Supreme Court Holds Federal Courts Must Stay, Not Dismiss, Actions Pending Arbitration

The United States Supreme Court recently held that federal courts are required to stay litigation following the grant of a motion to compel arbitration – courts do not have discretion to dismiss the case. In Smith et al. v. Spuzzirri et al, delivery drivers brought state and federal employment claims against their employer. There was no dispute that the claims were subject to arbitration. Following the grant of a motion to compel, the District Court dismissed the action without prejudice. The drivers appealed, arguing the District Court should have stayed their suit, not dismissed it, pending arbitration. The Ninth Circuit affirmed the District Court, holding that precedent in the Ninth Circuit allowed courts to dismiss or stay actions when compelling arbitration. Circuits were split as to this issue, thus the Supreme Court granted certiorari.

In a brief, unanimous decision, the Supreme Court held that the language of the Federal Arbitration Act (“FAA”) is clear and requires courts to stay litigation if a motion to compel is granted. Section 3 of the FAA reads, in relevant part, that following a finding that the issues in the suit are subject to arbitration the court “shall on application of one of the parties stay the trial of the action until such arbitration has been had . . .” The language of the statute is clear – “shall” is a mandate and “stay” means a stay, not a dismissal.

The Supreme Court also found that mandating a stay of proceedings is in harmony with the intent of the FAA – to promote arbitration when it has been agreed to by the parties. Stays of proceedings are not appealable as of right, whereas the grant of a dismissal triggers an immediate right of appeal, which would only prolong proceedings and delay resolution of the dispute by arbitration. Additionally, a stay, rather than a dismissal, keeps the court in a supervisory role, allowing it more easily assist in the arbitration, if needed, by appointing an arbitrator, enforcing subpoenas, and confirming awards.


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