Decision alert: Supreme Court unanimously rules that courts must stay cases referred to arbitration

On May 16, 2024, the Supreme Court unanimously ruled Smith vs Spizzirri If a court finds that a claim is an arbitrable dispute and a party requests a stay, the court is required under 9 U.S.C. § 3 of the Federal Arbitration Act (“FAA”) to grant a stay and has no authority to dismiss the claim. Justice Sotomayor wrote the opinion.

In SpizzirriDelivery driver Wendy Smith and others sued Intelliserve in Arizona state court, claiming the company violated labor laws by misclassifying them as independent contractors and failing to pay them minimum and overtime wages and paid sick leave. Intelliserve removed the case to federal court before filing for arbitration and dismissing the lawsuit. The parties agreed that all claims were subject to mandatory arbitration, but disagreed on whether the district court needed to order a stay of trial during arbitration. The district court dismissed the lawsuit without prejudice, the Ninth Circuit affirmed, and the Supreme Court reversed the judgment.

The court’s decision noted that the statutory text, structure, and purpose support Smith’s position that a court must grant the stay upon motion. The FAA states that if an issue in a lawsuit is subject to arbitration, the court “shall, upon motion by either party, stay the hearing of the lawsuit until such arbitration has taken place in accordance with the terms of the agreement.” The court held that the statute’s use of the word “shall” creates a duty that prevents the court from dismissing the lawsuit. The court further justified its decision by saying that the FAA’s appellate provisions support its decision. An order forcing arbitration is not normally subject to immediate appeal, but if a lawsuit subject to arbitration could be dismissed, a dismissal would trigger the right to immediate appeal.

In addition, courts with appropriate jurisdiction can assist parties in arbitration by staying a claim and keeping it on the court docket. For example, the FAA provides mechanisms for appointing arbitrators, enforcing subpoenas, and facilitating recovery – all of which would be lost if the claim were dismissed. Likewise, staying the case rather than dismissing it allows parties to easily return to court if arbitration fails or fails to resolve the dispute.

Bring away

• If a request for mandatory arbitration is granted, the court cannot dismiss the claim if a party requests a delay.

For further information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, Monika Harris, Puja Valera or A. Joseph Duffy, IV.