Arbitration – Appeals – Dismissal with Prejudice – Stay Required 

Although an order compelling arbitration is not usually immediately appealable, the trial court made its order immediately appealable – partially – by also dismissing the complaint with prejudice in violation of the North Carolina Revised Uniform Arbitration Act. 

We reverse the dismissal with prejudice, remand for entry of a stay, and otherwise dismiss plaintiff’s appeal. 

A dismissal with prejudice is a final judgment, but an order compelling arbitration—properly entered—is interlocutory and not subject to immediate appeal as of right. Thus, by compelling arbitration and dismissing plaintiff’s complaint with prejudice, the trial court entered something akin to Schrodinger’s cat: an appealable unappealable order, an interlocutory final judgment. 

Faced with this quantum-state quandary, and reviewing the relevant statutes and caselaw, we hold that the trial court erred in dismissing plaintiff’s complaint with prejudice. After compelling arbitration, the trial court was required to stay proceedings based on the mandatory language of the RUAA, which supplies the applicable procedural law in this case.  

The plain text of the RUAA does not contemplate dismissal upon entry of an order compelling arbitration. To the contrary, it requires, in mandatory terms, that “the court on just terms shall stay any judicial proceeding that involves a claim subject to . . . arbitration.” G.S. § 1-569.7(g). 

A party contending that he was wrongly ordered to submit his claim to arbitration may only challenge such a ruling by moving to vacate the award on that ground after said award has been rendered by the arbitrator and, should the award nonetheless be confirmed, appealing the issue after entry of that final judgment. Allowing orders compelling arbitration to be entered as final judgments would re-inject the appellate judiciary into the proceedings at the exact juncture that the court system is supposed to be stepping aside in favor of arbitration. 

We therefore hold, consistent with the plain language and purposes of the RUAA, that a trial court must stay proceedings when compelling arbitration. It may not convert what is otherwise intended to be an unappealable interlocutory order into an appealable final judgment by dismissing a complaint with prejudice. 

Vacated and remanded in part; appeal dismissed in part. 

Concurrence 

(Murphy, J.) To the extent that I am not bound to do so, I refuse to perpetuate the myth that it is the policy of the people of this state to favor arbitration over jury trials. 

Coles v. Sugarleaf Labs, Inc. (Lawyers Weekly No. 011-192-22, 16 pp.) (Lucy Inman, J.) (Hunter Murphy, J., concurring) Appealed from Catawba County Superior Court (Gregory Hayes, J.) Matthew Rogers for plaintiff; Bernard Tisdale and Janean Dunn for defendants. 2022-NCCOA-707