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Smith v. Spizzirri (US  22–1218 per curiam 5/16/24) Arbitration and Stay

By May 16, 2024June 30th, 2024Uncategorized

The Federal Arbitration Act (FAA) sets forth procedures for enforcing arbitration agreements in federal court. Section 3 of the FAA, entitled “Stay of proceedings where issue therein referable to arbitration,” provides that when a dispute is 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 in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” 9 U. S. C. §3. In this case, petitioners filed suit against respondents in state court alleging violations of federal and state employment laws. Respondents then removed to federal court and filed a motion to compel arbitration and dismiss the suit. Petitioners agreed their claims were arbitrable, but contended that §3 of the FAA required the District Court to stay the action pending arbitration rather than dismissing it entirely. The District Court issued an order compelling arbitration and dismissed the case without prejudice. The Ninth Circuit affirmed.

Held: When a district court finds that a lawsuit involves an arbitrable dispute and a party has requested a stay of the court proceeding pending arbitration, §3 compels the court to issue a stay, and the court lacks discretion to dismiss the suit. Statutory text, structure, and purpose all point to this conclusion. The plain text of §3 requires a court to stay the proceeding upon request. The statute’s use of the word “shall” “creates an obligation impervious to judicial discretion.” Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U. S. 26, 35. The obligation is to “stay” the proceeding. Respondents insist that “stay” “means only that the court must stop parallel in-court litigation, which a court may achieve by dismissing,” Brief for Respondents 15, but respondents’ reading disregards the long-established legal meaning of the word “stay” as a “temporary suspension” of legal proceedings. And respondents’ attempt to read “stay” to include “dismiss” cannot be squared with the surrounding statutory text, which anticipates that the parties can return to federal court if arbitration breaks down or fails to resolve the dispute. Notwithstanding §3’s text, respondents suggest that district courts retain the inherent authority to dismiss proceedings subject to arbitration. But even assuming such inherent authority, “the inherent powers of the courts may be controlled or overridden by statute or rule,” Degen v. United States, 517 U. S. 820, 823, and §3 does exactly that.

The FAA’s structure and purpose confirm that a stay is required. Section 16(a)(1)(C) of the FAA authorizes an immediate interlocutory appeal of the denial of an arbitration request. By contrast, Congress made clear in §16(b) that, outside of a narrow exception not applicable here, an order compelling arbitration is not immediately appealable. If a district court could dismiss a suit subject to arbitration even when a party requests a stay, that dismissal would trigger the right to an immediate appeal where Congress sought to forbid such an appeal. Finally, staying rather than dismissing a suit comports with the supervisory role that the FAA envisions for the courts. Keeping the suit on the court’s docket makes good sense in light of the FAA’s mechanisms for courts with proper jurisdiction to assist parties in arbitration.

Pp. 3–6. 62 F. 4th 1201, reversed and remanded.

SOTOMAYOR, J., delivered the opinion for a unanimous Court.