Court Opinion

ID: 9379845
Source: CourtListenerOpinion
Date Created: 2023-03-16 17:00:45.355458+00
Date Added: 2024-06-11T17:17:17.532325
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

WILLIAM F. FORREST; WENDY                 No. 22-16051
SMITH; MICHELLE MARTINEZ;
JODI MILLER; KENNETH                        D.C. No.
TURNER,                                  2:21-cv-01688-
           Plaintiffs-Appellants,             GMS

 v.
                                            OPINION
KEITH SPIZZIRRI; MIRIAM
SPIZZIRRI; KEN MARING;
MARING; CYNTHIA MOORE;
MOORE, Unknown; named as John
Doe Moore; UNKNOWN PARTY,
named as Pat Doe and Jane Doe I;
JOHN DE LA CRUZ; DE LA CRUZ,
Unknown; named as Jane Doe De La
Cruz; INTELLIQUICK DELIVERY,
INC., an Arizona corporation; MAJIK
LEASING LLC, an Arizona
corporation; MAJIK ENTERPRISES
I, INC., an Arizona corporation,
               Defendants-Appellees.

       Appeal from the United States District Court
                for the District of Arizona
      G. Murray Snow, Chief District Judge, Presiding
2                       FORREST V. SPIZZIRRI

                   Submitted March 9, 2023 *
                      Las Vegas, Nevada

                      Filed March 16, 2023

Before: Susan P. Graber, Mark J. Bennett, and Roopali H.
                 Desai, Circuit Judges.

                  Opinion by Judge Bennett;
                 Concurrence by Judge Graber

                          SUMMARY **

                            Arbitration

    The panel affirmed the district court’s order granting
defendants’ motion to compel arbitration of all claims in an
employment law action and dismissing the action without
prejudice, rather than staying the action pending arbitration.
    The panel held that, although the plain text of the Federal
Arbitration Act appears to mandate a stay pending
arbitration upon application of a party, binding Ninth Circuit
precedent establishes that district courts may dismiss when,
as here, all claims are subject to arbitration. The panel
concluded that this precedent was not abrogated by

*
 The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
**
   This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                     FORREST V. SPIZZIRRI                   3

Badgerow v. Walters, 142 S. Ct. 1310 (2022) (relying on
plain statutory text to limit the range of materials federal
courts can consult when assessing jurisdiction over an
application to confirm or vacate an arbitration award). The
further panel held that the district court did not abuse its
discretion in dismissing rather than staying the action
because the district court did not misstate the law,
misconstrue the facts, or otherwise act arbitrarily.
    Concurring, Judge Graber, joined by Judge Desai, wrote
that she concurred fully in the majority opinion. Judge
Graber wrote that she encouraged the Supreme Court to take
up the question, on which the courts of appeals are divided,
of whether a stay is required when a district court refers a
claim to arbitration. Judge Graber also urged the Ninth
Circuit to take this case en banc in order to follow statutory
language requiring a stay.

                        COUNSEL

Nicholas J. Enoch, Clara S. Acosta, and Morgan L. Bigelow,
Lubin & Enoch PC, Phoenix, Arizona, for Plaintiffs-
Appellants.
Laurent R. G. Badoux, Robert M. Dato, and Paul A. Alarcón,
Buchalter APC, Scottsdale, Arizona, for Defendants-
Appellees.
4                      FORREST V. SPIZZIRRI

                           OPINION

BENNETT, Circuit Judge:

    Plaintiff delivery drivers sued their employer, an on-
demand delivery service, 1 alleging violation of various state
and federal employment laws. The parties agreed that all
claims are subject to mandatory arbitration. Accordingly,
the district court granted Intelliserve’s motion to compel
arbitration, but also dismissed the lawsuit without prejudice.
Plaintiffs argue that the district court should have stayed the
action pending arbitration rather than dismissing it. We have
jurisdiction under 28 U.S.C. § 1291, and we affirm.
    The sole question before us is whether the Federal
Arbitration Act (“FAA”) requires a district court to stay a
lawsuit pending arbitration, or whether a district court has
discretion to dismiss when all claims are subject to
arbitration. Although the plain text of the FAA appears to
mandate a stay pending arbitration upon application of a
party, binding precedent establishes that district courts may
dismiss suits when, as here, all claims are subject to
arbitration. Thus, we affirm.
                                 I
    Plaintiffs are current and former delivery drivers for
Intelliserve. Plaintiffs sued Intelliserve in Arizona state
court alleging that Intelliserve violated federal and state
employment laws by, among other things, misclassifying
them as independent contractors; failing to pay them

1
  Defendants include individual owners and managers of Intelliserve
LLC as well as related corporate entities. We refer to Defendants
collectively as “Intelliserve,” as the parties do in their briefing.
                      FORREST V. SPIZZIRRI                    5

required minimum and overtime wages; and failing to
provide paid sick leave.
    Intelliserve removed the case to federal court, then
moved to compel arbitration and to dismiss the case.
Plaintiffs agreed that, under the FAA, all claims were subject
to mandatory arbitration, but argued that the FAA required
the district court to stay the action pending arbitration rather
than to dismiss the action. Section three 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.

9 U.S.C. § 3. As discussed below, Plaintiffs also argued in
the district court that a stay would provide certain
administrative benefits relative to dismissal.
    Rejecting those arguments, the district court granted
Intelliserve’s motion to compel arbitration and dismissed the
action without prejudice.
6                        FORREST V. SPIZZIRRI

                                   II
    We review the district court’s interpretation of the FAA
de novo. Jones Day v. Orrick, Herrington & Sutcliffe, LLP,
42 F.4th 1131, 1134 (9th Cir. 2022). Orders compelling
arbitration are also reviewed de novo. Thinket Ink Info. Res.,
Inc. v. Sun Microsystems, Inc. (“Thinket”), 368 F.3d 1053,
1060 (9th Cir. 2004).
                                   III
     Section three of the FAA provides that, upon
determination by a court that an issue or issues are referable
to arbitration, the court, on application of a party, “shall”
stay the trial of the action pending arbitration (provided the
stay applicant is not in default). 9 U.S.C. § 3. On its face,
Congress’s use of “shall” appears to require courts to stay
litigation that is subject to mandatory arbitration, at least
where all issues are subject to arbitration. 2 See, e.g., Dean
Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)
(holding that the word “shall” in a separate section of the
FAA constituted a mandate to the district court). 3

2
  Although not at issue here, we acknowledge that where some, but not
all, parties’ claims are subject to arbitration, courts have discretion to
stay or proceed with litigation on non-arbitrable claims. See Moses H.
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n.23 (1983);
United States v. Neumann Caribbean Int’l, Ltd., 750 F.2d 1422, 1426–
27 (9th Cir. 1985).
3
  In other contexts, courts have recognized that “shall” can mean “may”
in a statute. See Gutierrez de Martinez v. Lamagno, 515 U.S. 417, 432
n.9 (1995). But that construction is the exception, not the rule. Id.
Absent strong contextual indications to the contrary, we interpret the
term “shall” in accordance with its ordinary meaning: a mandatory
instruction. Haynes v. United States, 891 F.2d 235, 239–40 (9th Cir.
                          FORREST V. SPIZZIRRI                           7

    But this court has long carved out an exception if all
claims are subject to arbitration. “[N]otwithstanding the
language of [section three], a district court may either stay
the action or dismiss it outright when, as here, the court
determines that all of the claims raised in the action are
subject to arbitration.” Johnmohammadi v. Bloomingdale’s,
Inc., 755 F.3d 1072, 1074 (9th Cir. 2014); see also Thinket,
368 F.3d at 1060; Sparling v. Hoffman Constr. Co., Inc., 864
F.2d 635, 638 (9th Cir. 1988); Martin Marietta Aluminum,
Inc. v. Gen. Elec. Co., 586 F.2d 143, 147 (9th Cir. 1978). 4
    Applying this line of cases here, we conclude that
“notwithstanding the language of [section three],” the
district court had discretion to dismiss Plaintiffs’ suit
because the parties agreed that all claims were subject to
arbitration. Johnmohammadi, 755 F.3d at 1073–74.
                                   IV
    Plaintiffs make four primary arguments to sidestep this
binding precedent.          First, they point out that our
jurisprudence permitting dismissal of claims subject to
arbitration began in a case in which no party appears to have
requested a stay. See Martin Marietta, 586 F.2d at 147 (“The
[FAA] did not impose a duty upon [the defendants] to
request a stay any more than the contractual arbitration

1989). Nothing about the context here suggests that Congress meant
“may” when it wrote “shall.”
4
  Although the Ninth, First, Fifth, and Eighth Circuits permit district
courts to dismiss actions subject to arbitration, the Second, Third, Sixth,
Seventh, Tenth, and Eleventh Circuits require a stay upon application of
a party. See Katz v. Cellco P’ship, 794 F.3d 341, 345 (2d Cir. 2015)
(collecting cases and adopting the majority view); see also Arabian
Motors Grp. W.L.L. v. Ford Motor Co., 19 F.4th 938, 942 (6th Cir.
2021); Sommerfeld v. Adesta, LLC, 2 F.4th 758, 762 (8th Cir. 2021).
8                     FORREST V. SPIZZIRRI

clause required [them] to request arbitration when the
controversy arose.”). Plaintiffs argue that this result was
consistent with section three because the statute mandates
that a district court “shall . . . stay the trial of the action”
pending arbitration only “on application of one of the
parties.” 9 U.S.C. § 3 (emphasis added). Here, of course,
Plaintiffs did request a stay. This fact makes no difference,
because since Martin Marietta, we have acknowledged that
the district court’s discretion to dismiss extends to cases in
which a stay is requested. See, e.g., Johnmohammadi, 755
F.3d at 1073 (noting that defendant requested a stay pending
arbitration); Sparling, 864 F.2d at 637–38 (same). Most
recently, we clarified that this result occurs “notwithstanding
the language of [section three].” Johnmohammadi, 755 F.3d
at 1073.
    Second, Plaintiffs suggest that the FAA’s plain text
should dictate the outcome despite our precedent to the
contrary. But “[a]s a three-judge panel we are compelled to
apply” circuit precedent “unless it is ‘clearly irreconcilable
with the reasoning or theory of intervening higher
authority.’” Sauk-Suiattle Indian Tribe v. City of Seattle, 56
F.4th 1179, 1190 (9th Cir. 2022) (quoting Miller v. Gammie,
355 F.3d 889, 893 (9th Cir. 2003) (en banc)). There is no
such intervening higher authority here.
    Third, Plaintiffs argue that a recent Supreme Court
decision abrogates our precedents, thereby permitting us to
come to a different result. See Badgerow v. Walters, 142 S.
Ct. 1310 (2022). In Badgerow, the Court relied on plain
statutory text to limit the range of materials federal courts
can consult when assessing jurisdiction over an application
to confirm or vacate an arbitration award under sections nine
and ten of the FAA. Id. at 1314. Although Badgerow
supports the general proposition that courts should enforce
                            FORREST V. SPIZZIRRI              9

the plain text of the FAA (and other statutes), it does not
discuss section three or the district court’s discretion to stay
or dismiss an action pending arbitration. Thus, Badgerow
does not allow us, a three-judge panel, to overrule our prior
precedent. See Miller, 355 F.3d at 893.
    Finally, Plaintiffs contend that, even if the district court
had discretion to dismiss their suit, the court abused its
discretion. Ordinarily, a district court abuses its discretion
only when it makes a mistake of law, adopts a clearly
erroneous view of the facts, or otherwise acts arbitrarily. See
Lam v. City of San Jose, 869 F.3d 1077, 1084 (9th Cir. 2017).
While Plaintiffs argued that there were administrative
benefits that would have flowed from a stay, the district
court considered those arguments and provided sound
reasons for rejecting them, including by noting that Plaintiffs
could file a new action to confirm or vacate any arbitration
award. See Ready Transp., Inc. v. AAR Mfg., Inc., 627 F.3d
402, 404 (9th Cir. 2010) (“It is well established that district
courts have inherent power to control their docket.” (cleaned
up)); Katz, 794 F.3d at 346 (“We recognize that efficient
docket management is often the basis for dismissing a
wholly arbitrable matter.”). Because the district court did
not misstate the law, misconstrue the facts, or otherwise act
arbitrarily, we conclude that it did not abuse its discretion in
dismissing rather than staying the case.
       AFFIRMED. 5

5
    The parties shall bear their own costs on appeal.
10                   FORREST V. SPIZZIRRI

GRABER, Circuit Judge, with whom DESAI, Circuit Judge,
joins, concurring:

    I concur fully in the majority opinion. But I encourage
the Supreme Court to take up this question, which it has
sidestepped previously, Green Tree Fin. Corp.-Ala. v.
Randolph, 531 U.S. 79, 87 n.2 (2000), and on which the
courts of appeals are divided, see, e.g., Arabian Motors Grp.
W.L.L. v. Ford Motor Co., 19 F.4th 938, 941–43 (6th Cir.
2021) (reversing a dismissal, granting a stay, discussing
inter-circuit and intra-circuit inconsistencies, observing that
many rulings offer little analysis, and distinguishing Martin
Marietta Aluminum, Inc. v. Gen. Elec. Co., 586 F.2d 143,
147 (9th Cir. 1978), as not having resulted from a party’s
request for a stay); Katz v. Cellco P’ship, 794 F.3d 341, 344–
45 (2d Cir. 2015) (detailing both inter-circuit and intra-
circuit inconsistencies).
    In the meantime, I urge our court to take this case en banc
so that we can follow what I view as the Congressional
requirement embodied in the Federal Arbitration Act. When
a party requests a stay pending arbitration of “any issue
referable to arbitration under an agreement in writing,” the
court “shall . . . stay the trial of the action” until the
arbitration concludes or unless the requesting party is “in
default in proceeding with such arbitration.” 9 U.S.C. § 3
(emphases added).