Filanto, S.p.A. v. Chilewich International Corp.

United States Court of Appeals for the Second Circuit · Contracts

ContractsArbitrationAppealabilityarbitrationappealabilityembedded proceedingindependent proceedingfinal judgment

Facts

Chilewich had a contract with a Soviet entity requiring arbitration in Moscow and later contracted with Filanto to supply footwear. After Chilewich refused to accept 90,000 boots, Filanto sued for breach of contract in the Southern District of New York. Before answering, Chilewich moved to stay the action pending arbitration in Moscow, and the district court ruled that Filanto was estopped from denying an agreement to arbitrate and ordered arbitration. Although the judge's opinion suggested entry of a final judgment, the entered judgment did not dismiss the complaint, even though the docket later showed the case as closed.

Issue

Is an order compelling arbitration immediately appealable when entered in an embedded action on the underlying dispute, where the district court does not dismiss the complaint but the docket marks the case as closed? Does administrative closure make the order final for purposes of appellate jurisdiction?

Rule

Under 9 U.S.C. § 16, in an embedded proceeding—where a party seeks relief beyond an order compelling or prohibiting arbitration—an order directing arbitration is not immediately appealable if the complaint has not been dismissed. A docket entry marking the case closed for administrative or statistical convenience does not convert the order into a final, appealable judgment.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nora Bennett sued Lakefront Fabrication, Inc. in federal court in Chicago for breach of a supply contract and sought damages. Lakefront moved to compel arbitration under an arbitration clause, and the district judge ordered arbitration in Toronto but expressly stayed the lawsuit rather than dismissing it.

May Nora immediately appeal the order compelling arbitration as of right under the rule described by the majority opinion?

Explanation. The action is embedded because Nora sought merits relief on the underlying contract claim, not merely a ruling about arbitrability. In an embedded proceeding, an order directing arbitration is not immediately appealable when the complaint has not been dismissed. The district court's retention of the case by staying it means there is no final appealable judgment.