The Supreme Court recently resolved a Circuit split addressing how district courts should proceed when they have found that all claims in a dispute should be compelled to arbitration. Smith v. Spizzirri, No. 22-1218, — S.Ct. —-, 2024 WL 2193872 (U.S. May 16, 2024). The Federal Arbitration Act (“FAA”) provides that, once a court has referred a matter 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.” 9 U.S.C. § 3. In other words, once the district court has ordered a matter to arbitration, that court should stay the action in court until the arbitration has been completed if any party requests a stay. Id.
However, many Circuit Courts of Appeal – including the First, Fifth, Eighth, and Ninth Circuits – had interpreted this language as allowing a district court to completely dismiss the entire dispute once the court had ordered that all claims were subject to arbitration. The Supreme Court has now expressly overruled these holdings, adopting the position taken by the Second, Third, Sixth, Tenth, and Eleventh Circuits. (The Seventh Circuit’s position went one step beyond Smith by ordering a stay under Section 3 even when no party had requested a stay and one party had requested dismissal.)