Transportation Executive Summary: United States Supreme Court Holds That Just as “Shall Means Shall,” “Stay” Means “Stay”
The United States Supreme Court has at long last addressed the circuit split relating to the proper procedure following a party’s motion to compel arbitration under the Federal Arbitration Act (FAA). As arbitration is an important dispute resolution mechanism to the transportation industry, the case is worthy of commentary. This article will summarize the Supreme Court’s decision and discuss the prudence of the determination.
On May 16, 2024, the Supreme Court of the United States issued a decision in Smith v. Spizzirri, 144 S. Ct. 1173 (2024). In this appeal, the Court examined whether, under the FAA, a court may dismiss the case instead of issuing a stay when a party requests a stay pending arbitration.
Petitioners were current and former delivery drivers for an on-demand delivery service operated by respondents who were alleging violations of both state and federal employment laws. Smith v. Spizzirri, 144 S. Ct. 1173, 1175 (2024). Petitioners sued in Arizona state court. Id. Respondents later removed the case to federal court and moved to compel arbitration as well as dismiss the suit. Id. Although petitioners agreed to arbitration, they argued that Section 3 of the FAA required the District Court to stay rather than dismiss the action. Id. at 1176.
The District Court compelled arbitration and dismissed the case without prejudice. Id. While the Court acknowledged the proper procedure under Section 3 would be to stay proceedings rather than dismiss the action, it ultimately determined that the dismissal was, nonetheless, acceptable due to the inherent discretion retained by courts to dismiss actions. Petitioners timely appealed. Id. The Ninth Circuit Court of Appeals affirmed the District Court’s ruling. Id. However, a concurrence by Judge Graber, joined by Judge Desai, urged the Supreme Court to address the circuit split. Id, The Supreme Court granted certiorari, reversed the Court of Appeals decision, and remanded for further proceedings consistent with the opinion based on the analysis which follows. Id. at 1178.
Section 3 of the FAA, which addresses stays of proceedings pending arbitration, states that, when an issue 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 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.A. § 3 (emphasis added). The Supreme Court held that the inclusion of the word “shall” creates an obligation “impervious to judicial discretion.” Spizzirri, 144 S. Ct. at 1177. This is consistent with case law as well as the FAA. Id.
The Court posited that “just as ‘shall’ means ‘shall,’ ‘stay’ means ‘stay.’” Id. Respondents argued that the term “stay” means that there must be some form of a stop to “parallel in-court litigation.” Id. The Court finds this interpretation misguided. Id. Respondents’ interpretation of the term conflicts with the longstanding legal definition of a “stay” as a “temporary suspension.” Id. Additionally, the Court points out that the inclusion of the word “until” in the text indicates a legislative intent to build in a return ticket to the trial. Id. This return ticket would be unavailable upon dismissal of an arbitrable action, leading the Court to the determination that respondents’ interpretation is faulty. Id.
Next, the Supreme Court addressed the District Court’s assertion that courts retain inherent authority to dismiss, even under the FAA. Id. The Court cites Degen v. United States for the proposition that “inherent powers of the court may be controlled or overridden by statute or rule.” 517 U.S. 820, 823 (1996). This is exactly what Section 3 of the FAA seeks to do – override the inherent powers of the court.
The FAA’s structure and purpose further confirm this ruling. Under the FAA, when a court denies an arbitration request, Section 16 authorizes parties to immediately file an interlocutory appeal. Spizzirri, 144 S. Ct. at 1178. An order compelling arbitration, on the other hand, is generally not immediately appealable. Id. The goal of the FAA is “to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible.” Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 22 (1983). Dismissal following a request for a stay would trigger the right to an immediate appeal, which is directly contrary to what the legislature envisioned when creating the FAA. Furthermore, by providing mechanisms to the courts to assist, the FAA calls the courts to take a supervisory role in arbitration. Spizzirri, 144 S. Ct. at 1178. Courts may not shirk their supervisory responsibilities in favor of creating a lighter docket for themselves.
Thus, the Supreme Court ultimately found that, in this clear case of statutory interpretation, all signs point to the same conclusion: “When a federal court finds that a dispute is subject to arbitration, and a party has requested a stay of the court proceeding pending arbitration, the court does not have discretion to dismiss the suit on the basis that all claims are subject to arbitration.” Spizzirri, 144 S. Ct. at 1178.
The decision is just common sense. At some point, the prevailing party in the arbitration could return to court and seek enforcement of the award under Section 9 of the FAA. Likewise, the disappointed party to the arbitration award could seek vacation or modification of the award under Sections 10 or 11 of the FAA.
FOR MORE INFORMATION
Contact John F. Fatino for more information about trucking and transportation matters at 515-288-6041. University of Iowa College of Law J.D. candidate, Laurel T. Curtiss, assisted in the preparation of these materials. John F. Fatino earned his designation as a Qualified Neutral in 2019.