In January, I reported about the U.S. Supreme Court granting certiorari in Wendy Smith, et al. v. Keith Spizzirri, et al., 2024 WL 133822 (Jan. 12, 2024), in order 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. Not surprisingly, the Court reversed the Ninth Circuit and unanimously held the Federal Arbitration Act requires district courts to put lawsuits on hold pending the outcome of the arbitration. Smith v. Spirrizzi, 2024 WL 2193872 (May 16, 2024). The court noted that Section 3 of the FAA, which governs the enforcement of arbitration agreements, explicitly says that a district court referring a case to arbitration “shall on application of one of the parties stay the trial of the action until such arbitration has been had.” Justice Sotomayor wrote the court had “previously noted that the use of ‘shall’ in neighboring sections of the FAA created a mandatory obligation that left ‘no place for the exercise of discretion by a district court.’”

The practical effect of the decision is that when a court stays a case (as opposed to dismissal) and sends the matter to arbitration, the court’s decision is not appealable under the FAA, so the plaintiff must go through the arbitration process before contesting the trial court’s decision on arbitrability.