The United States Supreme Court continues to flesh out the Federal Arbitration Act (FAA). The Court’s recent decision in Smith v. Spizzirri, Case No. 22-1218 (May 16, 2024) answered another seemingly straight-forward question: when a court orders a case into arbitration should it “stay” or “dismiss” the case.
Section 3 of the FAA seemingly answers the question directly, specifying that when a case is subject to arbitration, the court “shall on application of one of the parties stay the trial of the action until [the] arbitration” has concluded. (Emphasis added). Yet, trial courts frequently dismiss cases subject to arbitration rather than staying them and circuit courts often affirm. No longer.
The Court’s unanimous opinion reached the obvious conclusion that “stay” means “stay” and not “dismiss.” The Court also noted that a dismissal, as opposed to a stay, was inconsistent with other FAA provisions permitting the Court to intervene to resolve disputes that may arise during the arbitration process. Michigan practitioners should note Michigan’s arbitration statute includes a similar provision, requiring courts to stay judicial proceedings on just terms when a case is ordered into arbitration. MCL 691.1687(6).
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