Which orders regarding arbitration are appealable?

Arbitration is supposed to be an alternative to the court system. Often, however, the two go hand-in-hand. Parties routinely turn to the courts to compel arbitration, to stay litigation pending arbitration, to review arbitration awards, and to make other arbitration-related decisions. Some of the resulting orders are immediately appealable; others are not. As two recent published decisions illustrate, knowing which category your case falls into is critical: The Court of Appeal is vigilant about appealability issues, and will dismiss an appeal from a non-appealable order without reaching the merits, even if the case is fully briefed.

In the arbitration context, the starting point for determining whether an order is appealable is Code of Civil Procedure Section 1294, which permits an "aggrieved party" to appeal from five categories of rulings: (1) an order dismissing or denying a petition to compel arbitration; (2) an order dismissing a petition to confirm, correct or vacate an award; (3) an order vacating an award (unless rehearing in arbitration is required); (4) a judgment based on an arbitration award; or (5) a "special order after judgment." Orders granting a petition to compel arbitration, notably, are not on this list. They can be reviewed only as part of an appeal from a final judgment on the arbitration award or, in some circumstances, on a writ petition. Muao v. Grosvenor Properties Ltd., 99 Cal. App. 4th 1085, 1089 (2002).

The Court of Appeal recently examined what Section 1294 means for two types of arbitration-related orders: an order denying a motion to stay an action pending arbitration, and an order vacating an interim arbitration award. The short answer is that neither is immediately appealable. But the longer answer - the courts' reasoning - is worth examining, because it provides important lessons for practitioners.

In Wells Fargo Bank N.A. v. The Best Service Co. Inc., 2014 DJDAR 16717 (Dec. 17, 2014), the plaintiff filed a complaint for declaratory and injunctive relief, and refused the defendant's demand to arbitrate. The defendant moved to stay the action pending compliance with the arbitration demand. The trial court denied the stay motion, and the defendant appealed.

Following briefing and oral argument, the Court of Appeal (2nd District, Division 5) dismissed the appeal and awarded the plaintiff its costs on appeal. The court rejected the defendant's argument that the order denying a stay was appealable as an order denying arbitration. Because there was no arbitration pending and the defendant's stay motion expressly did not seek to compel arbitration, the trial court could not be said to have denied a petition to compel arbitration. Nor was the order appealable under Code of Civil Procedure Section 1294.2, which permits the court to review an intermediate ruling or order upon an appeal authorized by Section 1294. As the court explained, Section 1294.2 requires there be a separate appealable order on appeal, and here there was none.

The Court of Appeal also focused on arbitration appealability in Judge v. Nijjar Realty Inc., 2014 DJDAR 16709 (Dec. 17, 2014), which was decided on the same day as Wells Fargo. In Judge, the defendants moved to vacate an arbitrator's interim award that construed an arbitration clause but left the merits of the dispute for future decision. The trial court issued an order vacating the interim award, and the plaintiff appealed.

After the appeal was fully briefed, the appellate court raised the issue of appealability and asked the parties to file letter briefs on whether an order vacating an interim arbitration award is appealable. The parties complied, apparently both taking the position that the award was appealable. The Court of Appeal disagreed and dismissed the appeal.

Judge acknowledged that a prior California Supreme Court case had reached the merits of a similar order, one that vacated an interim arbitration award. Invoking the rule that cases are "authority only for an issue actually considered and decided," Judge found that the prior Supreme Court case was not precedent on the issue of appealability because it did not directly address that issue. Judge therefore treated the appealability question as one of first impression.

Judge observed that "at first blush," the order vacating the interim award appeared to be appealable because Section 1294 permits an appeal from "[a]n order vacating an award." But the court concluded upon closer analysis that Section 1294 authorizes appeals only from orders vacating final arbitration awards, not from orders vacating interim awards that leave some issues undecided. This interpretation rested primarily on Code of Civil Procedure Section 1283.4, which provides that an arbitration award must "include a determination of all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy." (Emphasis added.) The court reasoned that under this provision, an interim ruling is not an "award" if it decides fewer than all matters submitted. Based on that reasoning, the court questioned whether the trial court had jurisdiction to vacate the interim award in the first place. The court declined to decide that issue, but squarely held that an order vacating an interim ruling is not appealable as an order vacating an "award."

Judge described its finality requirement as consistent with the policies underlying arbitration. Arbitration is supposed to be streamlined and efficient. Permitting parties to appeal from orders vacating interim awards - awards involving, for example, discovery disputes, demurrers, or summary adjudication - would make the arbitration process less efficient. It would also be "anomalous," because most interim orders outside the arbitration context are not appealable.

Both Judge and Wells Fargo reinforce the critical first step in any appeal: determining whether the order at issue is appealable. If you conclude that the order is appealable, explain the basis for appealability in the opening brief. If you conclude that the order is not appealable, consider whether it will be ripe for review and make a note to raise it then. And, as always, if in doubt, consult an appellate expert.