Arbitration Act ‘Forecloses’ Any Authority to Dismiss Arbitration Cases: Reply Brief

Section 3 of the Federal Arbitration Act (FAA) “unequivocally forecloses” a court’s authority to dismiss rather than stay cases subject to arbitration provisions, said petitioners Wendy Smith, Michelle Martinez and Kenneth Turner in their U.S. Supreme Court reply brief Friday in Smith v. Spizzirri (docket 22-1218).

The petitioners 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 (see 2403010007). They’re arguing that their case should have been stayed pending the outcome of the arbitration rather than dismissed under Section 3.

The case is being watched closely to determine whether the FAA's 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. At least one case -- the false-advertising arbitration appeal against SiriusXM in the 9th Circuit -- is stayed pending the SCOTUS decision in Smith (see 2402200002). Oral argument in Smith is set for Monday.

The power to dismiss a case subject to arbitration isn’t “some immutable authority critical to the proper functioning of Article III courts,” said the petitioners’ reply brief. “This is an ordinary procedural claims-processing rule,” it said. Just as courts can’t “skip ahead and dismiss without discovery,” or must entertain certain procedures before disposing of certain actions, courts “can be required to stay cases under specified circumstances for sound reasons,” it said.

That’s all that Section 3 does, said the reply brief. It recognizes that not every arbitration actually disposes of a theoretically arbitrable claim, it said. Congress understood the importance of “providing a backstop” in case the arbitration falls through, and thus the stay “remains in effect until the arbitration is over or the case returns for litigation,” it said.

Some courts have dismissed to avoid carrying cases on their dockets, said the reply brief. But the petitioners “are unaware of a single decision, nationwide, suggesting it is essential to adopt a cramped reading of Section 3 to avoid some impermissible intrusion on inherent judicial power to dismiss cases,” it said.

This situation bears little resemblance “to any sacrosanct area of judicial power,” said the reply brief. This isn’t the power to sanction, the power to dismiss for misconduct or non-prosecution, or “any other traditional judicial authority necessary to ensure a functioning court system,” it said. This is “a procedural directive for processing cases on a court’s docket,” it said.

The exercise of inherent power can always be limited by statute and rule, “which is what Section 3 has accomplished,” said the reply brief. It eliminates a possible remedy for enforcing arbitration provisions “and provides a procedural rule dictating how courts must process the action going forward,” it said. Nothing about that ordinary procedural directive “intrudes upon any immutable judicial power,” it said. There’s “no plausible basis” for reading Congress’ text “to mean anything other than what it says: courts are required to stay cases pending arbitration,” it said. A stay “means what it has always meant for well over the past century,” it said.