Yesterday, the Supreme Court granted cert in Smith v. Spizzirri, No. 22-1218. The issue in this case is whether section 3 of the FAA requires federal courts to stay a lawsuit pending arbitration, or whether courts have discretion to dismiss the lawsuit when all claims in the lawsuit are covered by the arbitration clause. Lower courts are currently divided on this issue.
This new case joins the Court’s other FAA cases being heard this term, like the Coinbase and LePage Bakeries cases. In recent years, the Court has typically accepted FAA cases as part of its limited docket. This regular, repeated grant of cert in FAA cases helps demonstrate how the Court values arbitration as part of our broader legal system, likely as a way to control overcrowded dockets. I tend to view the FAA as procedural law, and ideally, procedural law should not be subject to conflicting interpretations so that procedural law will not interfere with substantive law. Also, uncertainty in arbitration law undermines the potential value of arbitration as an efficient form of dispute resolution.
The Court has embarked on a new phase of FAA interpretation since about 2019. Prior to 2019, the Court’s FAA decisions tended to be more expansive when interpreting the FAA. However, since 2019, particularly with the new makeup of the Court, the Court has taken a more literal, and arguably more restrained approach when interpreting the FAA. As a result, I expect the Court is likely to take a very literal approach in this Smith case and hold that under section 3, courts must stay court proceedings while arbitration is pending. Such a ruling would also help complement the Court’s earlier decision in Badgerow, where the Court adopted a narrow view of subject matter jurisdiction for confirmation or vacatur proceedings. With a required stay under section 3 as a result of the potential and likely ruling in Smith, federal courts would retain power to confirm or vacate arbitral awards.
Section 3 of the FAA addresses federal courts, not state courts. However, during the expansionist phase of the Court’s FAA interpretations, the Court has held that the FAA applies in state court. The Court’s new, more literal interpretations from recent years are in tension with the Court’s older decisions involving the FAA, and I am wondering if the Court in this new Smith case will address this tension involving the FAA’s applicability in state courts.