Resolving a split among federal appeals courts, the U.S. Supreme Court has ruled unanimously that federal district courts must stay, or temporarily suspend, legal proceedings rather than dismiss the lawsuit when they order the parties to participate in arbitration. The case, Smith v. Spizzirri, is an employee misclassification case involving a mandatory arbitration agreement. The Supreme Court’s ruling, published May 16, 2024, reinforces the federal policy favoring arbitration over litigation.
Section 3 of the Federal Arbitration Act states that a district court referring a case to arbitration “shall on application of one of the parties stay the trial of the action until such arbitration has been had.” The Supreme Court reasoned that the plain language, structure, and purpose of Section 3 of the Federal Arbitration Act support this interpretation.
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