Mandatory arbitration agreements remain popular for employers concerned about the cost, delays, and unpredictability of traditional litigation. The Federal Arbitration Act (FAA) requires federal courts to defer in most situations to mandatory arbitration agreements entered into among litigants. What happens to the lawsuit when the court sends it for arbitration? Most federal appellate circuits concluded that the court must stay the proceeding pending the results of the arbitration. However, a few circuits have held that the court has the discretion in some circumstances to dismiss the lawsuit before arbitration is concluded.

Last week in Smith v. Spizzirri, a unanimous U.S. Supreme Court determined that the FAA requires that federal courts stay lawsuits sent for arbitration, and cannot dismiss the matter until the conclusion of such proceedings. The justices found that the plain language of the FAA mandates such stays and does not provide discretion to dismiss the claims.

This decision means that federal courts retain limited jurisdiction in the event of unusual issues with the arbitration. The court did not address what happens if neither of the litigants requests a stay. While presumably the court could issue the stay even without such request, a defendant’s motion to compel arbitration should include a request for a stay of the federal court case.

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