Alert

Ohio Court Rules the Federal Arbitration Act Means What It Says and Finds an Order Compelling Arbitration and Staying a Case to Not Be a Final, Appealable Order

October 18, 2024

On October 3, 2024, the Ohio Eighth Appellate District granted the appellee’s motion to dismiss an appeal, finding that an order compelling arbitration and staying a case under the Federal Arbitration Act (FAA) is not a final, appealable order.[1] 

Case Background

In Beard, the buyers under a retail installment sales contract filed claims against the car dealership they purchased the vehicle from and the indirect auto finance company that ultimately financed the purchase. In response, the finance company moved to compel arbitration and stay the case in accordance with the terms of an arbitration agreement the buyers had agreed to. Notably, the arbitration agreement also made clear that the FAA, not state law, governed the agreement: “[i]t is expressly agreed that this Contract evidences a transaction in interstate commerce. This Arbitration Clause is governed by the FAA and not by any state arbitration law.” 

The buyers opposed the motion and, notably, did not contest that the FAA applied. Ultimately, the trial court granted the motion to compel arbitration and stayed the case. In response, the buyers appealed the trial court’s decision. However, before a decision on the merits was reached, the auto finance company moved to dismiss the appeal for lack of a final, appealable order. As the auto finance company argued, both the plain language of the FAA, 9, U.S.C. § 16, and Supreme Court precedent make clear that orders compelling arbitration and staying a case are not immediately appealable under the FAA. The buyers opposed, arguing that Ohio’s Arbitration Act, not the FAA, governed the appeal and permitted appeals of orders compelling arbitration and staying the case.

Court’s Decision

Ultimately, the Eighth Appellate District was not persuaded by the buyer’s arguments and dismissed the appeal.  As the court noted:

The FAA does not provide for an appeal of an interlocutory order granting a motion compelling arbitration. The trial court’s order in this case was not a final order. Further, we find no merit to appellants’ argument that the FAA does not preempt Ohio’s arbitration statute, and we should therefore rely on R.C. 2711.02(C) to determine whether a final, appealable order exists. The arbitration agreement specifically stated that it was “governed by the FAA and not by any state arbitration law.” Appellants do not argue otherwise. We cannot disregard the provisions of the FAA when it is clear that Ohio’s arbitration statute is not applicable to this matter.

Credit Acceptance Corp. v. Beard, 2024-Ohio-4799, ¶ 13 (8th Dist.)

Not only does this decision rest upon the plain language of the FAA, but just this past term the Supreme Court reiterated why such orders are not ordinarily appealable, noting “[w]hen a court compels arbitration, by contrast, Congress made clear that, absent certification of a controlling question of law by the district court under 28 U.S.C. § 1292(b), the order compelling arbitration is not immediately appealable,” a decision made by Congress consistent with the underlying purpose of the FAA to move cases to arbitration and a decision on the merits as quickly as possible.  Smith v. Spizzirri, 601 U.S. 472 (2024).

The Takeaway

Beard highlights the importance of explicitly identifying the choice of law that will govern an arbitration agreement.  Moreover, because the FAA is equally binding on state and federal courts, the Beard decision also outlines ways prevailing parties can ensure the underlying purpose of the FAA is met by quickly moving such cases out of court and into arbitration without the necessity of a long, drawn-out, appeals process.

[1] James W. Sandy and McGlinchey Stafford represent the auto finance company in the underlying action and the appeal.