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A federal court in Missouri followed the precedent of a majority of circuit courts of appeal and held that a notice of appeal under § 16 of the Federal Arbitration Act (FAA) divests the district court of jurisdiction to proceed with the case pending appeal.
In Industrial Wire Products, Inc. v. Costco Wholesale Corp., No. 4:08-CV-70 CAS, 2008 WL 2906716 (E.D. Mo. July 24, 2008), Industrial Wire Products (IWP) sued Costco, and Costco moved to compel arbitration pursuant to an arbitration agreement in the parties' contract. The Court denied the motion to compel, holding that none of IWP's claims fell within the scope of the arbitration agreement.
Costco filed a notice of appeal under § 16 of the FAA, which grants a party the right to immediately file an interlocutory appeal from the denial of a motion to compel arbitration. Costco moved to stay court proceedings pending its appeal, and IWP opposed, arguing that the Court should allow discovery to proceed.
The Court granted Costco's motion to stay litigation pending the appeal. The Court noted that the Eighth Circuit has not definitively ruled on the issue, but the Court agreed with the majority of other circuit courts of appeal and held that a notice of appeal under § 16 of the FAA divests the district court of jurisdiction to proceed with the case pending appeal.
The Court reasoned that "the benefits of arbitration are put at risk and may be lost by the exercise of concurrent district and appellate court jurisdiction during the appellate process." Furthermore, the Court found that "a stay would be in the interests of justice and judicial economy, would avoid inconsistent rulings, and would reduce uncertainty."
Finally, the Court explained that "[a]llowing discovery to proceed before the Eighth Circuit has ruled on [Costco's] pending appeal, as [IWP] urges, could be a waste of the parties' time and judicial resources in the event [Costco] prevails on appeal."
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