SCOTUS Set To Weigh In On Whether Courts May Dismiss Actions That Are Referred To Arbitration

Topics: Arbitration Agreements, Class Actions, Court Decisions, Wage & Hour Issues

CDF Wage and Hour Task Force – Monthly Blog

Enforceable arbitration agreements continue to provide California employers who are faced with wage and hour claims with significant benefits. In fact, this year, with the addition of section 801.1 to the California Evidence Code making it more difficult for employers to get expert witness testimony on emotional distress damages into evidence at trial, there is even one more reason to be able to compel non-wage and hour employment lawsuits into arbitration.

While the plaintiffs’ bar continues to attack the enforceability of arbitration agreements in all types of employment cases, a new issue has emerged for determination. The United States Supreme Court has agreed to weigh in on the issue of whether trial courts may dismiss a case when it is referred to arbitration after a motion or stipulation, or if the trial courts must order an action stayed pending the outcome of arbitration. This issue has split 10 circuit courts, with four circuits allowing court discretion to dismiss and the other six circuits requiring stays. 

Delivery drivers for the logistic company IntelliQuick Delivery Inc. brought this to a head after filing misclassification claims against their employer, alleging that they were improperly classified as independent contractors under federal and Arizona law. The drivers were subject to arbitration agreements, and the parties agreed to stipulate to arbitration. However, they disagreed as to whether the district court had the option to stay the case or dismiss the underlying lawsuit. The District Court sided with the employer that the case should be dismissed, which was upheld by the Ninth Circuit.

In their June petition for certiorari to the Supreme Court, the drivers stated that “Petitioners would have prevailed had this dispute been filed in any of these six circuits, but instead lost because the action arose in the Ninth Circuit.” They further stated that “The resulting disuniformity frustrates the fair and proper administration of a nationwide scheme governing hundreds of cases each year, and the conflict will not dissipate on its own.” In opposition, the employer, IntelliQuick, noted that dismissal is part of the court’s inherent authority, especially when the parties have agreed to arbitrate their claims in a separate forum in California. 

According to the drivers, district courts should stay, not dismiss, as it would allow a party to return to court with a motion to confirm or vacate an arbitrator’s award. The District Court was not persuaded because parties are permitted to commence a new action to confirm or vacate an arbitration award. The Ninth Circuit affirmed the District Court based on its view that the Federal Arbitration Act gives district courts the discretion to dismiss. Thus, under the current situation, the Second, Third, Sixth, Seventh, Tenth, and Eleventh Circuits mandate stays, whereas the First, Fifth, Eighth, and Ninth Circuits interpret the Federal Arbitration Act to provide district courts with discretion to dismiss.  

The Supreme Court’s decision on this issue will likely not be issued until at least 2025 but will be closely watched by CDF. If you have any questions about this blog post or would like to schedule a review of your arbitration agreement and practices, please contact the authors of this article, Nancy “Niki” Lubrano, Brian Cole, or Osaama Saifi, or your favorite CDF attorney. Be sure to subscribe to CDF’s blog here to ensure you receive these regular monthly wage and hour law tips.