SCOTUS Takes Up Circuit Split on Staying or Dismissing Lawsuits in the Face of Arbitration Agreements

By John S. Delikanakis and Markie L. Betor

On January 12, 2024, the U.S. Supreme Court granted certiorari in Wendy Smith, et al. v. Keith Spizzirri, et al. The Court’s review should resolve a split in the U.S. Circuit Courts of Appeal as to whether, when presented with an agreement to arbitrate, a district court is limited to staying a case or dismissing it. The Court’s docket can be viewed here.

The case arose in an Arizona state court from delivery drivers (“Petitioners”) suing their employers, an on-demand delivery service and related companies (“Respondents”), for violations of federal and state employment laws.¹ After removal to federal court, Respondents moved to compel arbitration and dismiss the lawsuit in light of an arbitration agreement.² 

Petitioners agreed that their claims were arbitrable but argued that the plain language of the Federal Arbitration Act (“FAA”) required the district court to stay the lawsuit pending arbitration rather than dismiss it.³ The U.S. District Court of Arizona dismissed the lawsuit and compelled arbitration.⁴ Petitioners appealed.⁵ The Ninth Circuit affirmed.⁶ 

In affirming, the Ninth Circuit framed the only question before it as, “whether the [FAA] requires a district court to stay a lawsuit pending arbitration, or whether a district court has discretion to dismiss when all claims are subject to arbitration.”⁷ The Court examined the split in authority within the U.S. Circuit Courts of Appeal and acknowledged that its decisions on the issue align with the minority approach, which allows district courts the discretion to dismiss lawsuits in the face of arbitration agreements rather than stay lawsuits pending arbitration.⁸ The Ninth Circuit is joined by the First, Fifth, and Eighth Circuit Courts of Appeal.⁹ The Second, Third, Sixth, Seventh, Tenth, and Eleventh Circuit Courts of Appeal permit district courts to only stay a case in the face of a valid arbitration agreement.¹⁰

The Takeaway: Facially, the question before the U.S. Supreme Court might appear to be a one-dimensional procedural matter of little interest to anyone except litigators. It is not.

As one commentator succinctly put it, “[e]fficacy and dilatory tactics lie at the heart of the debate regarding whether courts should issue stay of proceedings or dismissal of proceedings.”¹¹ The immediate right of appeal after dismissal, when exercised, can delay the arbitral process, encourage gamesmanship, and dramatically increase the cost of dispute resolution contrary to the prior intent and written agreement of the parties to arbitrate. This is a decision to watch. Stay tuned.

Footnotes:

1. Forrest v. Spizzirri, 62 F.4th 1201, 1203 (9th Cir. 2023), cert. granted sub nom. Smith v. Spizzirri, No. 22-1218, 2024 WL 133822 (U.S. Jan. 12, 2024). [BACK]
2. Id. at 1204. [BACK]
3. Id.  [BACK]
4. Id.  [BACK]
5. Id. at 1203.  [BACK]
6. Id. [BACK]
7. Id. [BACK]
8. Id. at 1205 n. 4. [BACK]
9. Id. [BACK]
10. Id. [BACK]
11. Ransom, Jesse.United States Federal Circuit Court Practice: Stay versus Dismissal on Motions to Dismiss and Compel Arbitration. The Arbitration Brief 2, no. 1 (2012): 76, 77. [BACK]