Last week, in Smith v. Spizzirri, the United States Supreme Court unanimously held that a federal court must grant a party’s request for a stay while arbitration is pending. In Spizzirri, a group of delivery drivers sued their current and former employers in Arizona state court. The plaintiffs alleged they were misclassified as independent contracts and were denied benefits. The defendants removed the case to federal court. The defendants also moved to compel arbitration and dismiss the suit.
Plaintiffs agreed their claims are arbitrable but argued the Federal Arbitration Act (FAA) only requires the court to stay, not dismiss, the litigation with arbitration pending. The court disagreed and dismissed the case. The Ninth Circuit affirmed and deepened a 6 – 4 circuit split whether the FAA gives federal courts discretion to dismiss lawsuits with an arbitration pending.
The Supreme Court’s decision ends the circuit split. In practice, this decision generally benefits defendants. A federal court retains jurisdiction over a stayed case. Defendants may seek judicial redress from the federal court when arbitration issues arise. For example, if the court denies a motion to compel arbitration, a defendant may immediately appeal the decision. A defendant may also move to vacate, modify, or confirm an arbitration award in the same federal court. The Spizzirri decision streamlines the litigation process surrounding arbitrations, and thereby conserves time and unnecessary litigation expenses.