Commercial Litigation and Arbitration

Arbitration — Does District Court Have Discretion to Dismiss, Rather Than Stay, Action It Determines to Be Arbitrable? Circuit Split

Norfolk s. Rwy. v. Fla. E. Coast Rwy., 2014 U.S. Dist. LEXIS 24737 (M.D. Fla. Feb. 26, 2014):

In its Motion to Compel Arbitration, FEC requests that this Court dismiss the instant action, or in the alternative stay the proceeding, and compel arbitration. See FEC Motion to Compel Arbitration at 22. The FAA provides that "upon being satisfied that the issue involved . . . is referable to arbitration," the district court "shall on application of one of the parties stay the trial of the action until such arbitration has been had . . . ." 9 U.S.C. § 3. Courts of appeals have reached different conclusions, however, as to whether a district court has discretion to dismiss a claim (rather than stay the proceedings) where it finds all claims before it to be arbitrable. See Lloyd v. Hovensa, LLC, 369 F.3d 263, 268-69 (3d Cir. 2004)(discussing  circuit split and comparing cases). The Eleventh Circuit has held that the proper course is to stay the proceedings rather than dismiss the action. See Bender v. A.G. Edwards & Sons, Inc., 971 F.2d 698, 699 (11th Cir. 1992) ("The district court properly found that the state law claims were subject to arbitration, but erred in dismissing the claims rather than staying them. Upon finding that a claim is subject to an arbitration agreement, the court should order that the action be stayed pending arbitration."); see also Klay v. All Defendants, 389 F.3d 1191, 1203-04 (11th Cir. 2004)("For arbitrable issues, the language of Section 3 indicates that the stay is mandatory."); but see Samadi v. MBNA Am. Bank, N.A., 178 Fed. Appx. 863, 864, 866 (11th Cir. 2006)(affirming district court's dismissal of case when compelling arbitration without discussing a stay); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1379 (11th Cir. 2005)(same); Jackson v. Cintas Corp., 425 F.3d 1313, 1315-16, 1318 (11th Cir. 2005)(same). In accordance with Bender,15 this Court finds that upon determining that arbitration is warranted the Court is required to stay the proceeding pending arbitration. See Bender, 971 F.2d at 699Moreover, even if this Court has the discretion to dismiss the action rather than stay the proceeding, it would nonetheless stay the proceeding. See Downey v. Robert W. Baird & Co. Inc., No. 6:07-cv-1180-Orl-31DAB, 2007 WL 2729578, at * 2 (M.D. Fla. Sept. 18, 2007)(determining that the Eleventh Circuit would likely afford discretion to dismiss a case rather than stay the proceeding where all claims before the court where arbitrable, but nonetheless determining that "because a settlement of FLSA claims would appear to require judicial supervision, the Court finds that a stay is the more appropriate course to take here").

15   Recognizing some inconsistency among the above-cited cases, the Court notes that Bender appears to be the first Eleventh Circuit decision addressing the issue of whether a district court, in compelling arbitration, may dismiss the case rather than stay the proceedings. "Under the well-established prior panel precedent rule of this Circuit, the holding of the first panel to address an issue is the law of this Circuit . . . unless and until the first panel's holding is overruled by the [Eleventh Circuit] sitting en banc or by the Supreme Court." Smith v. GTE Corp., 236 F.3d 1292, 1300 n.8 (11th Cir. 2001).

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