The United States Supreme Court finally clarification what lower courts must do when a case is compelled to arbitration. In a unanimous decision from Justice Sotomayor, the Court decided that lower courts must stay cases subject to arbitration and that the lower courts have no discretion to dismiss those cases. 

Background Facts

Intelliquick Delivery, Inc. employs delivery drivers. The drivers sued their employer claiming that they were misclassified as independent contractors to avoid paying minimum wage, overtime, expense reimbursement and sick pay under Arizona law. During the dispute, the parties agreed that the claims were covered by an arbitration agreement. A question arose regarding whether the district court was required to stay the case pending arbitration, or if it had the discretion to dismiss it. The court dismissed the action pending the arbitration, but decisions from other federal appellate circuits decided the issue differently.

The plaintiff drivers argued that if their case had been heard in another circuit the outcome would likely have been different. Thus far, the Ninth, First, Fifth and Eighth Circuits have ruled that district courts have the discretion to dismiss a case that is sent to arbitration while the Second, Third, Sixth, Seventh, Tenth and Eleventh Circuits found that a stay must be issued while arbitration is pending. Ultimately, the district court in the instant case issued an order compelling arbitration and dismissed the case without prejudice. The Ninth Circuit affirmed. The Supreme Court granted review to resolve the inconsistent results.

The Federal Arbitration Act

The Court's decision and the parties' arguments focused on the interpretation of Section 3 of the Federal Arbitration Act, entitled "Stay of proceedings where issue therein referrable to arbitration." The section says:

 "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, providing the applicant for the stay is not in default in proceeding with such arbitration." 

9 U.S.C. § 3 (emphasis added).

The Word "Shall"

More specifically, the Court's decision focused on the impact of one word from Section 3 – the word "shall." According to the Court, when read in the larger context of Section 3, the word "shall" did not leave any room for ambiguities. The Act requires a lower court to "stay" the proceedings upon request because use of the word "shall" creates an "obligation impervious to judicial discretion."

Arguments in Favor of Dismissal

Intelliquick argued that the word "stay" could mean not only a temporary dismissal, but also a dismissal. Black's Law Dictionary defines the word "stay" as "a temporary suspension of legal proceedings." Black's Law Dictionary 1109 (2d.ed. 1910). In addition, Section 3 guarantees that the parties can bring the case back to federal court to resolve the claim if arbitration fails. Dismissing the case outright would completely thwart this purpose as outlined by the law.

Intelliquick also argued that district courts have inherent authority to dismiss proceedings subject to arbitration. The Court rejected this argument as well stating that the FAA overrides any discretion that a district court may have had and courts may not dismiss a suit where the parties have agreed to arbitration. The structure and purpose of the FAA support this conclusion. Section 16 of the FAA allows an immediate interlocutory appeal when a court denies a request for arbitration. 

The Court was also focused on the arbitrated-parties' rights on appeal. Where a lower court dismisses a matter subject to arbitration, that decision is immediately appealable. The Court found nothing in the FAA to suggest that Congress intended cases subject to arbitration would be immediately appealable and thus further exhaust judicial resources where the goal of arbitration is to move the dispute out of court and resolve it as quickly as possible.  

The Court also pointed out that a stay is more in alignment with the "supervisory role the FAA envisions for the courts." The FAA specifically gives courts jurisdiction to appoint an arbitrator, enforce subpoenas issued by arbitrators, and facilitate recovery on arbitration awards. Staying the case during arbitration allows the court to maintain this role without the parties having to file a new suit to reestablish these supervisory protections.


When a district court finds that a lawsuit involves an arbitrable dispute, Section 3 of the FAA requires the district court to stay the lawsuit pending completion of the arbitration. 

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