Smith v. Spizzirri

Welcome to Supreme Court Opinions. In this episode, you’ll hear the Court’s opinion in Smith v Spizzirri.

In this case, the court considered this issue: Does Section 3 of the Federal Arbitration Act give district courts discretion to dismiss a lawsuit when all claims are subject to arbitration?

The case was decided on May 16, 2024.

The Supreme Court held that when a district court finds that a lawsuit involves an arbitrable dispute and a party has requested a stay of the court proceeding pending arbitration, § 3 of the Federal Arbitration Act compels the court to issue a stay, and the court lacks discretion to dismiss the suit. Justice Sonia Sotomayor authored the unanimous opinion of the Court.

Section 3 of the Federal Arbitration Act (FAA) states that a court “shall” stay proceedings when an issue is subject to arbitration. The word “shall” creates a mandatory obligation that leaves no room for judicial discretion. The term “stay” means a temporary suspension of legal proceedings, not a conclusive termination. The statutory text surrounding “stay” in Section 3 indicates that parties can return to federal court if arbitration fails, which would not be possible if the case were dismissed.

Even if district courts have inherent authority to dismiss proceedings subject to arbitration, Section 3 of the FAA overrides that discretion and requires a stay. The FAA’s structure and purpose confirm that a stay is required. The FAA allows immediate appeals of orders denying arbitration but not orders compelling arbitration, reflecting Congress’s intent to move parties to arbitration quickly. Dismissing a case would trigger an appeal that Congress sought to forbid. Finally, staying a suit aligns with the supervisory role the FAA envisions for courts, allowing them to assist in the arbitration process as needed. Keeping the case on the docket avoids the costs and complications of filing a new suit to invoke the FAA's procedural protections.

Thus, Section 3 compels the district court to issue a stay and does not give the court discretion to dismiss the suit.

The opinion is presented here in its entirety, but with citations omitted. If you appreciate this episode, please subscribe. Thank you.