Last week, a divided Sixth Circuit panel in Dealer Computer Services, Inc. v. Dub Herring Ford, et al. (6th Cir., Case No. 09-1848, Oct. 14, 2010) (PDF) (“DCS II”), held that the three-prong ripeness inquiry previously set forth by the Sixth Circuit in a closely related earlier ruling in the same case, Dealer Computer Services, Inc. v. Dub Herring Ford, 547 F.3d 558 (6th Cir. 2008) (PDF) (“DCS I”), is the correct standard to be applied in the Circuit, notwithstanding the fact that the U.S. Supreme Court earlier this year in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010) (PDF), articulated a two-part ripeness inquiry in concluding that a suit challenging the construction of a class arbitration clause was ripe.
The issue in DCS II was whether the district court had jurisdiction to confirm an arbitration panel’s interim award denying class action arbitration. The ripeness inquiry was triggered because the arbitration panel’s partial award was “clearly interlocutory” in that it had no impact on the merits of any claim but rather merely resolved the procedural question of whether the individually named claimants would be able to arbitrate their claims on behalf of a nationwide class—in this case, a putative class of 2,470 Ford dealerships across the country who were parties to written contracts with Dealer Computer Services, Inc. for an electronic parts catalog system.
The district court in DSC II applied the ripeness factors set forth by the Sixth Circuit in DCS I, which include: (1) the likelihood that the harm alleged by the party will ever come to pass; (2) the hardship to the parties if judicial relief is denied at this stage of the proceedings, and (3) whether the factual record is sufficiently developed to produce a fair adjudication of the merits. Applying these factors, the district court held that it lacked jurisdiction to confirm the arbitration panel’s interim award denying class arbitration. The Sixth Circuit affirmed. Circuit Judges McKeague and Cole agreed with the district court that the appellant failed to demonstrate that it was subject to cognizable hardship if immediate judicial review of the arbitration panel’s interim award was denied.
The appellant in DCS II argued that the district court wrongly applied the DCS I standard, noting not only that other circuits apply a less rigid standard than the Sixth Circuit but also that the U.S. Supreme Court in Stolt-Nielsen itself recently applied a two-part ripeness inquiry which simply evaluates “the fitness of the issues for judicial decision” and “the hardship of withholding judicial consideration.” But Judges McKeague and Cole were unconvinced. They observed that the two-part ripeness inquiry set forth (in a footnote) by the Supreme Court in Stolt-Nielsen “is nominally different from the three-factor standard we employed in DCS – I, but in practical effect, the distinction is one without a difference.” In further downplaying Stolt-Nielson’s teaching of ripeness, the majority noted that the Supreme Court did not grant certiorari in Stolt-Nielson in order to clarify the law of ripeness, but rather to decide a class arbitration issue under the Federal Arbitration Act, and that explained “why the majority’s ripeness discussion is summary and dismissive in nature, a fact that counsels against reading the decision’s ripeness teaching more expansively than it deserves.”
District Court Judge Samuel H. Mays, Jr., from the Western District of Tennessee, dissented. He concluded that the Supreme Court’s recent decision in Stolt-Nielson abrogated the Sixth Circuit’s prior holding in DCS I because the facts and procedural posture of the two cases were “materially indistinguishable.” Thus, the holding in DCS I could not support the proposition that the appellant’s motion to confirm the arbitration panel’s award was unripe.
It will be interesting to see if the U.S. Supreme Court decides to weigh in on Judge Mays’s conclusion that Stolt-Nielson abrogated the Sixth Circuit’s three-party ripeness inquiry in DCS I.