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In Western Security Bank v. Winzenreid, No. 15-35617 (9th Cir. Mar. 14, 2016), the Ninth Circuit Court of Appeals held that it lacked jurisdiction to review an order denying a stay pending arbitration where the movant did not seek to compel arbitration.

In December 2011, Plaintiff entered into loan agreements with (i) Defendants, (ii) Meridian Surgical Partners (“Meridian”) and (iii) Omni Funding Corp. (“Omni”). Plaintiff loaned more than $2 million for construction of an ambulatory surgical center in Billings, Montana. Defendants executed an unconditional commercial guaranty agreement, which guaranteed a certain percent of the debt owed to Plaintiff by Omni. Omni defaulted on the loan in September 2013 and Plaintiff brought a lawsuit in district court, seeking to recover under the guaranty agreements. Defendants raised the affirmative defense that Meridian, which was not sued, fraudulently induced them to guarantee the loan. In February 2014, Defendants filed a demand for arbitration against Meridian.

Defendants then filed a motion in the district court to stay Plaintiff’s lawsuit pending the separate arbitration between Defendants and non-party Meridian. Section 3 of the Federal Arbitration Act (“FAA”) allows a court to stay a lawsuit if it involves an “issue referable to arbitration.” Defendants sought their stay pending arbitration under section 3, notwithstanding the fact that they did not seek to compel Plaintiff to arbitrate its claims against them.  The district court denied the stay motion and Defendants filed an interlocutory appeal with the Ninth Circuit.

Defendants invoked section 16(a) of the FAA, which permits an interlocutory appeal from an order refusing a stay under section 3 of the FAA, as the basis for the Ninth Circuit’s jurisdiction.  Defendants argued that, because Meridian’s alleged fraudulent inducement was at issue in the separate arbitration, their affirmative defense in the litigation constituted an “issue referable to arbitration” within the meaning of section 3 of the FAA. Plaintiff argued in response that the Ninth Circuit lacked jurisdiction because neither FAA section 3 nor section 16(a) applies in the absence of an attempt by Defendants to compel Plaintiff to arbitrate.

The Ninth Circuit used a two-step test adopted previously by the Tenth Circuit for determining whether a court of appeals has appellate jurisdiction under FAA section 16(a). First, the court must consider whether the motion in the district court was brought under FAA section 3 or 4. However, because a party may mis-caption its motion in an attempt to take advantage of section 16(a), the court may also look beyond the caption to the essential attributes of the motion itself. If the essence of the movant’s request is that the issues presented be decided exclusively by an arbitrator and not by any court, then the denial of that motion may be appealed under section 16(a). If, on the other hand, the movant requests a juridical remedy that is inconsistent with the position that the issues in the litigation may be decided only by the arbitrator, the movant is no longer proceeding exclusively under the FAA and has forfeited its right to interlocutory review under section 16(a).

The Ninth Circuit ruled that, here, Defendants’ motion did not meet the second step of this test since, although styled as a motion to stay pending arbitration under section 3, the motion appeared to have been mis-captioned in an attempt to take advantage of section 16(a).  The court noted that Defendants had made clear that they did not seek to compel Plaintiff to arbitrate; rather, they ultimately sought a judicial remedy from the district court after completion of the separate arbitration. Thus, the Ninth Circuit concluded that “the essence” of the stay motion was not for relief under the FAA, and the Ninth Circuit therefore lacked appellate jurisdiction under section 16(a).

A version of this post originally appeared in the May 2016 edition of Baker & McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.


Yingjie (Michelle) Li is an associate at Baker & McKenzie in Washington, DC, where she is a member of the Compliance & Investigations Practice Group. Ms. Li has significant experience in matters relating to international litigation, internal investigations, corporate compliance and Chinese investment and risk management. She is proficient in the legal systems of the US and China and has extensive knowledge and experience in all aspects of Chinese law. Ms. Li can be reached at and +1 202 835 6163.