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United States Court of Appeals,
Fifth Circuit.
No. 95-10816
Summary Calendar.
ALTMAN NURSING, INC., Plaintiff-Counter-Defendant-Appellant,
v.
CLAY CAPITAL CORP., Defendant-Counter-Claimant-Appellee.
June 6, 1996.
Appeal from the United States District Court for the Northern
District of Texas.
Before SMITH, BENAVIDES and DENNIS, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Altman Nursing, Inc. ("Altman"), appeals an order requiring
arbitration both of its claims against Clay Capital and of Clay's
counterclaims. Concluding that the order is not final, we dismiss
the appeal for want of jurisdiction.
I.
Altman and Clay entered into a stock purchase agreement
containing an arbitration clause. When a dispute arose concerning
Altman's obligations under the agreement, Altman filed various
claims in the district court but did not seek to compel
arbitration.
Clay responded by filing various counterclaims and moving to
compel arbitration pursuant to the agreement. The district court
granted Clay's motion and ordered all claims submitted to
arbitration. Altman appealed.
II.
1

Clay maintains that we should dismiss the appeal because the
motion to compel arbitration was an "embedded" proceeding, and
there can be no interlocutory appeal from an embedded proceeding.
The Arbitration Act, codified as amended at 9 U.S.C. งง 1-16,
governs appellate jurisdiction over orders compelling arbitration:
(a) An appeal may be taken from--
. . . . .
(3) a final decision with respect to an arbitration that
is subject to this title.
(b) Except as otherwise provided in section 1292(b) of title
28, an appeal may not be taken from an interlocutory order--
(1) granting a stay of any action under section 3 of this
title;
(2) directing arbitration to proceed under section 4 of
this title;
(3) compelling arbitration under section 206 of this
title; or
(4) refusing to enjoin an arbitration that is subject to
this title.
9 U.S.C. ง 16. Thus, an order compelling arbitration is appealable
only if it is a final order. Interlocutory orders compelling
arbitration are not appealable. McDermott Int'l, Inc. v.
Underwriters at Lloyds, 981 F.2d 744, 746-47 (5th Cir.), cert.
denied, 508 U.S. 951, 113 S.Ct. 2442, 124 L.Ed.2d 660 (1993).
Most courts determine whether an order compelling arbitration
is final or interlocutory by looking to whether the arbitration
claim is "independent" or is "embedded" in other proceedings. Id.
at 747. An independent proceeding is one in which "the only issue
before the court is the dispute's arbitrability." Id.; see also
2

Gammaro v. Thorp Consumer Discount Co., 15 F.3d 93, 95 (8th
Cir.1994) (quoting McDermott ). An embedded claim, on the other
hand, arises in a suit in which "one party or the other seeks "some
relief other than an order requiring or prohibiting arbitration
(typically some relief concerning the merits of the allegedly
arbitrable dispute).' " Id. (quoting Filanto, S.P.A., v. Chilewich
Int'l Corp., 984 F.2d 58, 60 (2d Cir.1993)).
The claim for arbitration in this case is an embedded one, as
Altman concedes: The parties not only seek to compel arbitration,
but also seek relief on a number of underlying claims. Altman
contends that the arbitration order is nonetheless a final order,
because it completely ended litigation and sent all claims to
arbitration. Altman relies on Arnold v. Arnold Corp., 920 F.2d
1269 (6th Cir.1990), which held that an arbitration order was
final, though it involved an embedded claim, because it
"dismisse[d] an action in deference to arbitration and enter[ed] a
final judgment." Id. at 1275 (quotations omitted).
We disagree. The appropriate test of finality is whether the
order involved an independent or embedded proceeding. An order
involving an embedded proceeding is always an interlocutory order;
an order involving an independent claim is always final. In
reaching this conclusion, we are persuaded both by our own
statements in McDermott and by the decisions of our fellow courts
of appeals.
McDermott did not explicitly hold that there can never be an
interlocutory appeal from an embedded proceeding. It did, however,
3

strongly suggest that conclusion:
In determining whether an order affecting arbitration is final
or interlocutory, most courts distinguish between arbitration
actions that are "independent" and those that are "embedded"
among other claims. Generally, if the only issue before the
court is the dispute's arbitrability, the action is considered
independent and a court's decision on that issue constitutes
a final decision. If, however, the case includes other claims
for relief, an arbitrability ruling does not end the
litigation on the merits, but is considered interlocutory
only.
981 F.2d at 747 (citations and internal quotations omitted). In
fact, a number of other courts have cited McDermott in holding that
orders involving embedded proceedings are not appealable under the
Arbitration Act. See, e.g., Gammaro, 15 F.3d at 95; Filanto, 984
F.2d at 60.
We are also persuaded by the fact that the overwhelming
majority of other circuits to address this issue have concluded
that there can be no interlocutory appeal from an embedded
proceeding.1 Only the Sixth Circuit, in Arnold, has reached a
1See, e.g., Prudential Ins. Co. of Am. v. Lai, 42 F.3d 1299,
1302 (9th Cir.1994) ("if the motion to compel arbitration is
"embedded' in a substantive suit pending before the court, the
district court's decision to compel arbitration ... is not
considered to be final, and therefore not reviewable"); Adair
Bus Sales v. Blue Bird Corp., 25 F.3d 953, 955 (10th Cir.1994)
(adopting view "that an order can only be final within the
meaning of ง 16(a)(3) and therefore immediately appealable if
arbitrability is the sole issue before the district court");
Gammaro, 15 F.3d at 95 (appellate courts do not have jurisdiction
to hear appeals from embedded proceedings); Humphrey v.
Prudential Sec. Inc., 4 F.3d 313, 317 (4th Cir.1993) ("An order
compelling arbitration is final when it results from a proceeding
in which the sole issue before the district court is the
arbitrability of the dispute."); Filanto, 984 F.2d at 60 ("If
the suit is "embedded[,]' ... orders directing arbitration are
not immediately appealable."); Perera v. Siegel Trading Co., 951
F.2d 780, 785 (7th Cir.1992) ("[T]his court finds arbitration
orders final if arbitration is the sole issue before the court
and interlocutory if raised in an embedded proceeding.").
4

different conclusion.2 But Arnold looked to the legislative
history of section 16 of the Arbitration Act to find the meaning of
"final decision." We believe this approach was wrong for the
reasons stated by the Seventh Circuit in Perera:
"Final decision" is a legal term of art traditionally used to
distinguish appealable and nonappealable lower court decisions
under 28 U.S.C. ง 1291--the general provision governing
appellate jurisdiction. Judicial decisions have given meaning
to this term of art. Section 16 does not define the term
"final decision," nor does it indicate an intent to change the
preexisting judicial interpretation of this term of art. As
such, we can assume that by using a term of art Congress
intended to retain its preexisting meaning. Moreover, [as]
section 16 uses very specific language to change the prior law
regarding the appealability of interlocutory decisions
disfavoring arbitration, 9 U.S.C. ง 16(a)(1)(A-C), it seems
that Congress would have been equally specific if it had
intended to change the preexisting interpretation of "final
decision."
951 F.2d at 783-84 (citations omitted).
Accordingly, we conclude that an order requiring arbitration
in an embedded proceeding is interlocutory and hence not appealable
under the Arbitration Act. Because this proceeding is an embedded
one, we conclude that we lack jurisdiction to hear the appeal.
The appeal is DISMISSED.

2See Arnold, 920 F.2d at 1275 ("[A] final order is one which
dismisses "an action in deference to arbitration' and enters a
final judgment.").
5