SCOTUS to Decide Whether Courts Must Stay Suits Subject to Arbitration Provisions, or May Also Choose to Dismiss Them

The U.S. Supreme Court will hear a case addressing whether courts must stay lawsuits pending arbitration after they determine that an arbitration agreement applies, or whether courts also have discretion to dismiss a case where all claims are being sent to arbitration.

The Federal Arbitration Act (FAA) provides that when a court finds a lawsuit 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” concluded.  Six of the Circuit Courts of Appeals have determined that this language requires that a case be stayed (and only stayed) pending the arbitration, finding that the language of this provision is absolute and only allows for a stay of the lawsuit.  Another four Circuit Courts of Appeals have held that courts also have discretion to dismiss the case if the entire dispute in the case is subject to arbitration.  These courts have determined that courts may dismiss such cases as part of their inherent authority to dismiss cases that should never have been filed in court, and that the relevant language solely prohibits a court from proceeding with a “trial” on some claims while others are being arbitrated (i.e., a stay is only required in cases where some but not all claims must be arbitrated, since the court may eventually have to hear the remaining claims).

The Supreme Court granted certiorari to resolve this question.  The case is Smith v. Spizzirri, No. 22-1218.  The court will likely hear oral arguments in the case in April 2024 and issue a decision in June 2024.