Fifth Circuit Declines to Weigh in on Split Re Authority to Issue Injunction Pending Arbitration

Per Janvey v. Alguire --- F.3d ----, 2011 WL 2937949 (5th Cir. July 22, 2011):

The circuit split concerns the power of a district court to issue an injunction while arbitration is pending. The Fifth Circuit acknowledged the circuit split in RGI, Inc. v. Tucker & Associates, Inc., 858 F.2d 227, 229 (5th Cir.1988), but did not enter the fray.^FN6 The Employee Defendants contend that once again we may avoid the fray and still decide the issue in their favor because both the Eighth Circuit, on one side of the split, and the Seventh Circuit, on the other side of the split, would not permit an injunction here. The Eighth Circuit held that “where the [Federal Arbitration Act (“FAA”) ] is applicable to the dispute between the parties and no qualifying language has been alleged, the district court errs in granting injunctive relief” because the judicial inquiry required to determine “the propriety of injunctive relief necessarily would inject the court into the merits of issues more appropriately left to the arbitrator.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d 1286, 1292 (8th Cir.1984). The Seventh Circuit held that the district court may only issue injunctive relief that is effective only until the arbitration panel is able to address whether the equitable relief should remain in effect. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Salvano, 999 F.2d 211, 215–16 (7th Cir.1993).

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The RGI Court found that “[t]he crux of the problem [in the circuit split] is whether the commands of the [FAA] require that a federal court immediately divest itself of any power to act to maintain the status quo once it decides that the case before it is arbitrable.” RGI, 858 F.2d at 228–29 (emphasis added). Here, however, the district court has not yet decided whether the case is arbitrable and thus the circuit-split cases are not applicable.
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FN7. Given that the facts at issue here do not require us to enter the circuit split, we reserve for another day the issues of whether a district court divests itself of the discretion to maintain the status quo once it decides the case before it is arbitrable and, if not, what the limits of that discretion may be.