A Trap For The Unwary . . .
Plaintiff Kum Tat Limited sued in California state court in connection with its attempted purchase of residential property for approximately $40M, after its attempted purchase went sideways. Defendant Linden Ox Pasture removed to federal court. Plaintiff then moved unsuccessfully to compel arbitration and to stay the action pursuant to California Code of Civil Procedure sections 1281.2 and 1281.4. The trial court denied the motion, concluding the parties failed to form a contract.
Under the California Arbitration Act, California Code of Civil Procedure, section 1294, a party whose motion to compel arbitration has been denied can appeal. Similarly, under the Federal Arbitration Act, 9 U.S.C. section 16(a)(1), one can file an interlocutory appeal from an order denying a petition to order arbitration. So, given that the district court denied Kum Tat's motion to compel arbitration, should the Ninth Circuit have entertained an interlocutory appeal?
No. The reason is that Kum Tat invoked the California Code of Civil Procedure as the basis for an appeal, rather than the Federal Arbitration Act. So the Ninth Circuit dismissed the appeal for lack of federal jurisdiction. Gotcha.
Ironically, Linden Ox's answering brief did not contest jurisdiction. But of course the federal court gets to exercise its "independent obligation to ensure jurisdiction."
COMMENT. Kum Tat's motion to compel arbitration was explicitly brought under California arbitration law, and Kum Tat later emphasized that the motion was not made under the FAA. Suppose the arbitration motion had been more ambiguous, and failed to cite state or federal arbitration law? Could such a motion have been brought "under" the FAA for purposes of the interlocutory appeal? The Ninth Circuit expressly states that it does not decide that question. Kum Tat, footnote 3. Generally, parties seeking to compel arbitration find themselves in a stronger position when they proceed under the FAA. Apparently Kum Tat's motion to compel arbitration sought to distinguish some unfavorable case law interpreting the FAA, explaining why Kum Tat was at pains to stake the position that it was proceeding under state law. Kum Tat, footnote 1.