Omni Hotels Mgmt v. Bayer, et al

United States Court of Appeals
Fifth Circuit
F I L E D
May 21, 2007
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
For the Fifth Circuit
_______________
m 06-30372
_______________
OMNI HOTELS MANAGEMENT CORPORATION,
Plaintiff-Appellee,
VERSUS
PHILIP BAYER; KIM W. BAYER; JOHN PATRICK BLANCANEAUX;
WILLIAM H. COURET, III; VANESSA HARVEY; TAMARA LANG; HAYWOOD BUSH;
BERNARD AINSWORTH; ARCEAL BUTLER, SR.; ROBERT R. DABNEY;
CYNTHIA M. DANIELS; ANDREW P. DAVIS; DIANA P. DAVIS; BOBBY HARDY;
ALIDA JOHNSON; SHEDRICK JOURNEE; MARSHALL POWELL;
SCHFREDA PATRICE THOMAS; EVERT WILLIAMS; CLEOPHUS BENSON, JR.;
PRISCILLA CEASAR; JOYCE ROBAIR; BENNIE SCOTT,
Defendants-Appellants.
_________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
m 2:05-CV-1883
_________________________

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Before GARWOOD, SMITH, and DEMOSS,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Present and past employees of the Omni
Hotels Management Corporation (“OHMC”)
brought a state court class action against
OHMC and several of its subsidiaries, seeking
damages for exposure to toxic mold at the
Omni Royal Crescent Hotel. OHMC filed this
declaratory judgment action seeking to enforce
an arbitration agreement binding its employ-
ees. The district court ruled that the arbitra-
tion agreement was binding, so it compelled
arbitration and enjoined the defendants from
maintaining a state court action. We affirm.
I.
Effective May 2003, OHMC adopted a
written, mandatory arbitration agreement, for
all employees nationwide, under which all em-
ployment-related claims are to be resolved
through mandatoryarbitration. The agreement
explicitly covers “personal injury and employ-
ment-related tort claims (including claims for
negligence, gross negligence, and intentional
harm).” Employees were provided a copy of
the agreement stating both that continued em-
ployment was predicated on their agreement to
arbitrate and that continued employment pro-
vided consideration for the agreement. Em-
ployees were also given a receipt that they
were requested to sign as proof of notice.
Several employees refused to sign, in some
cases writing “refused” on the receipt.
In November 2003, employees and former
employees of OHMC (collectively “state court
plaintiffs”) brought a class action in Louisiana
state court alleging damages from exposure to
toxic mold. The complaint listed as defendants
OHMC, 535 Gravier, L.L.C. (the management
company), Decatur, Omni Royal Crescent
Corporation, William Sherrer, and Gerard
Vitrano. Of the defendants, only OHMC had
complete diversity from the state plaintiffs.
OHMC and its subsidiaries filed a dilatory
exception of prematurity, claiming that some
of the employees were bound by arbitration
agreements. Although there was considerable
discovery in state court, the issue of the arbitr-
ability of the claims was not resolved.
In May2005, OHMC brought a declaratory
judgment action against the state court plain-
tiffs, seeking to enforce arbitration against any
employees who were subject to the agreement,
and to enjoin any state court plaintiff from
seeking to represent employees who were
subject to the agreement. The district court
granted OHMC a declaratory judgment that
the agreements were enforceable, compelled
those employees who were employed by
OHMC after May 2003 to arbitrate their
claims, and granted a preliminary injunction
“(1) barring these employee defendants from
participating in the state suit against [OHMC],
and (2) barring all defendants from acting as
class representatives in the state suit for a class
including such persons.” The state court
plaintiffs appeal that order.
II.
OMHC claims we have no appellate juris-
diction, but we disagree. To begin with, we
have jurisdiction to determine our own juris-
diction. Cerveceria Cuauhtemoc Moctezuma
S.A. de C.V. v. Mont. Beverage Co., 330 F.3d
284, 286 (5th Cir. 2003). Beyond that, under
the express appellate jurisdiction provisions of
the Federal Arbitration Act (“FAA”),
* Pursuant to 5TH CIR. R. 47.5, the court has de-
termined that this opinion should not be published
and is not precedent except under the limited cir-
cumstances set forth in 5TH CIR. R. 47.5.4.

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except as otherwise provided in 28 U.S.C.
§ 1292, an appeal may not be taken from an
interlocutory orderSS (1) granting a stay of
any action under section 3 of this title; (2)
directing arbitration to proceed under
section 4 of this title; (3) compelling arbi-
tration under section 206 of this title;
9 U.S.C. § 16(b). The FAA’s appellate provi-
sions reflect the Congressional preference for
arbitration as a way of resolving disputes “by
authorizing immediate appeals from orders dis-
favoring arbitration and forbidding immediate
appeals from orders favoring arbitration.”
Apache Bohai Corp. v. Texaco China, B.V.,
330 F.3d 307, 309 (5th Cir. 2003). If the
original state lawsuit had been filed in federal
court, and the district court had stayed the
proceedings while compelling arbitration, we
would lack jurisdiction over the appeal. See
Mire v. Full Spectrum Lending, Inc., 389 F.3d
163 (5th Cir. 2004); Apache Bohai, 330 F.3d
at 309-10.
Here, however, the order compelling arbi-
tration was obtained in an independent federal
proceeding and was coupled with an injunction
barring several of the state court plaintiffs
from proceeding with their state suit. We ex-
amined appellate jurisdiction in this procedural
posture in Brown v. Pac. Life Ins. Co., 462
F.3d 384.
There, plaintiffs brought a fiduciary duty
suit in state court against Smith Barney and a
non-diverse investment representative. Smith
Barney removed to federal court, although the
case was remanded for improper removal
procedure. Smith Barney then filed a separate
federal action seeking to stay all state court
proceedings, and to compel arbitration of all
claims. The district court ruled for Smith Bar-
ney, staying the state court action and compel-
ling arbitration. The Browns sought immedi-
ate appeal.
We observed that when “the district court
granted the sole remedy sought by the plaintiff
in the Federal ActionsSSan order compelling
arbitration,” that order was not interlocutory,
but rather final. Id. at 391. Because there was
“nothing left for the court to do but execute
the judgment . . . the order compelling arbitra-
tion in the Federal Actions ended the litigation
in federal court on the merits and was a final
appealable decision under 9 U.S.C. § 16-
(a)(3).” Id. Turning to the federal injunction,
we strictly interpreted § 16(b) only to deprive
this court of jurisdiction over appeals from
stays granted under 9 U.S.C. § 3, which, “by
its terms, does not authorize a federal court to
enjoin state proceedings. . . . Such a stay
could not be properly issued pursuant to sec-
tion 3.” Id. at 392. The district court’s order
in Brown was immediately appealable in full.
Brown, 462 F.3d at 393.
OHMC’s declaratory judgment action re-
quested that the district court compel arbitra-
tion and issue an injunction barring certain
state court plaintiffs from participation in the
state class action. When the court compelled
arbitration, OHMC received all the relief it
sought in the district court, so, under Brown,
that order was a final appealable order under
9 U.S.C. § 16(a). The injunction against Bay-
er affecting the state court action could not
have been issued under § 3, and thus it is ap-
pealable under 28 U.S.C. § 1292(a), which
authorizes appeals from interlocutory orders
“granting, continuing, modifying, refusing or
dissolving injunctions.” It follows that this
court has jurisdiction over the state court
plaintiffs’ appeal.
III.
On the remaining issues, after considering
the written and oral arguments of the parties

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and the pertinent portions of the record com-
piled for this appeal, we affirm the judgment,
essentially for the reasons assigned in the dis-
trict court’s Order and Reasons: The threat of
piecemeal and inconsistent litigation does not
make those state court defendants who are not
diverse to the state court plaintiffs indispens-
able parties under Federal Rule of Civil Proce-
dure 19. See Brown, 462 F.3d at 393; Snap-
On Tools Corp. v. Mason, 18 F.3d 1261 (5th
Cir. 1994); Moses H. Cone Mem. Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 19-21
(1983). Abstention is inappropriate in the
arbitration setting where a balancing of the
Colorado River factors does not weigh very
heavily against the exercise of jurisdiction. See
Brown, 462 F.3d at 396; Moses H. Cone, 460
U.S. at 25-26. Control of discovery is com-
mitted to the sound discretion of the trial
court, and it did not err by ruling on the mo-
tion to compel arbitration without deferring
for further discovery, particularly given the
Federal Arbitration Act’s requirement of “an
expeditious and summary hearing, with only
restricted inquiry into factual issues.” Id. at
22. The district court was correct that the em-
ployees were bound by the agreement under
Louisiana law even if they refused to sign it,
and the state court plaintiffs have failed to
demonstrate the requisite knowledge on the
part of OHMC to establish error or fraud that
could vitiate consent.
The order appealed from is AFFIRMED.

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