Reconsidering Louisiana Courts’ Approach to Appellate Rights Under the FAA

Over the last few decades mandatory arbitration has become more and more common.  Many services that we use daily have terms of service that expressly require arbitration instead of litigation in courts.  Federal and State governments often encourage arbitration and have passed laws to do just that.  Congress passed the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., in 1947, and Louisiana enacted the Louisiana Binding Arbitration Law (LBAL), La. Rev. Stat. §§ 9:4201-9:4217, in 1997.  Courts have recognized that the FAA and LBAL are substantively very similar in that they both recognize and encourage arbitration as a valid procedure to resolve disputes.  But there are some key differences, especially with respect to appellate rights.

Under the FAA, the denial of a motion to compel arbitration is immediately appealable, 9 U.S.C. § 16, even though normally that would be considered an interlocutory order not subject to an immediate appeal.  But the LBAL does not authorize an interlocutory appeal for the denial of a motion to compel arbitration.

This gets interesting when you have a dispute governed by the FAA in Louisiana state court.  But why would this happen?  The FAA is applicable to any dispute that concerns interstate or foreign commerce.  9 U.S.C. § 1.  But the FAA itself does not in and of itself confer federal jurisdiction.  See Vaden v. Discover Bank, 556 U.S. 49, 59 (2009).  As the Supreme Court has noted:

The [Federal] Arbitration Act is something of an anomaly in the field of federal-court jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdiction under 28. U.S.C. § 1331 or otherwise.

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32 (1983).

As a result, it is not uncommon that you will have an arbitration dispute governed by federal law, the FAA, which nevertheless must be litigated in State court.

But while the FAA must be applied in State courts, Louisiana and a number of other States have determined that “the provisions of § 16 of the FAA governing the timing of appeals are procedural in nature and that states are free to follow their own procedural rules regarding appeals, unless those rules undermine the goals and principles of the FAA.”  Collins v. Prudential Ins. Co., 99-1423 (La. 01/19/00), 752 So. 2d 825, 828-29; see also S. Cal. Edison Co. v. Peabody W. Coal Co., 977 P.2d 789 (Ariz. 1999); Berger Farms v. First Interstate Bank of Oregon, 939 P.2d 64 (Ore. App. 1997).  And Louisiana courts have consistently held that denying an automatic right to an appeal upon the denial of a motion to compel arbitration does not undermine the goals and principles of the FAA.  Saavedra v. Dealmaker Devs., LLC, 2008-1239 (La. App. 4 Cir. 03/18/09), 8 So. 3d 758, 762.  So if your motion to compel arbitration is denied in Louisiana state court, your only recourse is to request a supervisory writ from the court of appeal, which has complete discretion in deciding whether to entertain your argument.  By contrast, in federal court the appeal must be heard.

However, recent jurisprudence from the United States Supreme Court might indicate that Louisiana courts (and those of other States) have gotten this question wrong, and that FAA’s creation of a right to an immediate appeal is substantive and crucial to the FAA’s goals and principles.  In Coinbase, Inc. v. Bielski, 143 S. Ct. 1915 (2023), the Court determined that the district court must enter a stay of all proceedings pending an interlocutory appeal on the arbitration issue.  The Court reasoned that “[a]bsent an automatic stay of district court proceedings, Congress’s decision in §16(a) to afford a right to an interlocutory appeal would be largely nullified.”  Id. at 1921 (emphasis added).  Denial of an automatic stay pending appeal would “‘largely defeat[] the point of the appeal’” and be “like a lock without a key, a bat without a ball, a computer without a keyboard—in other words, not especially sensible.”  Id. (quoting Bradford-Scott Data Corp. v. Physician Computer Network, 128 F.3d 504, 505 (7th Cir. 1997)).

Reading Coinbase to support the conclusion that the FAA’s right to an immediate appeal is substantive (rather than procedural) is also supported by prior Supreme Court jurisprudence.  See Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 951 (1997) (recognizing that a statute that “creates jurisdiction where none previously existed … speaks not just to the power of a particular court but to the substantive rights of the parties as well.” (first emphasis in original; bolded emphasis added).  In the wake of Coinbase, the United States Second Circuit has already held that the FAA’s grant of interlocutory appellate rights for denials of motions to compel arbitration creates a substantive right.  Res. Grp. Int’l Ltd. v. Chishti, 91 F.4th 107, 112-13 (2d Cir. 2024).  State courts must enforce substantive rights created by the FAA when the FAA is applicable.

In practice, the right to an immediate appeal of the denial of a request for arbitration is essential.  Once the entire case has been tried, courts are unlikely to unwind everything and start from square one in arbitration, and the parties have already expended significant resources.  And I think that is exactly why the FAA provides for an immediate appeal.  If State legislatures want to protect the right to arbitration and not frustrate the goals of the FAA, our courts must honor § 16’s right to an immediate appeal.  With respect, the Louisiana Supreme Court should revisit this issue, especially in light of Coinbase.  Let’s see if they do.

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