Arbitration is meant to be an alternate to litigation. Yet arbitration is itself the subject of much litigation over who must arbitrate, what must be arbitrated, whether and how the arbitration should proceed, and the deference courts must show to arbitration awards. This blog is intended to be a resource for litigators, in-house counsel, arbitrators and anyone else who wants to stay on top of the many thorny issues that arise under the Federal Arbitration Act. Our Bloggers →

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Second Circuit Clarifies That Arbitrable Claims Should Be Stayed, Not Dismissed

By Liz Kramer | July 29, 2015 in Uncategorized

Parties who ask a court to compel arbitration of all the plaintiff’s claims have a decision to make: should they ask the court to stay the claims or dismiss them (if it finds them arbitrable)?   After noting that the federal courts of appeal are “about evenly divided” on that question, the Second Circuit held that in its circuit, a stay of the proceedings is required “after all claims have been referred to arbitration and a stay requested.”  Katz v. Cellco Partnership, __ F.3d__, 2015 WL 4528658 (2d Cir. July 28, 2015).

The Second Circuit reasoned that the text and policy of the FAA “command this result.”  It found that efficient docket management (an incentive to dismiss the claims) “cannot trump a statutory mandate.”  In requiring that arbitrable claims be stayed, the Second Circuit notes that it joins the 7th, 3d, 10th and 11th circuits.  However, cases from the 80s and 90s in the 1st, 5th and 9th circuits appear to allow dismissal of the action.

Given that there are now more courts of appeal in the “stay” column than the “dismiss” column, and their decisions are more recent, this decision may be the one that turns the tide and resolves the circuit split on this issue.

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