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INTRODUCTION!
According to a recent Lexis® query, the U.S. Supreme Court issued ninety opinions dealing with the Federal Arbitration Act ("FAA") between 1925 (the year of its enactment) and June 2023. In 2024, the Court added three more opinions, while numerous federal appeals courts also weighed in with important decisions analyzing the meaning, scope, and application of the FAA.
SUPREME COURT ARBITRATION DECISIONS
DISTRICT COURT Must STAY, NOT Dismiss, ACTION WHEN COMPELLING ARBITRATION
In Smith v. Spizzirri,2 the Court unanimously held that section 3 of the FAA requires the district court to stay a lawsuit rather than dismiss it when it involves an arbitrable dispute and a party requests the court to stay its proceedings pending arbitration, even if all of the claims are subject to arbitration. The decision resolved a longstanding split between the Second, Third, Sixth, Seventh, Tenth, and Eleventh Circuits (finding that a stay is mandated) and the First, Fifth, Eighth, and Ninth Circuits (finding that a district court has discretion to dismiss proceedings).
Section 3 of the FAA provides in relevant part that when any issue in a suit 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." Writing for the Court, Justice Sonia Sotomayor found that the FAA's plain text, as well as its structure and purpose, supported the issuance of a stay rather than a dismissal.®
With respect to the FAA's text, the Court reasoned that the word "shall" in section 3 "creates an obligation impervious to judicial discretion." Moreover, the Court emphasized, the word "stay" means 'stay."® Even at the time that the FAA was enacted, "stay" meant the "temporary suspension' of legal proceedings, not the conclusive termination of such proceedings." Section 3 "ensures that the parties can return to federal court if arbitration breaks down or fails to resolve the dispute. That return ticket is not available if the court dismisses the suit rather than staying it."!°
Regarding the FAA's "structure and purpose," the Court explained that section 16 of the statute authorizes an immediate appeal when a motion to compel arbitration is denied, but not when arbitration is compelled.!! That promotes...