Opinion ID: 894889
Heading Depth: 1
Heading Rank: 4

Heading: Stay of Litigation Pending Arbitration

Text: In addition to moving to compel arbitration, ML Trust and ML Life moved to stay the plaintiffs' litigation against them. Assuming the same issues must be decided both in arbitration (against Medina) and in court (against the affiliates), we hold the latter must be stayed until the former is completed. Trial judges cannot deny a party its day in court, but they have always had wide discretion to say when that day will be. Both the Federal and Texas Arbitration Acts require courts to stay litigation of issues that are subject to arbitration. [47] Without such a stay, arbitration would no longer be the rapid, inexpensive alternative to traditional litigation [48] it was intended to be, so long as one could find a trial judge willing to let the litigation proceed for awhile. The Federal Arbitration Act was passed precisely to overcome such judicial hostility. [49] Thus, when an issue is pending in both arbitration and litigation, the Federal Arbitration Act generally requires the arbitration to go forward first; arbitration should be given priority to the extent it is likely to resolve issues material to this lawsuit. [50] This has been the practice in all the federal courts. [51] As Judge Posner has noted: [There] are cases in which a party to an arbitration agreement, trying to get around it, sues not only the other party to the agreement but some related party with which it has no arbitration agreement, in the hope that the claim against the other party will be adjudicated first and have preclusive effect in the arbitration. Such a maneuver should not be allowed to succeed . . . [and] would require the court to stay the proceedings before it and let the arbitration go forward unimpeded. [52] We encountered the problem in different circumstances in In re Kellogg Brown & Root, Inc., in which a nonsignatory's litigation of a lien claim was abated while arbitrators decided who owned the equipment to which the lien claim attached. [53] Once arbitration was completed, we held the litigation could proceed. [54] The case illustrates one of many circumstances in which litigation must be abated to ensure that an issue two parties have agreed to arbitrate is not decided instead in collateral litigation. In this case, if the alleged misrepresentations and omissions by Medina must be arbitrated, that proceeding must be given priority so that it is not rendered moot by deciding the same issues in court. After the arbitration is completed, the plaintiffs' claims against ML Trust and ML Life can then be litigated (to the extent they survive) without infringing the arbitration agreement. In the interim, a stay of litigation ensures that the Alanizes do not both have [their] contract and defeat it too. [55]