Last week, the U.S. Supreme Court granted certiorari in Wendy Smith, et al. v. Keith Spizzirri, et al., 2024 WL 133822 (Jan. 12, 2024). The review should resolve a split in the circuits as to whether, when presented with an agreement to arbitrate, a district court is limited to staying a case or dismissing it.

The underlying case involves on-demand delivery drivers suing their employers for violations of federal and state employment laws. The defendants moved to compel arbitration and dismiss the lawsuit in light of an arbitration agreement. The plaintiffs agreed that their claims were arbitrable but argued that the plain language of the Federal Arbitration Act (“FAA”) required the district court to stay the lawsuit pending arbitration – rather than dismiss it. The U.S. District Court of Arizona dismissed the lawsuit and compelled arbitration. The Plaintiffs appealed and the Ninth Circuit affirmed. See, 62 F.4th 1201.

In affirming, the Ninth Circuit framed the only question before it as, “whether the [FAA] requires a district court to stay a lawsuit pending arbitration, or whether a district court has discretion to dismiss when all claims are subject to arbitration.” The Court examined the split in authority within the circuits and acknowledged that its decisions on the issue align with the minority approach, which allows district courts the discretion to dismiss lawsuits in the face of arbitration agreements rather than stay lawsuits pending arbitration. The Ninth Circuit is joined by the First, Fifth, and Eighth Circuits. The Second, Third, Sixth, Seventh, Tenth, and Eleventh Circuits permit district courts to only stay a case in the face of a valid arbitration agreement. See, Arabian Motors Grp. W.L.L. v. Ford Motor Co., 19 F.4th 938, 941–43 (6th Cir. 2021).

While perhaps not obvious, the practical effect could be significant. While a dismissal is an appealable order, a stay is not. Thus, a dismissal would lead to (perhaps significant) delay in the disposition of a case, contrary to the usual intent of arbitration.