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  • Hewlett-Packard v. Berg, 61 F.3d 101, 1st Cir. (1995)

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    This document summarizes a court case regarding Hewlett-Packard's appeal of a district court order confirming an arbitration award and rejecting HP's request for a setoff or stay of the confirmation proceedings. The district court ordered arbitration of claims regarding a 1982 contract but confirmed the award from arbitration of claims regarding a 1984 contract. While there was no formal final judgment, the court found the confirmation order was appealable under the Federal Arbitration Act. The court also found it had jurisdiction to consider HP's argument that confirmation should have been stayed. However, the court did not need to decide if it could consider HP's setoff request because any error in rejecting it was not legally significant.

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    Filed: 1995-08-03 Precedential Status: Precedential Citations: 61 F.3d 101 Docket: 94-2251

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    This document summarizes a court case regarding Hewlett-Packard's appeal of a district court order confirming an arbitration award and rejecting HP's request for a setoff or stay of the confirmation proceedings. The district court ordered arbitration of claims regarding a 1982 contract but confirmed the award from arbitration of claims regarding a 1984 contract. While there was no formal final judgment, the court found the confirmation order was appealable under the Federal Arbitration Act. The court also found it had jurisdiction to consider HP's argument that confirmation should have been stayed. However, the court did not need to decide if it could consider HP's setoff request because any error in rejecting it was not legally significant.

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    55 views8 pages

    Hewlett-Packard v. Berg, 61 F.3d 101, 1st Cir. (1995)

    Uploaded by

    Scribd Government Docs
    This document summarizes a court case regarding Hewlett-Packard's appeal of a district court order confirming an arbitration award and rejecting HP's request for a setoff or stay of the confirmation proceedings. The district court ordered arbitration of claims regarding a 1982 contract but confirmed the award from arbitration of claims regarding a 1984 contract. While there was no formal final judgment, the court found the confirmation order was appealable under the Federal Arbitration Act. The court also found it had jurisdiction to consider HP's argument that confirmation should have been stayed. However, the court did not need to decide if it could consider HP's setoff request because any error in rejecting it was not legally significant.

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    of 8

    61 F.

    3d 101

    HEWLETT-PACKARD COMPANY, INC., Plaintiff,


    Appellant,
    v.
    Helge BERG, etc., et al., Defendants, Appellees.
    No. 94-2251.

    United States Court of Appeals,


    First Circuit.
    Heard April 6, 1993.
    Decided Aug. 3, 1995.

    Richard Allan Horning with whom Horning, Janin & Harvey, Kevin P.
    Light, Choate, Hall & Stewart and Robert W. Sutis were on brief, for
    appellant.
    David A. Burman, for appellees.
    BOUDIN, Circuit Judge, BOWNES, Senior Circuit Judge, and STAHL,
    Circuit Judge.
    BOUDIN, Circuit Judge.

    Hewlett-Packard appeals from an order of the district court confirming an


    arbitration award rendered in a business dispute with appellees Helge Berg and
    Lars Skoog and rejecting Hewlett-Packard's requests for a stay of the
    confirmation proceeding or a declaration that it is entitled to a set-off for the
    award. The case presents several difficult legal issues which can be understood
    only after a brief description of the facts and prior proceedings.

    I. BACKGROUND
    2

    In March 1982, Apollo Computer, now owned by Hewlett-Packard, entered


    into a two-year distributorship contract with a Swedish company called
    Dicoscan Distributed Computer Scandinavia to sell Hewlett-Packard products
    in several Nordic countries. The 1982 contract included an agreement to submit
    any dispute under the contract to binding arbitration. In March 1984, the parties

    executed a new distributorship contract, which also contained an arbitration


    clause.
    3

    In the meantime, during 1983 and 1984, Dicoscan experienced financial


    problems. In mid-1984, Apollo claimed that Dicoscan was far behind in its
    payments. In September, Apollo terminated the 1984 agreement. The following
    month, Dicoscan filed for bankruptcy. The bankruptcy court assigned to Berg
    and Skoog, directors and officers of Dicoscan, the right to bring claims against
    Apollo based on the contracts.

    Berg and Skoog filed a request for arbitration with the International Chamber
    of Commerce Court of Arbitration, claiming millions of dollars of damages
    arising out of Apollo's unilateral termination of the 1984 agreement. Apollo
    counterclaimed in the arbitration by asserting that the Swedish company had
    failed to pay about $10,000 due on the 1984 contract and about $207,000 due
    under the 1982 contract. After a dispute about Berg and Skoog's right to invoke
    arbitration, see Apollo Computer, Inc. v. Berg, 886 F.2d 469, 473 (1st
    Cir.1989), an arbitration proceeding was begun.

    The arbitrators were required by the parties' contracts to apply Massachusetts


    law. Ultimately, the arbitrators awarded around $700,000 plus interest to Berg
    and Skoog, but allowed a set-off for the $10,000 that Dicoscan still owed
    Apollo under the 1984 contract. To both parties' surprise, the tribunal held that
    it was without jurisdiction to decide Apollo's more substantial claim based on
    the 1982 contract, ruling that the 1982 contract was not within the Terms of
    Reference issued by the arbitrators at the beginning of the proceeding.

    As a result, Apollo was left with a sizable obligation to Berg and Skoog on the
    1984 contract without a determination of its claim for more than $207,000 on
    the 1982 contract. Apollo unilaterally decided to pay the arbitration award
    amount but subtracted the $207,000 plus interest (together, about $300,000) as
    a "setoff in recoupment," which, it said, is a time-honored common law
    doctrine embraced in Massachusetts courts. Apollo also filed a request with the
    tribunal for a second arbitration regarding the 1982 contract. That tribunal has
    indicated that it will hear the arbitration.

    In January 1993, Apollo (later succeeded as the plaintiff by Hewlett-Packard)


    filed the complaint in this action with the Massachusetts district court. HewlettPackard requested that the district court (1) declare that Hewlett-Packard was
    entitled to the $207,000 set-off and that the arbitration award is fully satisfied,
    and (2) vacate the tribunal's award and correct it. Hewlett-Packard later

    withdrew its second claim for relief.


    8

    Berg and Skoog moved to dismiss the complaint, arguing that such declaratory
    relief is unavailable as to foreign arbitration awards. Later, Berg and Skoog
    moved for confirmation of the arbitration award. Hewlett-Packard opposed
    confirmation of the award on the ground that, by failing to include its 1982 setoff, the award was contrary to public policy. In the alternative, Hewlett-Packard
    moved to stay confirmation, pending the outcome of the second arbitration.
    Hewlett-Packard also asked the court to compel arbitration as to its 1982 claim.

    On November 7, 1994, the district judge filed a memorandum, together with a


    separate order, disposing of all of these motions. The court's order compelled
    arbitration under the 1982 contract but it confirmed the award previously made
    by the tribunal on the 1984 contract. The court said that it was without power to
    stay the confirmation proceeding, as Hewlett-Packard had requested, and that
    the request for a set-off was an improper attempt to modify the tribunal's
    award.

    10

    Apparently ready to enforce the now-confirmed arbitration award, Berg and


    Skoog moved the court for entry of final judgment, and proffered a detailed
    judgment specifying the award, interest and attorney's fees. Four days later,
    Hewlett-Packard filed its notice of appeal and thereafter filed a response
    disputing certain aspects of the proposed judgment. The district court has not
    acted on the motion for entry of final judgment; and no such judgment has been
    entered.

    II. DISCUSSION
    11

    Hewlett-Packard purports to appeal all three of the district court's adverse


    actions: the confirmation of the arbitration award, the refusal to stay that
    confirmation proceeding pending the outcome of the second arbitration; and the
    rejection of Hewlett-Packard's set-off claim declaration. Commendably,
    Hewlett-Packard has alerted us to a possible jurisdiction problem, which this
    court is obliged to consider. We do so but caution future panels that the
    jurisdictional problems have not been briefed in this case.

    12

    Nothing in the record in this case purports to be a "final judgment," set forth in
    a separate document as required by Fed.R.Civ.P. 58, disposing of all claims.
    Thus, in formal terms there is no basis for appeal of a "final decision" under 28
    U.S.C. Sec. 1291, even if the court actually resolved all of the claims before it.
    Indeed, as already noted, the defendants have pending a motion that requests

    entry of a "final judgment."


    13

    Nevertheless, the November 7 order, insofar as it confirms the arbitration


    award, is appealable now because Congress directed in the statute governing
    arbitration-related appeals that such an "order" confirming an award should be
    immediately appealable. 9 U.S.C. Sec. 16(a)(1)(D). The reason is a proarbitration policy designed to expedite confirmation of arbitration awards. This
    is clear from precedent and scholarly commentary. See, e.g., 15B C. Wright, A.
    Miller & E. Cooper, Federal Practice and Procedure Sec. 3914.17, at 9-12, 3234 (2d ed. 1992).

    14

    There is one technical hitch. Seemingly, the order confirming the award is not
    itself a judgment that can be collected through court processes until it is entered
    on the docket as a judgment. See 9 U.S.C. Sec. 13. This has nothing to do with
    the final judgment rule; rather, the statute that governs confirmations provides
    that after a confirmation is ordered, a separate "entry of judgment" must be
    made pursuant to that order, and it is only at that stage that "[t]he judgment so
    entered ... may be enforced as if it had been rendered in an action in the court in
    which it is entered." Id.

    15

    Nevertheless, the Federal Rules of Civil Procedure do not say that appeals can
    only be taken from judgments; on the contrary, they contemplate that, subject to
    the complex rules that determine what is immediately appealable, there may be
    such a thing as an "appealable order" that is not a judgment. Fed.R.Civ.P. 79(b).
    And, as already noted, Congress has designated as immediately appealable "an
    order ... confirming ... an [arbitration] award." 9 U.S.C. Sec. 16(a)(1)(D).

    16

    Our position is not at odds with Middleby Corp. v. Hussmann Corp., 962 F.2d
    614 (7th Cir.1992). Middleby held that no immediate appeal could be taken
    where the district court issued an order of confirmation but declined to enter
    judgment after making a specific determination to delay giving effect to the
    confirmation order until further proceedings were concluded. Here, by contrast,
    the district court denied the requested stay, and the confirmation order is
    immediately effective, requiring only the filing of specified papers with the
    clerk to permit "the entry of judgment thereon." 9 U.S.C. Sec. 13.

    17

    Because the confirmation order is appealable, we think that there is also before
    us Hewlett-Packard's claim that the confirmation proceeding should have been
    stayed. The reason is simply that the underlying argument for a stay is also an
    objection to the confirmation order itself. To this extent, it is effectively an
    interlocutory ruling made in the process of approving the confirmation request

    and like any other such interlocutory ruling it is reviewable at the time that the
    confirmation order itself is brought up on appeal. Cf. Stringfellow v.
    Concerned Neighbors in Action, 480 U.S. 370, 375, 107 S.Ct. 1177, 1181, 94
    L.Ed.2d 389 (1987); 15A Wright, Miller & Cooper, supra, Sec. 3905.1, at 24963.
    18

    A similar argument might also be made to justify an appeal now based on the
    district court's refusal to declare Hewlett-Packard's right to the set-off it
    asserted. The problem is complicated, but we see no need to resolve the
    complexities. Whether or not the refusal to allow the set-off is an appealable
    issue, the refusal at this time turns out not to be a legal error, so the
    jurisdictional issue need not be decided. See Norton v. Mathews, 427 U.S. 524,
    530-32, 96 S.Ct. 2771, 2774-76, 49 L.Ed.2d 672 (1976); In re Pioneer Ford
    Sales, 729 F.2d 27, 31 (1st Cir.1984).

    19

    We turn now to the merits. Hewlett-Packard does not object to the confirmation
    of the award in all respects; it says it has paid the award except the disputed
    amount including interest. But Hewlett-Packard says that the district court erred
    by confirming the award in full instead of either allowing a set-off or granting a
    stay of the confirmation pending the results of the new arbitration.

    20

    We agree with the district court's rejection at this time of the first alternative.
    Whether Hewlett-Packard has a valid claim under the 1982 contract is subject
    to arbitration; we agree with the district court--and Hewlett-Packard--that the
    tribunal has never resolved the merits of that claim. Whatever the
    Massachusetts law on set-offs, the district court could not allow the set-off at
    present without determining that Hewlett-Packard had a valid claim, which is
    the very subject of the arbitration.

    21

    It is hard to imagine a step that would be more offensive to the pro-arbitration


    policies reflected in Congress' endorsement of the 1958 Convention on the
    Recognition and Enforcement of Foreign Arbitral Awards, often called the
    New York Convention. The New York Convention was approved by Congress,
    and implementing legislation was codified at 9 U.S.C. Secs. 201-08. The statute
    enlists the aid of federal courts to compel arbitration. 9 U.S.C. Sec. 206. By
    contrast, the judicial set-off requested here would circumvent the 1982 contract
    to arbitrate and the now-pending arbitration under that contract.

    22

    The request to defer confirmation of the award under the 1984 contract stands
    on a different footing. However the case might stand absent the bankruptcy,
    Dicoscan's bankruptcy gives Hewlett-Packard a very substantial prudential

    argument. If the existing award were confirmed in full and reduced to


    judgment, Hewlett-Packard would have to pay the full award to the defendants
    as successors-in-interest of an insolvent company. If in due course HewlettPackard then prevailed on its claims against the insolvent company on a closely
    related transaction, it would have no assurance of collecting anything.
    23

    Further, Hewlett-Packard cannot be blamed for the discrepant timing in the


    resolution of its claim, or at least no argument to that effect has been made.
    After it was told that the defendants did have arbitration rights despite an antiassignment clause in the contracts, Hewlett-Packard apparently made a
    reasonable effort to have both the defendants' claim and its own counterclaim
    resolved in one proceeding at the same time. Only the arbitrators' surprising
    interpretation of their mandate frustrated this attempt.

    24

    Under these circumstances, the seemingly fair solution would be to confirm the
    award in its uncontested part, reserving confirmation of the balance until the
    1982 contract dispute is arbitrated. The district court refused to consider a stay
    of confirmation on the ground that it was without power to do so. We fully
    understand the basis for the district court's doubt about its authority, but we
    conclude that it does have the power to issue a stay in the peculiar
    circumstances of this case.

    25

    Ordinarily there could be no doubt that a court, although obliged to decide a


    claim, would retain discretion to defer proceedings for prudential reasons.
    Indeed, a typical reason is the pendency of a related proceeding in another
    tribunal. "[T]he power to stay proceedings is incidental to the power inherent in
    every court to control the disposition of the causes on its docket with economy
    of time and effort for itself, for counsel, and for litigants." Landis v. North
    Amer. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 166, 81 L.Ed. 153 (1936).

    26

    The question here is whether this traditional authority is curtailed by the New
    York Convention and its implementing legislation. The statute provides that,
    upon a petition for confirmation, a district court "shall confirm the award
    unless it finds one of the grounds for refusal or deferral of recognition or
    enforcement of the award specified in the said Convention." 9 U.S.C. Sec. 207
    (emphasis added). Article VI of the Convention is the only provision that deals
    with staying confirmation. Article VI states:

    27an application for the setting aside or suspension of the award has been made to a
    If
    competent authority [in the country where the award has been made], the authority
    before which the award is sought to be relied upon may, if it considers it proper,
    adjourn the decision on the enforcement of the award [and require a security].

    28

    The circumstances outlined in Article VI do not appear to exist in this case. The
    question is whether a district court may grant a stay in circumstances other than
    those authorized in Article VI.

    29

    The fact that section 207 uses the word "shall" is not decisive, because a stay is
    a deferral rather than refusal. But the fact that the statute refers to the
    Convention and the Convention lists a single ground for a stay could be taken
    to exclude all other grounds under the principle of expressio unius est exclusio
    alterius. That was, in substance, the reasoning of the district court. However,
    expressio unius is an aid to construction and not an inflexible rule. See, e.g.,
    United States v. Massachusetts Bay Transport. Auth., 614 F.2d 27, 28 (1st
    Cir.1980). Whatever we might think if the question were entirely open,
    precedent informs our decision in this case. Domestic arbitrations are governed
    by the United States Arbitration Act (chapter 1 of Title 9) but not by the
    Convention (chapter 2 of Title 9). The Act states that, upon application, "the
    court must grant [a confirmation] order unless the award is vacated, modified,
    or corrected as prescribed in sections 10 and 11 of this title." 9 U.S.C. Sec. 9
    (emphasis added). But courts routinely grant stays in such cases for prudential
    reasons not listed in sections 10 and 11. E.g., Middleby, 962 F.2d at 615-16.

    30

    Similarly, this court has held that district courts have discretion to stay an
    action to compel arbitration pending the outcome of related litigation, even
    though the Act states that on a motion to compel the court "shall hear the
    parties" and "shall proceed summarily to trial." 9 U.S.C. Sec. 4; see Acton
    Corp. v. Borden, Inc., 670 F.2d 377, 383 (1st Cir.1982). In Acton, then-Judge
    Breyer held that, in drafting the statute, Congress did not "intend[ ] a major
    departure from the ordinary rule allowing one federal court to stay litigation
    when another federal court is on the process of deciding the same issue." We
    take the same view of Congress' intentions in implementing the Convention.

    31

    Of course, a stay of confirmation should not be lightly granted. A central


    purpose of the Convention--an international agreement to which the United
    States is only one of approximately one hundred signatories--was to expedite
    the recognition of foreign arbitral awards with a minimum of judicial
    interference. But the risk that the power to stay could be abused by disgruntled
    litigants--real though that risk is, see Spier v. Calzaturificio, 663 F.Supp. 871,
    875 (S.D.N.Y.1987)--argues more for a cautious and prudent exercise of the
    power than for its elimination.

    32

    Because the district court acted under a misapprehension of its authority, we


    vacate the confirmation order and remand for further proceedings. Whether
    confirmation or collection of the award should be partially deferred pending the

    resolution of the 1982 contract arbitration is a matter for the district court to
    determine in the first instance. Still, we think it would require some explanation
    if, in the face of the equities of this case, the district court concluded that the
    full award should be confirmed and collected now.
    33

    The confirmation order is vacated and the matter is remanded to the district
    court for further proceedings consistent with this opinion.

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