The Second Circuit Court of Appeals yesterday weighed in on the “unsettled” question whether a district court should stay a case or dismiss it, when it grants a motion to compel arbitration. The court held that the case should be stayed. The opening paragraph summarizes the issue and the reasoning:
In an effort to more efficiently manage their dockets, some district courts in this Circuit will dismiss an action after having compelled arbitration pursuant to a binding arbitration agreement between the parties. That is what happened here. After the District Court (Briccetti, J.) found Michael A. Katz’s state law claims against Cellco Partnership d/b/a Verizon Wireless (“Verizon”) to be arbitrable, the court compelled arbitration but denied Verizon’s request to stay proceedings. By dismissing the case, however, the District Court made the matter immediately appealable as a final order, provoking additional litigation—specifically, this appeal. Although we recognize the administrative advantages of a rule permitting dismissal, we hold that the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”), requires a stay of proceedings when all claims are referred to arbitration and a stay requested.