District courts must stay arbitration lawsuits pending the outcome of private dispute resolution proceedings, the Supreme Court ruled unanimously on Thursday.
“When a district court finds that a lawsuit involves an arbitrable dispute, and a party requests a stay pending arbitration, (Section 3) of the FAA (Federal Arbitration Act) compels the court to stay the proceeding,” Justice Sonia Sotomayor wrote in the court’s opinion.
The case involved a dispute brought by three delivery drivers against their employer, an on-demand delivery service in Arizona. The employees asserted that the company misclassified them as independent contractors, failed to pay minimum and overtime wages or provide paid sick leave.
“The respondents removed the case to federal court and moved to compel arbitration and dismiss the case. The petitioners agreed that their claims were arbitrable, but argued that the Section 3 of the FAA required the district court to stay the case pending arbitration rather than dismissing it,” the National Law Review reported. “The District Court dismissed the case without prejudice, and the Ninth Circuit affirmed.”
According to Sotomayor, Section 3 of the FAA denies judicial discretion in whether to dismiss arbitration cases.
“The Court interpreted the term ‘stay’ to mean a ‘temporary suspension’ of legal proceedings, not a dismissal,” Miller Canfield attorneys Frederick Acomb and James Woolard wrote for the National Law Review.
