US Chamber Urges SCOTUS to Interpret FAA’s Section 3 by Its ‘Plain Language’

When a court compels arbitration, the Federal Arbitration Act's text and structure require the court to stay the judicial action pending the outcome of the arbitration whenever a party requests a stay, said the U.S. Chamber of Commerce in a U.S. Supreme Court amicus brief Monday (docket 22-1218) in support of neither party in Smith v. Spizzirri.

Section 3 of the FAA states clearly that, upon a party’s request, a case must be stayed if the court issues an order compelling arbitration, said the brief. The Chamber urges SCOTUS to interpret Section 3 “in accordance with its plain language,” it said.

Petitioners Wendy Smith, Michelle Martinez and Kenneth Turner are asking SCOTUS to reverse the 9th U.S. Circuit Appeals Court’s affirmation of the district court’s dismissal of their case after compelling their claims to arbitration, saying the case presents an important question of “statutory construction” under the FAA. The case is being watched closely to determine whether Section 3 requires district courts to stay a lawsuit pending arbitration, or whether they have discretion to dismiss when all claims are subject to arbitration.

The three plaintiff-appellants in the 9th Circuit false-advertising appeal against SiriusXM joined with SiriusXM to ask the court Feb. 16 to stay that appeal, pending the outcome in Smith v. Spizzirri (see 2402200002). The SiriusXM plaintiff-appellants are challenging the district court decision compelling their claims to arbitration. SiriusXM's cross-appeal is challenging the district court's ruling to dismiss, rather than stay the case pending the outcome of the arbitration.

Congress’ “unambiguous mandate” overrides any discretion courts might otherwise have to dismiss cases pending on their dockets, said the Chamber’s amicus brief. The structure of the FAA “buttresses that conclusion,” it said.

Most important, a mandatory stay gives effect to Congress’ decision in Section 16 “not to authorize an immediate appeal from a district court order that compels arbitration in accordance with the terms of the arbitration agreement and stays the case under Section 3,” said the brief. If a court compelling arbitration weren’t required to issue a stay, and could instead dismiss the lawsuit, the plaintiff would be able to appeal immediately, it said. Overriding a party’s stay request and instead entering a dismissal “therefore effects an impermissible end-run around Section 16’s design,” it said.

When the underlying case is filed in or removed to federal court, a stay also preserves “the availability of the federal forum for proceedings related to the arbitration,” said the brief. Those proceedings can include FAA-authorized judicial intervention in connection with the arbitration, such as appointing an arbitrator if necessary, or compelling witnesses to attend the arbitration, it said. They can also include post-arbitration proceedings to confirm, vacate or modify the arbitration award, it said.