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SCOTUS: Courts don’t have discretion to dismiss cases sent to arbitration

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Dive Brief:

  • Federal courts cannot dismiss lawsuits they’ve ruled are subject to mandatory arbitration when the party compelling arbitration requests a stay, the U.S. Supreme Court ruled Thursday in Smith v. Spizzirri. 
  • In a unanimous ruling, the high court highlighted part of section 3 of the Federal Arbitration Act, which says the court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” 
  • The ruling overturns a decision by the 9th U.S. Circuit Court of Appeals that said Circuit precedent gave a district court discretion to dismiss an arbitration case if all claims were subject to arbitration. The case in question involved a misclassification suit filed by current and former delivery drivers for an on-demand delivery service.

Dive Insight:

“Respondents’ attempt to read ‘stay’ to include ‘dismiss’ cannot be squared with the surrounding statutory text, which anticipates that the parties can return to federal court if arbitration breaks down or fails to resolve the dispute,” Justice Sonia Sotomayor wrote in the decision, summing up the opinion of the court.

Although the lawsuit was originally filed in Arizona, the high court’s ruling “will impact all federal courts,” according to a post by CDF Labor Law LLP. “While the enforceability of employment arbitration agreements will remain the subject of much litigation, especially in California, Spizzirri removes one issue of contention which will help to streamline disputes over arbitration agreements,” the authors wrote. 

Arbitration agreements have been the subject of legal scrutiny recently, with mandatory agreements in particular under the spotlight.

Lawmakers and advocates are pushing for legislation that would create an exemption for age discrimination claims in mandatory arbitration cases, for example. Such legislation would build on existing law passed in 2022, which disallows mandatory arbitration in cases of sexual assault and sexual harassment.  

And last month, the Supreme Court unanimously ruled that transportation workers don’t need to be employed in the transportation industry to be covered by the FAA’s exemption for workers engaged in foreign or interstate commerce in forced arbitration cases.

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