ARBITRATION UPDATE: SCOTUS Decision On Ability To Get Court Assistance In Aid of Arbitration

Court Steps

ARBITRATION ALERT: The U.S. Supreme Court (a) made it more difficult for parties to take a quick (interlocutory) appeal challenging a district court’s order compelling arbitration, and (b) made it easier for parties to quickly obtain judicial assistance in connection with a pending arbitration.

➤ Last week, in Smith v. Spizzirri, the Court resolved a circuit split by addressing this question:

“[W]hether § 3 permits a court [that grants a motion to compel
arbitration] to dismiss the [court] case instead of issuing a stay when
the dispute is subject to arbitration and a party requests a stay
pending arbitration.”

➤ The Court unanimously held that Section 3 “does not” permit dismissal.  Instead, “[w]hen a district court finds that a lawsuit involves an arbitrable dispute, and a party requests a stay pending arbitration, § 3 of the FAA compels the court to stay the proceeding.”.

➤ The decision makes it more difficult to take interlocutory appeals because:

o   Courts have generally held that there is no right to an immediate
appeal when the district court issues a stay of the lawsuit pending
the conclusion of the arbitration.

o  By contrast, when the district court issues an order that grants a
motion to compel arbitration and dismisses the lawsuit, the
dismissal order is generally deemed to be a final appealable order.

➤ The decision makes it easier to seek quick judicial intervention in connection with a pending arbitration because:

o  A stay “avoids costs and complications that might arise if a party
were required to bring a new suit and pay a new filing fee to invoke
the FAA's procedural protections.”

o  Instead of filing a new suit, a party can simply file a motion in the
pending (stayed) court proceeding seeking the court’s assistance in,
for example, “appointing an arbitrator, see 9 U. S. C. § 5; enforcing
subpoenas issued by arbitrators to compel testimony or produce
evidence, see § 7; and facilitating recovery on an arbitral award, see
§ 9.”