Fifth Circuit Discusses Appealability and Costs

American Heritage Life Ins. Co. vs. Orr, No. 01-60678 (5th Cir, 6/16/02)

Consolidated appeals of orders compelling arbitration produce an appellate Opinion on two issues of importance in arbitration: appealability and forum costs.

Appealability: In the action below, the district court decided a motion to compel arbitration in an independent proceeding begun by insurance companies named as defendants in a state court action. In addition to upholding the agreements to arbitrate, the lower court also stayed the state court proceedings pending arbitration and ordered its case closed.

The jurisdictional question presented when the Fifth Circuit took up the appeal was whether the order compelling arbitration was a “final” order, given the stay order. The insurance companies opposing appeal, argued that, by closing the case and issuing a stay, instead of dismissing the action, the lower court entered a non-final order. Green Tree v. Randolph, 531 U.S. 79 (2000) made clear that a “final” decision is one that “ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.” That description applies in this case, where “[t]here is no practical distinction between ‘dismiss’ and ‘close’ for purposes of this appeal.” (A concurring Opinion explains further that, even though Green Tree specifically excluded from immediate appeal instances where a stay is ordered, the Court was referring to a stay under Section 3 of the FAA. Here, the stay was ordered as to the state court, not the court in which the instant action took place.)

Forum Costs: Appellants also objected that they could not afford the fees that would be necessary under the rules specified in the agreements, i.e., the AAA Commercial Rules. Green Tree places the burden of proving the oppressive nature of arbitration costs on the party seeking to avoid the agreement. Thus far, notes the Court, only the insurance companies have paid any fees and, under the agreements, Appellants need pay nothing but an initial fee of $125 until after the first day of proceedings, and, then, only if they do not prevail. Appellants raise Cole v. Burns Intl., 105 F.3d 1465 (4th Cir. 1997), in arguing that the insurance companies should have to pay all arbitrator fees, but the Court distinguishes Cole. In the case at bar, “the Agreements expressly state who shall pay the arbitration fees. Moreover, the rules of the AAA provide Appellants sufficient avenues to request fee-paying relief, if necessary…. The mere fact that Appellants face the possibility of being charged arbitration fees, including paying the arbitrator’s fee if directed to do so by the arbitrator, does not render the Agreements unenforceable.” (SAC Ref. No. 02-25-04)


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