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    Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ernest M. McCollum, 469 U.S. 1127 (1985)

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    The document is a dissenting opinion from the denial of a writ of certiorari in a Supreme Court case. The dissent argues that the Court should hear the case to resolve a circuit split over whether the Federal Arbitration Act allows courts to issue preliminary injunctions pending arbitration. While some circuits have found such injunctions are allowed to maintain the status quo, others have found they are barred by the Act. The issue is important and capable of evading review due to the short duration of arbitration proceedings.

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    Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ernest M. McCollum, 469 U.S. 1127 (1985)

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    The document is a dissenting opinion from the denial of a writ of certiorari in a Supreme Court case. The dissent argues that the Court should hear the case to resolve a circuit split over whether the Federal Arbitration Act allows courts to issue preliminary injunctions pending arbitration. While some circuits have found such injunctions are allowed to maintain the status quo, others have found they are barred by the Act. The issue is important and capable of evading review due to the short duration of arbitration proceedings.

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    Filed: 1985-01-14 Precedential Status: Precedential Citations: 469 U.S. 1127 Docket: 84-629

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    The document is a dissenting opinion from the denial of a writ of certiorari in a Supreme Court case. The dissent argues that the Court should hear the case to resolve a circuit split over whether the Federal Arbitration Act allows courts to issue preliminary injunctions pending arbitration. While some circuits have found such injunctions are allowed to maintain the status quo, others have found they are barred by the Act. The issue is important and capable of evading review due to the short duration of arbitration proceedings.

    Copyright:

    Public Domain
    Download as COURT, PDF, TXT or read online from Scribd
    Download as court, pdf, or txt
    38 views5 pages

    Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ernest M. McCollum, 469 U.S. 1127 (1985)

    Uploaded by

    Scribd Government Docs
    The document is a dissenting opinion from the denial of a writ of certiorari in a Supreme Court case. The dissent argues that the Court should hear the case to resolve a circuit split over whether the Federal Arbitration Act allows courts to issue preliminary injunctions pending arbitration. While some circuits have found such injunctions are allowed to maintain the status quo, others have found they are barred by the Act. The issue is important and capable of evading review due to the short duration of arbitration proceedings.

    Copyright:

    Public Domain
    Download as COURT, PDF, TXT or read online from Scribd
    Download as court, pdf, or txt
    of 5

    469 U.S.

    1127
    105 S.Ct. 811
    83 L.Ed.2d 804

    MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.


    v.
    Ernest M. McCOLLUM et al.
    No. 84-629.

    Supreme Court of the United States


    January 7, 1985
    Rehearing Denied Feb. 25, 1985.

    See 470 U.S. 1024, 105 S.Ct. 1384.


    On petition for writ of certiorari to the Court of Appeals of Texas,
    Fourteenth Supreme Judicial District.
    The petition for a writ of certiorari is denied.
    Justice WHITE, with whom Justice BLACKMUN joins, dissenting.

    This petition presents the question whether 3 of the Federal Arbitration Act, 9
    U.S.C. 3, bars a court from issuing a temporary injunction pending arbitration
    of a contractual dispute.1 Respondent McCollum (hereafter respondent) is a
    former employee of petitioner Merrill Lynch, Pierce, Fenner and Smith, Inc.
    The employment contract signed by Merrill Lynch and respondent provided
    that in the event that respondent's employment with Merrill Lynch was
    terminated, respondent would not be allowed to remove client lists from the
    premises of Merrill Lynch nor to solicit any of Merrill Lynch's clients for a
    period of one year from the date of termination. The contract also provided that
    "any controversy between [respondent] and Merrill Lynch arising out of
    [respondent's] employment, or the termination of [respondent's] employment
    with Merrill Lynch for any reason whatsoever shall be settled by arbitration at
    the request of either party . . . ."

    Respondent left petitioner and obtained a position with one of petitioner's

    competitors. Alleging that respondent had violated the terms of his contract by
    absconding with petitioner's client lists and soliciting petitioner's clients,
    petitioner sued respondent for damages and injunctive relief in the District
    Court for Harris County, Texas. After entering a temporary restraining order
    enjoining respondent from any actions in violation of the contract, the District
    Court concluded that the dispute was arbitrable and that the court therefore
    lacked authority to adjudicate it. Accordingly, although the court was of the
    opinion that petitioner would have been entitled to injunctive relief but for the
    arbitration clause, the court dissolved its restraining order, denied petitioner's
    motion for a temporary injunction, and stayed all further proceedings in the
    action pending arbitration of the underlying dispute.
    3

    Petitioner appealed the District Court's order to the Texas Court of Appeals.
    Petitioner attacked the trial court's finding that the dispute was arbitrable, the
    denial of preliminary injunctive relief, and the order compelling arbitration.
    The Court of Appeals affirmed the lower court on all three issues. 666 S.W.2d
    604 (1984). In upholding the denial of the preliminary injunctive relief pending
    arbitration, the Court of Appeals interpreted 3 of the Federal Arbitration Act
    (applicable, in the court's view, to state as well as federal courts) to command
    an immediate halt to judicial proceedings once a court determines that the
    dispute underlying an action is arbitrable. Judicial resolution of the issues
    involved in a motion for injunctive relief, the court held, would be inconsistent
    with the Act's command that the merits of the dispute be determined by the
    arbitrator. Thus, the court concluded that 3 of the Arbitration Act precludes a
    court from entering a preliminary injunction to maintain the status quo pending
    arbitration in any arbitrable dispute.

    The Supreme Court of Texas denied petitioner's application for a writ of error
    to review the judgment of the Court of Appeals, and petitioner filed this timely
    petition for certiorari.

    The question presented by this casewhether the Arbitration Act bars a court
    from issuing a preliminary injunction in a case subject to arbitrationis one
    that has divided the state and federal courts.2 In adopting the position that
    preliminary injunctive relief is unavailable, the Texas Court of Appeals
    followed recent rulings of the Federal Courts of Appeals for the Eighth and
    Tenth Circuits, Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d
    1286, 1291 (CA8 1984); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Scott,
    No. 83-1480 (CA10, May 12, 1983) (unpublished order). However, the Second
    and Seventh Circuits, apparently untroubled by 3 of the Arbitration Act, have
    routinely held that preliminary injunctions are available to maintain the status
    quo pending arbitration even in actions subject to the Arbitration Act's

    command that the court compel arbitration rather than adjudicating the
    underlying dispute. See Sauer-Getriebe KG v. White Hydraulics, Inc., 715 F.2d
    348 (CA7 1983); Connecticut Resources Recovery Auth. v. Occidental
    Petroleum Corp., 705 F.2d 31 (CA2 1983); Guinness-Harp Corp. v. Joseph
    Schlitz Brewing Co., 613 F.2d 468 (CA2 1980); Erving v. Virginia Squires
    Basketball Club, 468 F.2d 1064 (CA2 1972). The Supreme Court of Colorado
    has also recently held (without any discussion of the Arbitration Act) that a
    preliminary injunction to maintain the status quo is available in an action in
    which a court is otherwise obligated to stay its proceedings and compel
    arbitration. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. District Court of
    Denver, 672 P.2d 1015 (1983).
    6

    The importance of resolving the question of the availability of preliminary


    injunctive relief in cases subject to arbitration is underscored by the confusion
    over the issue among the Federal District Courtscourts whose decisions on
    the issuance of preliminary relief are often effectively final, given that the
    imminence of arbitration may sharply limit a party's incentives to appeal an
    adverse decision. In an opinion written in 1951, Judge Weinfeld of the Southern
    District of New York concluded that the power to issue a preliminary
    injunction pending arbitration follows from the court's power to compel
    arbitration, for "[i]t would be an oddity in the law if the Court, after compelling
    a party to live up to his undertaking to arbitrate, had to stand idly by during the
    pendency of the arbitration which it has just directed and permit him to assert
    his 'right to breach a contract and to substitute payment of damages for
    nonperformance.' " Albatross S.S. Co. v. Manning Bros., Inc., 95 F.Supp. 459,
    463 (1920) (quoting O. Holmes, Collected Legal Papers 175). Judge Weinfeld's
    reasoning was adopted by the District Court for the Eastern District of New
    York in Janmort Leasing, Inc. v. Econo-Car International, Inc., 475 F.Supp.
    1282 (1979). In other recent cases, however, District Courts have concluded
    that they lack the power to issue a preliminary injunction in cases subject to 3
    of the Arbitration Act. See, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
    DeCaro, 577 F.Supp. 616 (WD Mo.1983); Merrill Lynch, Pierce, Fenner &
    Smith, Inc. v. Shubert, 577 F.Supp. 406 (MD Fla.1983); Merrill Lynch, Pierce,
    Fenner & Smith, Inc. v. Thompson, 575 F.Supp. 978 (ND Fla.1983); Smith v.
    Merrill Lynch, Pierce, Fenner & Smith, Inc., 575 F.Supp. 904 (ND Tex.1983);
    Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Thomson, 574 F.Supp. 1472 (ED
    Mo.1983). But cf. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. De Liniere,
    572 F.Supp. 246 (ND Ga.1983), in which the court, in a case governed by 3,
    apparently assumed it had the power to grant a preliminary injunction but
    denied the injunction on the merits.

    Whether the Arbitration Act bars the issuance of a preliminary injunction

    pending arbitration appears to be a frequently litigated question of considerable


    importance to the parties to arbitration agreements. The issue is one well worth
    definitive resolution by this Court. The most obvious obstacle to review of this
    particular case is that the arbitration proceedings will likely have begun and
    endedmooting the issue of relief pending arbitrationby the time this Court
    has the opportunity to resolve the issue. This obstacle, however, is more
    apparent than real. The Court has recognized an exception to its general
    mootness doctrine for cases presenting issues that are "capable of repetition, yet
    evading review." See, e.g., Sosna v. Iowa, 419 U.S. 393, 95 S.Ct. 553, 42
    L.Ed.2d 532 (1975); Dunn v. Blumstein, 405 U.S. 330, 92 S.Ct. 995, 31
    L.Ed.2d 274 (1972). In Weinstein v. Bradford, 423 U.S. 147, 96 S.Ct. 347, 46
    L.Ed.2d 350 (1975), we held that "the 'capable of repetition, yet evading
    review' doctrine was limited to the situation where two elements combined: (1)
    the challenged action was in its duration too short to be fully litigated prior to its
    cessation or expiration, and (2) there was a reasonable expectation that the
    same complaining party would be subjected to the same action again." Id., at
    149, 96 S.Ct., at 348. Both criteria are satisfied in this case. It would be the rare
    case indeed in which an arbitration proceeding compelled under the Arbitration
    Act would not have commenced before the issue of the propriety of injunctive
    relief pending arbitration found its way to this Court. Thus, unless the Court is
    willing to apply the "capable of repetition, yet evading review" doctrine, it is
    likely that the issue will never be conclusively resolved here. Moreover, the
    likelihood that petitioner will again find itself in the position of seeking
    injunctive relief pending arbitration of a contractual dispute with a former
    employee seems substantial: in fact, several of the courts that have so far
    examined the issue have done so in proceedings initiated by petitioner. The
    question, then, is one that is "capable of repetition, yet evading review"; and in
    view of its importance, I would grant certiorari to resolve it.

    Section 3 provides:
    "If any suit or proceeding be brought in any of the courts of the United States
    upon any issue referable to arbitration under an agreement in writing for such
    arbitration, the court in which such suit is pending, upon being satisfied that the
    issue involved in such suit or proceeding is referable to arbitration under such
    an agreement, shall on application of one of the parties stay the trial of the
    action until such arbitration has been had in accordance with the terms of the
    agreement, providing the applicant for the stay is not in default in proceeding
    with such arbitration."

    Petitioner contends not only that the Texas Court of Appeals misconstrued 3

    of the Arbitration Act, but also that 3 is inapplicable in state-court


    proceedings. Although this Court, in holding that state courts must apply 2 of
    the Act, has reserved the question whether 3 applies to the state courts, see
    Southland Corp. v. Keating, 465 U.S. 1, 16, n. 10, 104 S.Ct. 852, 861, n. 10, 79
    L.Ed.2d 1 (1984), petitioner cites no authority for the proposition that 3 does
    not apply, and there appears to be no substantial disagreement among the state
    courts over 3's applicability. See Moses H. Cone Memorial Hospital v.
    Mercury Construction Corp., 460 U.S. 1, 26, n. 34, 103 S.Ct. 927, 942, n. 34,
    74 L.Ed.2d 765 (1983); Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
    Melamed, 405 So.2d 790 (Fla.App.1981).

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