Opinion ID: 2820774
Heading Depth: 2
Heading Rank: 2

Heading: The Federal Arbitration Act Requires a Stay

Text: We join those Circuits that consider a stay of proceedings necessary after all claims have been referred to arbitration and a stay requested. The FAA’s text, structure, and underlying policy command this result. Section 3 of the FAA provides: If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, 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, providing the applicant for the stay is not in default in proceeding with such arbitration. 8 9 U.S.C. § 3 (emphasis added). The plain language specifies that the court “shall” stay proceedings pending arbitration, provided an application is made and certain conditions are met.6 It is axiomatic that the mandatory term “shall” typically “creates an obligation impervious to judicial discretion.” Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998). Congress’s “use of a mandatory ‘shall’ . . . impose[s] discretionless obligations.” Lopez v. Davis, 531 U.S. 230, 241 (2001). Nowhere does the FAA abrogate this directive or render it discretionary. And though courts may disregard a statute’s plain meaning where it begets absurdity, see Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296 (2006), that is manifestly not the case here. Far from it. A mandatory stay comports with the FAA’s statutory scheme and pro‐arbitration policy. The statute’s appellate structure, for example, “permits immediate appeal of orders hostile to arbitration . . . but bars appeal of interlocutory orders favorable to arbitration.” Green Tree, 531 U.S. at 86. The FAA authorizes immediate interlocutory review of an order refusing to compel arbitration or denying a stay of proceedings; it would make little sense to receive 6 Although the statutory text refers to an action brought “upon any issue referable to arbitration,” 9 U.S.C. § 3 (emphasis added), we address here only the disposition of actions in which all claims have been referred to arbitration. 9 a conclusive arbitrability ruling only after a party has already litigated the underlying controversy. See 9 U.S.C. § 16(a)(1)(A)–(B) (“An appeal may be taken from . . . an order . . . refusing a stay of any action under section 3 . . . [or from an order] denying a petition under section 4 . . . to order arbitration to proceed.”). By contrast, the FAA explicitly denies the right to an immediate appeal from an interlocutory order that compels arbitration or stays proceedings. See id. § 16(b)(1)–(2) (“[A]n appeal may not be taken from an interlocutory order . . . granting a stay of any action under section 3 . . . [or] directing arbitration to proceed under section 4.”). The dismissal of an arbitrable matter that properly should have been stayed effectively converts an otherwise‐unappealable interlocutory stay order into an appealable final dismissal order. Affording judges such discretion would empower them to confer appellate rights expressly proscribed by Congress. For similar reasons, a mandatory stay is consistent with the FAA’s underlying policy “to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22 (1983). A stay enables parties to proceed to arbitration directly, unencumbered by the uncertainty and expense of additional 10 litigation, and generally precludes judicial interference until there is a final award. 7 We recognize that efficient docket management is often the basis for dismissing a wholly arbitrable matter. See, e.g., Lewis Tree Serv., Inc. v. Lucent Techs., Inc., 239 F. Supp. 2d 332, 340 (S.D.N.Y. 2002) (finding that “no useful purpose will be served by granting a stay”); Reynolds v. de Silva, No. 09 Civ. 9218(CM), 2010 WL 743510, at  (S.D.N.Y. Feb. 24, 2010) (finding it an “inefficient use of the Court’s docket to stay the action”). But this is not reason enough. While district courts no doubt enjoy an inherent authority to manage their dockets, Link v. Wabash R.R., 370 U.S. 626, 630–31 (1962); Marion S. Mishkin Law Office v. Lopalo, 767 F.3d 144, 148 (2d Cir. 2014), that authority cannot trump a statutory mandate, like Section 3 of the FAA, that clearly removes such discretion. See Perez v. Wis. Dep’t of Corr., 182 F.3d 532, 536 (7th Cir. 1999) (“[J]udges must place enforcement of the [Prison Litigation Reform Act’s administrative‐exhaustion requirement] over a concern for efficient docket 7 For example, the FAA specifies circumstances in which judicial participation in the arbitral process is permitted. Arbitrating parties may return to court, inter alia, to resolve disputes regarding the appointment of an arbitrator or to fill an arbitrator vacancy, 9 U.S.C. § 5; to compel attendance of witnesses or to punish witnesses for contempt, id. § 7; and to confirm, vacate, or modify an arbitral award, id. §§ 9–11. 11 management.”); In re Prevot, 59 F.3d 556, 566 (6th Cir. 1995) (“A court has the inherent power to manage its docket, subject of course to statutes requiring special treatment for specified types of cases.”); Marquis v. FDIC, 965 F.2d 1148, 1154 (1st Cir. 1992) (“It is beyond cavil that, absent a statute or rule to the contrary, federal district courts possess the inherent power to stay pending litigation when the efficacious management of court dockets reasonably requires such intervention.”). In sum, while we recognize the impetus for a rule permitting dismissal, we conclude that the text, structure, and underlying policy of the FAA mandate a stay of proceedings when all of the claims in an action have been referred to arbitration and a stay requested.