A federal appellate court has jurisdiction to hear an interlocutory appeal of the denial of a non-signatory’s motion to compel arbitration in accordance with an international agreement, according to the First Circuit Court of Appeals.

In Sourcing Unlimited, Inc. v. Asimco Int’l, Inc., No. 07-2754, 2008 WL 2132838 (1st Cir. May 22, 2008), Sourcing Unlimited, Inc., ("SUI") entered into a manufacturing partnership contract with Asimco Technologies, Inc. ("ATI"). The contract contained a broadly-worded arbitration agreement.

After the partnership became strained, SUI filed suit against one of ATI’s subsidiaries, Asimco International, Inc., ("AII") alleging several tort, contract, and statutory claims. SUI alleged that it had an "oral contract" with AII that was separate and distinct from its contract with ATI, and that separate oral contract did not require arbitration.

AII moved to compel arbitration claiming that any contract between it and SUI was a modification of the SUI-ATI contract and was subject to the arbitration agreement. AII moved to compel arbitration under Chapter 2 of the Federal Arbitration Act ("FAA"), which governs the treatment of international arbitration agreements pursuant to the New York Convention. 9 U.S.C. §§ 201-208.

The district court denied the motion to compel without a specific rationale. It only cited the fact that SUI had not signed an arbitration agreement with AII in rendering its decision.

On appeal, the Court first determined that it had jurisdiction over appeals by a non-signatory of an order denying a motion to compel brought under Chapter 2 of the FAA. Specifically, the Court noted that 9 U.S.C. § 16(a)(1)(C) allows interlocutory appeals of orders refusing a motion to compel under 9 U.S.C. § 206.

While SUI cited precedent from the Tenth and D.C. Circuits that rejected interlocutory appeals taken under 9 U.S.C. § 16, the Court noted that these decisions involved domestic instead of international agreements. See In re Universal Serv. Fund Tel. Billing Practice Litigation, 428 F.3d 940 (10th Cir. 2005) (rejecting non-signatory interlocutory appeal under 9 U.S.C. § 16(a)(1)(A) & (B)); DSMC Inc. v. Convera Corp., 349 F.3d 679 (D.C. Cir. 2003) (same).

Unlike the language in Chapter 1 of the Federal Arbitration Act, the Court found that the New York Convention does not require a party to be a signatory to a written arbitration agreement to seek an appeal. To find otherwise, said the Court, "would insulate a whole class of denials of motions to compel arbitration from review until after the litigation has run its course… [and] would contravene the courts’ obligation to enforce arbitration agreements under the New York Convention and Chapter 2 of the FAA."

The Court found the subject matter of the SUI-AII dispute was intertwined sufficiently with matters within the scope of the SUI-ATI arbitration agreement for SUI to be estopped from resisting arbitration. To the Court, most of the claims against AII either directly or indirectly invoked the SUI-ATI agreement and any alleged oral agreement required reference to the agreement to be enforced. This result was particularly appropriate, according to the Court, because the signatory was the party seeking to frustrate the non-signatory’s efforts to seek arbitration.