Court Generally Should Stay Action on Granting Motion to Compel Arbitration, Not Dismiss It — Judicially-Created Exception If Arbitration Will Clearly Resolve All Issues

From Green v. SuperShuttle Int’l, Inc., 2011 WL 3890326 (8th Cir. Sept. 6, 2011):

Mack Green and other current or former shuttle bus drivers at the Minneapolis–St. Paul International Airport (collectively Green) brought suit against SuperShuttle International, Inc., SuperShuttle Franchise Corporation, and SuperShuttle of Minnesota, Inc. (collectively SuperShuttle) in Minnesota state court alleging violations of the Minnesota Fair Labor Standards Act (MFLSA) arising from SuperShuttle’s alleged misclassification of its drivers as franchisees rather than employees. After SuperShuttle removed the action to federal court, the district court granted SuperShuttle’s motion to compel arbitration, held the drivers must submit their claims to the arbitrator on an individual basis rather than as a class because of class action waivers in their contracts, and dismissed the suit without prejudice.

Green appealed claiming the district court *** erred in dismissing the federal action instead of staying it pending arbitration. ***

Finally, Green contends the district court should have stayed this action pending completion of the arbitration, rather than dismissing it without prejudice. ***

The FAA generally requires a federal district court to stay an action pending an arbitration, rather than to dismiss it. See 9 U.S.C. § 3 (stating district courts “shall ... stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement”) (emphasis added). The district court relied upon a judicially-created exception to the general rule which indicates district courts may, in their discretion, dismiss an action rather than stay it where it is clear the entire controversy between the parties will be resolved by arbitration. See Jann v. Interplastic Corp., 631 F.Supp.2d 1161, 1167 (D.Minn.2009) (collecting cases).

In this case, it is not clear all of the contested issues between the parties will be resolved by arbitration. The arbitrator may very well determine the transportation worker exemption applies. If such happens, Green and the other drivers may be prejudiced by the dismissal of the district court action because the statute of limitations may run and bar them from refiling complaints in state or federal court. Under these circumstances, we believe the district court abused its discretion in dismissing the action, rather than staying it pending completion of the arbitration.

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