OPINION ANALYSIS

Justices dubious about dismissing suits while waiting for arbitration

Smith v. Spizziri is this week’s item on the court’s bountiful menu of cases under the Federal Arbitration Act. The question here is what options are available to a trial court that decides to send a case to arbitration. Must it stay the matter or, instead, does it have the option to dismiss it entirely? Discussion at the argument suggested that the justices were skeptical about the practical consequences of dismissal, so Justice Sonia Sotomayor’s opinion for a unanimous court rejecting that option is no surprise.

The opinion is remarkably concise – less than six pages, with more than two devoted to the facts and proceedings in the lower courts. Sotomayor takes the position that the answer is obvious because the “text, structure, and purpose” of the Federal Arbitration Act “all point to the same conclusion.” As for the text, Section 3 of the FAA says that a trial court “shall … stay the trial of the action until such arbitration has been had …, providing the applicant for the stay is not in default in proceeding with [the] arbitration.” Not surprisingly, Sotomayor emphasizes the court’s customary view that Congress’s use of the word “shall” “creates an obligation impervious to judicial discretion.” Accordingly, she reasons, “[w]hen § 3 says that a court ‘shall … stay’ the proceeding, the court must do so.”

Also, because “‘stay’ means ‘stay,’” the court is not free to dismiss the case as an alternate way to “stop parallel in-court litigation.” The textual problem with that approach is that it “disregards the long-established legal meaning of the word ‘stay.’” Moreover, it ignores the statutory direction to stay the proceeding only “until such arbitration has been had,” and “only so long as ‘the applicant … is not in default,” The “return ticket” that provision contemplates “is not available if the court dismisses the suit rather than staying it.”

As for structure, Sotomayor explains that the FAA quite deliberately grants a right to appeal from a district court decision refusing to send a case to arbitration, but denies any right to appeal when a district court agrees to send a case to arbitration. Dismissal, as opposed to a stay, upends that arrangement by providing an immediate right to appeal.

Finally, as to purpose, Sotomayor notes the FAA’s various “mechanisms for courts … to assist parties in arbitration, by, for example, appointing an arbitrator, … enforcing subpoenas,” and the like. Repeating a point emphasized at the argument, she concludes that it “makes good sense in light of this potential ongoing role” to “kee[p] the case on the court’s docket.”

This will not go down as one of the weighty decisions of the term, but it will bring clarity to an area that has long been confused in the lower courts.