Arbitration Trifecta, Part 2: Denial of Motion to Compel Arbitration Not Immediately Appealable
Takeaway:
Litigants should remember that they typically cannot immediately appeal an order denying a motion to compel arbitration. More importantly, they should require plaintiffs to submit a claim to arbitration since it is their claim and not leave it up to the parties to fashion an arbitration process. The default should be in the absence of an arbitration claim, the court proceedings should be dismissed.
The second arbitration case issued by the Maryland Court of Special Appeals is Standard Construction & Coatings, LLC v. Belmore Properties, found here. The case reaffirms the general rule that an order denying a motion to compel arbitration is not immediately appealable. The losing party must wait until the matter is decided by the court and a final judgment issues. The party then appeals from that final judgment.
The facts in Belmore are unique, however, in that the trial court seemingly left it up to the parties to fashion their own arbitration process. Not surprisingly, the parties failed to reach a consensus and arbitration failed. Belmore had filed suit in the District Court of Maryland for breach of a construction contract and Standard filed a motion to dismiss arguing that the contract claims should be resolved through arbitration. This is where things get tricky. The trial court stayed Standard’s motion and ordered the parties to submit the matter to arbitration by May 6, 2019. If the parties did not start arbitration by then, the court would deem the parties to have waived arbitration and set the matter in for a court proceeding. The parties were not able to reach agreement on arbitration by that date, and the court thereafter denied Standard’s motion to dismiss (seeking arbitration). Standard then appealed.
While there was significantly more procedural wrangling in the case (including filing a circuit court action), the appellate court reaffirmed the longstanding principle that a party typically cannot appeal the denial of a motion to compel arbitration because that order is not a final judgment that puts the party out of court. A parallel declaratory judgment action is equally problematic given the original court’s involvement.
The nuance here is that it is surprising that the trial court left it up to the parties to agree on arbitration and, barring an agreement, set the matter back in for a court proceeding. The usual practice when faced with a valid arbitration clause would have simply been to order the plaintiff to file an arbitration action. No arbitration action, then no claim. Here, the court seemed to reverse the action: if the parties did not agree (and what parties suing each other agree on anything), then arbitration is waived. This makes it very easy for a party resisting arbitration (or arbitration on favorable terms) to simply walk away from arbitration and go back to court. But that ignores the valid arbitration clause and provides either party an easy out.