Unpublished Disposition, 902 F.2d 38 (9th Cir. 1989)

MEMORANDUM^* 

Balboa Insurance Company and Meritplan Insurance Company (Balboa) appeal from the district court's order granting South Central Insurance Agencies' (South Central) Motion for Reconsideration. We affirm.

Balboa and South Central are parties to a 1983 General Agency Agreement (Agreement) that granted South Central the authority to act as a general agent for Balboa to sell insurance in the states of Mississippi and Alabama. The Agreement contained a provision that mandated the submission of any disputes over the Agreement's interpretation to binding arbitration. The Agreement also contained a choice of law provision stating that the "Agreement [was] subject to and construed under the laws of the State of California."

In February of 1986, Balboa terminated the Agreement. As a result of this termination, South Central filed a complaint in the United States District Court for the Northern District of Mississippi against Balboa and Robert Lindquist, Balboa's Executive Vice-President. Lindquist was not a signatory to the Agreement.

On September 3, 1987, Balboa filed a Petition to Compel Arbitration between Balboa and South Central in the Central District of California pursuant to the arbitration provision of the Agreement. The petition requested arbitration of all issues raised in the Mississippi lawsuit.

On September 4, 1987, Balboa answered the Mississippi lawsuit and simultaneously moved to stay the Mississippi proceedings pending arbitration. South Central in turn filed a Motion for a Preliminary Injunction in the Mississippi lawsuit, seeking to enjoin Balboa's Motion to Compel Arbitration in the Central District of California. On May 3, 1988, the Mississippi district court denied South Central's Motion for a Preliminary Injunction and granted Balboa's Motion for a stay of the proceedings pending termination of the arbitration process.¹ 

On February 9, 1989, the District Court for the Central District of California issued an Order compelling arbitration between Balboa and South Central. The district court did not enter a separate judgment with respect to this order.

On March 6, 1989, South Central filed a Motion for Reconsideration of the district court's Order Compelling Arbitration. South Central's Motion for Reconsideration was based primarily on Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. ----, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989), a case then pending before the United States Supreme Court. That same day, the Supreme Court issued its opinion in Volt.

In response to the Volt decision, and after full briefing by the parties, the district court granted South Central's Motion for Reconsideration by Minute Order dated March 28, 1989. The district court ordered a stay on the arbitration of all claims and counterclaims until resolution of the Mississippi action. Balboa appeals from this Order.² 

II

Balboa first argues that this court treat South Central's Motion for Reconsideration as a motion to amend judgment under Fed.R.Civ.P 59(e). Rule 59(e) specifies that " [a] motion to alter or amend the judgment shall be served not later than 10 days after entry of the judgment." The Federal Rules of Civil Procedure have established a procedure by which a judgment is to be entered. A judgment or order is not entered within the meaning of Rule 59(e) unless it is entered in compliance with Fed. R. Civ. P. 58. Hollywood v. City of Santa Maria, 886 F.2d 1228, 1231 (9th Cir. 1989). Rule 58 requires that every judgment be set forth on a separate document. Carter v. Beverly Hills Sav. and Loan Ass'n, 884 F.2d 1186, 1189 (9th Cir. 1989). In the present case, the record contains "no separate document setting forth the judgment of the district court."³  Allah v. Superior Court, 871 F.2d 887, 890 (9th Cir. 1989). Since no Rule 58 "judgment" was entered with respect to the district court's order compelling arbitration, the district court retained jurisdiction to amend or change its order.⁴  Therefore, South Central's Motion for Reconsideration of the district court's order compelling arbitration does not lie under Rule 59(e).

Balboa next argues that the district court improperly applied Rule 7.16 of the Local Rules of the Central District of California in granting South Central's Motion for Reconsideration. This court reviews a district court's application of its local rules for an abuse of discretion. United States v. Warren, 601 F.2d 471, 474 (9th Cir. 1979).

Local Rule 7.16 permits a Motion for Reconsideration to be filed where a change of law occurs after the time of the decision of any motion.⁵  Balboa argues that the Supreme Court's decision in Volt did not represent a "change of law" and, thus, was not a proper basis for a Motion for Reconsideration.

The Supreme Court's decision in Volt affirmed a California Court of Appeals decision that was decided in 1987. See Board of Trustees v. Volt Inf. Sciences, Inc., 195 Cal. App. 3d 349, 240 Cal. Rptr. 558 (1987). Therefore, Balboa argues, the Supreme Court's decision did not change the law. The Supreme Court's decision in Volt, however, clarified that the California Court of Appeal's decision was not simply premised on the California Court's interpretation of the parties' contract, but drew into question "the validity of Cal.Civ.Proc.Code Sec. 1281.2(c) on federal grounds." Volt, 103 L. Ed. 2d at 496 n. 4. Given this clarification and the district court's broad discretion in interpreting and applying its own local rules, Warren, 601 F.2d at 474, the district court's consideration of South Central's Motion for Reconsideration was not an abuse of discretion.

Balboa next argues that the Volt decision does not apply to diversity actions in federal court because the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., is the only statute applicable in diversity based federal court proceedings. This argument misinterprets the scope of the FAA. The FAA's primary purpose is to ensure "that private agreements to arbitrate are enforced according to their terms." Volt, 103 L. Ed. 2d at 500. Where the parties contract to abide by state rules of arbitration, "enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the Act would otherwise permit it to go forward." Id. Therefore, the choice of law agreed to in the contract, not the judicial forum in which rights under the FAA are asserted, determines the applicability of the FAA to a particular agreement. This construction of the FAA gives "effect to the contractual rights and expectations of the parties, without doing violence to the policies behind the FAA." Id.

Balboa next argues that Sec. 1281.2(c), as applied in this case, directly conflicts with the FAA and, therefore, the FAA displaces the state provision at issue. The Supreme Court rejected this argument in Volt. Where the parties agree to arbitrate in accordance with California law, Sec. 1281.2(c) determines when arbitration should proceed. Since the parties' agreement specifically provides when arbitration should proceed, the FAA guaranteed right to compel arbitration is not implicated. " [T]he FAA does not confer a right to compel arbitration on any dispute at any time; it confers only the right to obtain an order directing that 'arbitration proceed in the manner provided for in [the parties'] agreement.' " Id. at 497 (citation omitted).

The agreement between the parties expressly states that "this agreement shall be subject to and construed under the laws of the State of California." The agreement also contains a provision that " [t]he arbitrators shall be required to decide matters submitted to them upon the customs and usages of the business in a spirit of equity rather than on technicalities or legal requirements." Balboa argues that the express language of the contract states that California law does not govern the question when arbitration of a dispute should be compelled. This argument has no merit. The choice of law provision in the contract governs the question when a dispute is arbitrable. The contract provision that Balboa relies upon sets forth the procedures applicable once a dispute is determined to be arbitrable. Thus, the express language of the contract dictates that California law governs the question when arbitration is to be compelled.

Finally, Balboa argues that even if Sec. 1281.2(c) controls interpretation of the Agreement, arbitration between Balboa and South Central should be compelled. Under Sec. 1281.2(c), a court is permitted to stay arbitration pending the outcome of related litigation between " [a] party to the arbitration agreement ... [and a] third party [not bound by it, where] there is a possibility of conflicting rulings on a common issue of law or fact." South Central's Mississippi lawsuit seeks relief against Balboa's agent Robert Lindquist, a non-signatory to the arbitration agreement. Since Lindquist is not a party to the arbitration agreement, an arbitrator's decision resolving the dispute between Balboa and South Central would have no effect on South Central's claims against Lindquist. See C.V. Starr & Co. v. Boston Reinsurance Corp., 190 Cal. App. 3d 1637, 1642, 236 Cal. Rptr. 167, 170 (1987). The potential for conflicting rulings is readily apparent. Thus, the district court properly invoked Sec. 1281.2(c) to grant South Central's Motion for Reconsideration, and to stay the arbitration pending resolution of the Mississippi action.⁶ 

AFFIRMED.