Fifth Circuit Says Decision to Remand a Dispute Back to Arbitral Panel for Clarification May Not be Appealed

On Friday, the United States Court of Appeals for the Fifth Circuit refused to review a district court’s decision to remand a dispute back to the original arbitral panel.  In Murchison Capital Partners, LP v. Nuance Communications, Inc., No. 13-10852, a limited partnership (“Murchison”) claimed that Nuance Communications (“Nuance”) fraudulently induced the partnership’s members to approve a merger with Nuance in return for a lump sum payment and contingent future revenues from a specific software program.  After Nuance refused to pay additional revenues to the Murchison shareholders, they sought arbitration pursuant to the terms of the merger agreement.

Although an arbitral panel found that Nuance fraudulently induced the former shareholders into agreeing to the merger, the panel stated no damages were merited since the software program was not likely to perform well enough to merit a payout to the shareholders at the time they agreed to the merger.  Because of this, Murchison received an arbitral award in its favor of $0.  After Nuance sought to enforce the award, the Northern District of Texas remanded the case back to the arbitral panel for additional findings of fact and reconsideration of the shareholders’ out-of-pocket damages.  As part of the order for remand, however, the court stated it was not vacating the original arbitral award.  Nuance then appealed the district court’s decision to the Fifth Circuit Court of Appeals.

On appeal, Nuance claimed the lower court’s order for remand was improper.  In response, Murchison argued that the Fifth Circuit lacked jurisdiction to consider the issue because the court’s decision to remand the case for additional clarification was not a final and appealable order.  Before reaching Nuance’s argument, the court examined whether it had sufficient jurisdiction to consider the case.

Initially, the Fifth Circuit examined relevant case law and stated “orders vacating an award and remanding the case for an entirely new arbitration are appealable, but orders remanding a case back to an arbitration panel for further clarification of an existing award are not.”  Since the district court specifically held it was not vacating the arbitral award, the Fifth Circuit found that the lower court’s order was not final and appealable.  In addition, the appeals court said “we have no statutory ground for appellate jurisdiction under the FAA.”  The court added, “[w]e must also decline to exercise jurisdiction over the district court’s nonfinal order to avoid generating piecemeal appeals.”  Because the appellate court found that it lacked jurisdiction to consider the Northern District of Texas’ order remanding the parties’ dispute back to the original arbitral panel, the Fifth Circuit dismissed the case for lack of jurisdiction.