Recently the U.S. Supreme Court granted the petition for certiorari in Smith v. Spizzirri, which presents the question of whether § 3 of the Federal Arbitration Act (FAA) requires district courts to issue a stay pending arbitration or allows courts the discretion to dismiss the suit when all claims are subject to arbitration.

Section 3 of the FAA provides: “If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, 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.” The Second, Third, Sixth, Seventh, Tenth, and Eleventh Circuits have all held that the plain text of § 3 mandates a stay of the proceedings. While the First, Fifth, Eighth, and Ninth Circuits have granted district courts discretion to dismiss the proceedings if the entire dispute is subject to arbitration.

Our Take:

The Supreme Court has consistently held that if the text of a statute is unambiguous, it must be applied as written. Section 3 explicitly states that a case should be stayed until the conclusion of the arbitration, without providing any room for discretionary dismissal. Given this, we anticipate that the court will adhere to the clear mandate of the statute and apply the text as it is written.

Why this matters? A dismissal order is immediately appealable while a stay order is not. So if the Supreme Court finds district courts have dismissal discretion, it could result in more immediate appeals from orders compelling arbitration. Thus, this result could drive up costs and slow down the process contrary to the purpose of arbitration.