New Supreme Court Decision Upholds “Staying” Cases Subject to Arbitration

The Supreme Court’s recent decision in Smith v. Spizzirri clarifies how courts should handle lawsuits in matters that are subject to mandatory arbitration. 

Under Section 3 of the Federal Arbitration Act (FAA), if any lawsuit involving an issue covered by a written arbitration agreement is brought in a U.S. court, the court must, upon request by one of the parties, stay the trial until the arbitration is completed.

In Spizzirri, the high court held that a court cannot automatically dismiss a case because the dispute is first subject to arbitration. The Court also distinguished between the terms “stay” and “dismiss” for purposes of interpreting Section 3 of the FAA. 

The Court reflected on the plain language of the statute and the term “stay” as used within the context of other litigation proceedings. The Court emphasized that the term should be treated no differently when it comes to arbitrable matters. The Court also notes that Section 3 of the FAA does not grant the court the judicial discretion to dismiss these cases. 

The defense in Spizzirri argued that the term “stay” in this context should be interpreted to dismiss a proceeding. The Court disagreed with this claim, citing the Black’s Law Dictionary definition of “stay” as a “temporary suspension” of a proceeding. 

It is important for courts to stay these proceedings as opposed to dismissing them to ensure that the arbitration process is fully utilized while preserving the court’s jurisdiction over the case. If arbitration does not resolve all issues, or if further judicial action is needed, the stay allows the case to resume in court without the need for the parties to refile and restart the litigation process, thereby saving time and resources.

Potomac Legal Group has successfully represented numerous clients in arbitration proceedings. The Firm won a $2.8 million award for FMLA interference and retaliation for a technology company employee, as well as more than $200,000 for a technology salesperson in an unpaid sales commissions dispute. 

If your legal matter is subject to arbitration, or your employment or sales compensation agreement contains an arbitration clause, the employment attorneys at Potomac Legal Group are available to review your matter.

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