On May 16, 2024, the U.S. Supreme Court unanimously held that lawsuits involving an arbitrable dispute must be stayed upon the request of a party. Rather than dismiss the case, section 3 of the Federal Arbitration Act (the “FAA”) compels the court to issue a stay until the arbitration is completed. Smith, et al. v. Spizzirri, et al., No. 22-1218 (See here).
Several current and former delivery drivers sued their employer in Arizona state court alleging their employer violated state and federal employment laws by misclassifying them as independent contractors, failing to pay them required minimum and overtime payments, and failing to provide paid sick leave.
After removing the case to federal court, the employer filed a motion to compel arbitration and dismiss the lawsuit. Although the parties agreed that the claims were subject to arbitration under the FAA, they disagreed on how the district court should handle the lawsuit. The employer argued that section 3 of the FAA permitted the district court to dismiss the case, while the plaintiffs argued that the FAA required the district court to stay the action pending arbitration. The district court dismissed the action without prejudice and the Ninth Circuit affirmed.
The delivery drivers filed a petition for a writ of certiorari and the Supreme Court reversed the Ninth Circuit’s decision and remanded.
Citing section 3 of the FAA, the Supreme Court held 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 concluded. 9 U. S. C. §3. The Court found that the FAA’s structure and purpose confirm that a stay is required.
Delivering the Court’s opinion, Justice Sotomayor emphasized that the statutory text, structure, and purpose of section 3 all point to its requirement for a court to stay the proceeding upon request. Id. Not only does staying a suit upon the completion of arbitration comport with the supervisory role the FAA envisions for courts, it also avoids invoking procedural mechanisms for the filing of an immediate appeal, which would be permissible upon a dismissal of the suit. Id.