Fifth Circuit COA Vacates Lower Court’s Order Withdrawing Arbitration

The nation’s Fifth Circuit Court of Appeals has ordered a discrimination and retaliation lawsuit to arbitration.  In Salas v. GE Oil & Gas, No. 16-20379 (5th Cir. May 12, 2017), a man, Gaspar Salas, began working for GE Oil & Gas after the company acquired his former employer.  At the time of the acquisition, GE introduced a dispute resolution program requiring workers who continued their employment with the company after November 1, 2013 to abide by the company’s arbitration program.

About six months after the dispute resolution program became effective, Salas filed a discrimination and retaliation lawsuit against GE.  GE responded to the man’s complaint by filing a motion to compel arbitration based on the company’s dispute resolution program.  The trial court granted the company’s motion, but the parties did not engage in arbitral proceedings.

More than one year later, Salas filed a motion to compel arbitration with the same trial court.  Instead of granting the redundant motion, however, the court withdrew its earlier order compelling arbitration and reopened the case citing the parties’ failure to engage in arbitration.  After that, GE filed an unsuccessful motion for reconsideration before filing an appeal with the United States Court of Appeals for the Fifth Circuit.

The Fifth Circuit first dismissed Salas’ argument that the appellate court lacked jurisdiction to consider GE’s appeal.  Next, the court addressed GE’s claim that the district court lacked subject matter jurisdiction to reopen the case.  After stating “This Court has held that a district court may retain ancillary jurisdiction (beyond merely enforcing the arbitration award) even after compelling arbitration and dismissing a case,” the Fifth Circuit added:

The district court’s order of March 30, 2016, did not fall within the narrow scope of this ancillary jurisdiction. The court neither determined whether the parties’ agreement to arbitrate was valid nor enforced that agreement. Instead, the court found that the parties had “failed” to arbitrate and withdrew its prior order compelling arbitration. This was not permitted under the FAA. 9 U.S.C. § 4.

Next, the appellate court held:

“[B]ased on a court’s limited authority under the FAA to intervene in the arbitral process prior to issuance of an award,” Gulf Guar., 304 F.3d at 488, we conclude that the district court lacked jurisdiction to withdraw its order compelling arbitration and reopen the case due to a default in the arbitral process. On remand, the court’s jurisdiction is limited to (1) determining whether an agreement to arbitrate still exists and (2) enforcing that agreement.

Because the trial court did not have jurisdiction to reopen the parties’ dispute, the United States Court of Appeals for the Fifth Circuit vacated the lower court’s order withdrawing the its own prior order compelling arbitration and remanded the case.

Photo credit: Foter.com