Key Points

  • The First Circuit found that the district court's administrative closure constituted a denial of the motion to compel arbitration, giving appellate jurisdiction under § 16(a)(1)(B).
  • The FAA's Section 4 mandate that courts 'shall' order arbitration is impervious to judicial discretion; district courts must decide pending motions to compel.
  • The panel vacated and remanded with instructions to rule on the motion to compel and to explain the basis for the decision.
  • The court clarified that if arbitration is compelled, it must be individual arbitration as per the parties' agreement, not class arbitration.

The First Circuit vacated the administrative closure of a wage-and-hour class action against The Campbell's Company, ruling that the district court effectively denied the defendant's motion to compel arbitration and must decide it on the merits. In a March 4 opinion, the panel found that the district court's refusal to rule on the motion and its decision to park the case on the administrative docket violated the Federal Arbitration Act.

Plaintiff Powell sued The Campbell's Company, alleging misclassification as an independent contractor and seeking unpaid wages and overtime. The defendant moved to compel arbitration under an arbitration provision that Powell had agreed to as part of a prior class action settlement. The district court held a hearing in October 2024 and granted a stay of the litigation, but declined to compel arbitration.

The district court stated it was "not at all clear that [the FAA] applies at all" and said, "I don't compel anyone to do anything, what I'm doing is closing the doors to this court." The court then administratively closed the case without entering judgment, allowing reopening only under limited conditions such as the conclusion of arbitration or the passage of six months without arbitration.

"I don't compel anyone to do anything, what I'm doing is closing the doors to this court."

The defendant appealed. The First Circuit first addressed appellate jurisdiction. Because the district court had not explicitly denied the motion, the panel looked to the substance of the order. It concluded that the district court's statement that it would not compel anyone constituted a denial in substance, giving jurisdiction under 9 U.S.C. § 16(a)(1)(B), which permits appeals from orders denying petitions to compel arbitration.

The panel emphasized that under Section 4 of the FAA, "the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." It noted that the Supreme Court has held that the use of "shall" "creates an obligation impervious to judicial discretion." The district court therefore could not avoid the arbitration question by administratively closing the case.

The court vacated the denial and remanded for the district court to determine whether to grant or deny the motion to compel arbitration and to explain the basis for its decision. The panel criticized the procedural irregularities, noting that the administrative closure left the parties in "litigation limbo" and did not resolve the pending motion.

The panel offered guidance on remand. It noted that the parties' agreement required individual arbitration for all claims relating to misclassification. If the district court compels arbitration, it should require individual arbitration, not class arbitration as the district court had suggested. "The order to compel would require the parties to proceed as such, in alignment with the conditions set out in the Settlement Agreement," the panel wrote.

The district court had rejected Powell's argument that the FAA's Section 1 exemption for transportation workers applied. The panel left that determination for the district court to reconsider, noting that Powell had not cross-appealed the issue.

The decision reinforces that district courts must rule on motions to compel arbitration. Administrative closure is not a substitute for a decision on the merits. Parties who move to compel under the FAA have a right to a ruling, and the court cannot sidestep that obligation.

The case is Powell v. The Campbell's Company, No. 25-1052, and was remanded for further proceedings consistent with the opinion.