
The question here presented involves the interpretation of 28 U. S. C. § 1292 (1) which makes an exception to the requirement of finality, permitting appeals from "interlocutory orders . . . granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court." Appealability here turns on whether the District Court's refusal to stay this trial for arbitration was the refusal of an "injunction" under § 1292.
The provision for interlocutory appeals was first introduced in 1891 when the circuit courts of appeals were established as intermediate appellate courts. 26 Stat. 826. Section 7 of that Act allowed appeals from interlocutory orders in equity "granting or continuing" injunctions, but from those only. Additions to the class of appealable interlocutory orders were made from time to time until the enactment of § 1292 in its present form.*fn6
[ 348 U.S. Page 181]
No discussion of the underlying reasons for modifying the rule of finality appears in the legislative history, although the changes seem plainly to spring from a developing need to permit litigants to effectually challenge interlocutory orders of serious, perhaps irreparable, consequence.*fn7 When the pressure rises to a point that influences Congress, legislative remedies are enacted. The Congress is in a position to weigh the competing interests of the dockets of the trial and appellate courts, to consider the practicability of savings in time and expense, and to give proper weight to the effect on litigants. When countervailing considerations arise, interested parties and organizations become active in efforts to modify the appellate jurisdiction.*fn8 This Court, however, is not authorized to approve or declare judicial modification. It is the responsibility of all courts to see that no unauthorized extension or reduction of jurisdiction, direct or indirect, occurs in the federal system. Shanferoke Corp. v. Westchester Corp., 293 U.S. 449, 451. Any such ad hoc decisions disorganize practice by encouraging attempts to secure or oppose appeals with a consequent waste of time and money. The
[ 348 U.S. Page 182]
choices fall in the legislative domain. They are enlargement of the allowable list of appealable interlocutory orders; abandonment of fragmentary appeals; or a general allowance of such appeals in the discretion of the trial judge upon findings of need, with or without the consent or approval of the appellate court.
A series of decisions of this Court has developed the rationale for determining the appealability of such an interlocutory order as this under § 1292 and its predecessors. The appealability of routine interlocutory injunctive orders raised few questions. See George v. Victor Co., 293 U.S. 377. There the statute was clear. It was when stays of proceedings, in distinction to injunctions, were appealed that the issue of jurisdiction became sharp. In Enelow v. New York Life Ins. Co., 293 U.S. 379, a case arising when federal courts had actions at law and proceedings in equity, a complaint at common law on a life insurance policy was met by an answer alleging fraud in the policy's procurement with a prayer for its cancellation and a motion to try the equitable issue first. The motion was granted, and jurisdiction on appeal from that order was approved on this reasoning:
"The power to stay proceedings in another court appertains distinctively to equity in the enforcement of equitable principles, and the grant or refusal of such a stay by a court of equity of proceedings at law is a grant or refusal of an injunction within the meaning of § 129 [ § 1292]. And, in this aspect, it makes no difference that the two cases, the suit in equity for an injunction and the action at law in which proceedings are stayed, are both pending in the same court, in view of the established distinction between 'proceedings at law and proceedings in equity in the
[ 348 U.S. Page 183]
national courts and between the powers of those courts when sitting as courts of law and when sitting as courts of equity.' Per Van Devanter, J., in Griesa v. Mutual Life Ins. Co., 165 Fed. 48, 50, 51." 293 U.S., at 382.*fn9
After the adoption of the one form of action by the Fed. Rules Civ. Proc., 2, we reiterated this ruling in a like case. Ettelson v. Metropolitan Ins. Co., 317 U.S. 188. We said a stay of the complaint until disposition of the fraud issue "is as effective . . . as an injunction . . . . The statute looks to the substantial effect of the order made."
The point was made in the Enelow case that power to stay mere steps within the framework of the litigation before a court differs as to appealability from an injunction prohibiting proceedings in another court. This distinction was applied in Morgantown v. Royal Ins. Co., 337 U.S. 254. There the insurance company brought a suit for reformation of the contract. The insured counterclaimed, seeking to enforce the contract as written, and demanded a jury trial; the company moved to strike the demand; the court granted the motion and set the case for trial to the court without a jury. The insured appealed and the Court of Appeals dismissed the appeal. We affirmed, holding that the Enelow rule did not apply; that since this was an equitable proceeding with a counterclaim to enforce the policy, the decision to hear the reformation issue first without a jury was only a decision as to how to try the case, and therefore was not an interlocutory order in the nature of an injunction. To the argument that the importance of a jury trial justified
[ 348 U.S. Page 184]
treating the order of trial as an interlocutory injunction, we answered:
"Many interlocutory orders are equally important, and may determine the outcome of the litigation, but they are not for that reason converted into injunctions." 337 U.S., at 258.
The Morgantown case controls here.*fn10 Whether the District Court was right or wrong in its ruling that the contract provision did not require arbitration proceedings, it was simply a ruling in the only suit pending, actual or fictional. It was a mere order and not an injunction as that word is understood through the Enelow and the Ettelson cases as a stay through equitable principles of a common-law action. This present case is to be distinguished from the Shanferoke case, supra, note 5, in the same way. There in a common-law action a motion for an interlocutory injunction on an equitable defense was refused. The order was appealable under Judicial Code § 129. This Court said:
"For the reasons stated in Enelow v. New York Life Ins. Co., decided this day, ante, p. 379, an order granting or denying a stay based on an equitable defense or cross-bill interposed in an action at law under § 274b, is appealable under § 129." 293 U.S., at 452.
The reliance on the analogy of equity power to enjoin proceedings in other courts has elements of fiction in this day of one form of action. The incongruity of taking jurisdiction from a stay in a law type and denying jurisdiction in an equity type proceeding springs from the persistence of outmoded procedural differentiations. Some simplification would follow from an assumption or denial of jurisdiction in both. The distinction has been
[ 348 U.S. Page 185]
applied for years, however, and we conclude that it is better judicial practice to follow the precedents which limit appealability of interlocutory orders, leaving Congress to make such amendments as it may find proper.
It is difficult to generalize as to whether interlocutory appeals are or are not advantageous to an efficient administration of justice. A compromise has been worked out by Congress through § 1292. But that compromise does not authorize appeals to simplify litigation. This ruling was a step in controlling the litigation before the trial court, not the refusal of an interlocutory injunction.
MR. JUSTICE BURTON concurs in the judgment of the Court.
MR. JUSTICE BLACK, with whom MR. JUSTICE DOUGLAS concurs, dissenting.
[ 348 U.S. Page 186]
I think the District Court's order denying a stay is appealable because it is (1) "final" within the meaning of 28 U. S. C. § 1291 and (2) a refusal to grant an interlocutory injunction within the meaning of § 1292. As the Court admits, a collateral issue may be so severable and unrelated to central trial issues that a judgment on the collateral issue is considered "final" and appealable under § 1291, even though other important issues are left undecided. Given this common sense meaning § 1291 authorizes the present appeal. For certainly decision of whether a judicial rather than an arbitration tribunal shall hear and determine this accounting controversy is logically and practically severable from the factual and legal issues crucial to determination of the merits of the controversy. And this Court has held that § 1292 makes all stay orders appealable that have the substantial effect of interlocutory injunction orders. Ettelson v. Metropolitan Page 186} Ins. Co., 317 U.S. 188. The refusal to stay here had that effect. Indeed, the Court seems to admit that this order refusing a stay would be appealable had it been entered by another judge not presiding in this particular case. I agree with the Court that this jurisdictional "incongruity . . . springs from the persistence of outmoded procedural differentiations" that have "elements of fiction" in this modern day. I do not agree that the Court's obeisance to these incongruous fictions is required by congressional enactments.
The Court relies on a purpose of Congress to avoid a waste of time and money incident to repeated "piecemeal" appeals in the same suit. But, as pointed out, Congress, in §§ 1291 and 1292, has left the way open for the appeal of many judgments finally deciding collateral and severable issues separately adjudicated in a case. Any rigid rule to the contrary would itself guarantee useless delays and expenses. For two trials, one unnecessary, may take longer and cost more than two appeals where one would do. Take this case for example. It must now go back for a court accounting trial which could be time-consuming and expensive to litigants and to the Government. And should petitioner lose on the merits it could undoubtedly appeal. On that review the first question for the appellate court would be whether the order denying arbitration, which the Court now refuses to consider, was right or wrong. If found wrong, the trial court's judgment on the merits would have to be vacated and the case again sent back for determination on the merits -- this time by arbitration. In that event the trial the Court now orders will have been wholly futile -- not even the litigant who now appears to be successful will have gained anything from it, unless perchance he stands to profit from delay. There is some difficulty, at least, in laying this wasteful procedure at the door of Congress.