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What’s Good for the Goose May Not Be for the Gander.

Tennessee Rule of Appellate Procedure 13(a) provides that “any question of law may be brought up for review and relief by any party.”  Well, not always.

In Melo Enterprises, LLC, et al. v. D1 Sports Holdings, LLC, Case No. M2017-02294-COA-R3-CV, decided January 25, 2019, by the Tennessee Court of Appeals, D1 filed a motion to compel arbitration of Melo’s claims for conversion, fraudulent representation and declaratory relief arising out of the sale of limited partnership units. The trial court compelled arbitration on the conversion and declaratory relief claims but noting a Tennessee choice of law provision in an underlying document, held that Tennessee law required judicial determination of the fraudulent inducement claim.  D1 immediately appealed.

T.C.A. § 29-5-319 allows immediate, interlocutory appeals of orders denying a motion to compel arbitration and orders granting motions to stay arbitration. But as Melo conceded, there is no provision for immediately appealing, under this statute, a grant of a motion to compel arbitration.  Melo, as appellee, argued that it could raise the issues on appeal concerning the grant of the arbitration motion under Rule 13(a).  The Court of Appeals held:

We certainly do not question that the appellate rules of procedure permit an appellee to raise his or her own appellate issues in response to an appeal initiated by another party.  This right, however, has no bearing on whether the raised issues are, in fact, amenable to appellate review.  If our consideration of an issue would run afoul of a jurisdictional prohibition, then we cannot entertain it.

The Court of Appeals viewed the underlying documents differently than the trial court and determined that there was not an effective incorporation of an arbitration agreement into the operative documents. It therefore affirmed that the fraudulent inducement claim would be litigated, not arbitrated.

As pointed out by Judge W. Neal McBrayer in a well-written concurrence, a party in Melo’s position is not without options, having been denied an immediate appeal under T.C.A. § 29-5-319(b). Appellees, like Melo, can request permission to pursue an interlocutory appeal under Rules 9 and 10.  In fact, given the risk of parallel proceedings, Judge McBrayer predicted that courts would be receptive to such requests.

Authored by: William R. O'Bryan, Jr.