Commercial Litigation and Arbitration

Even If Court Generally Must Dismiss, Not Stay, an Action upon Compelling Arbitration (There Is a Circuit Split on the Dismiss-vs.-Stay Question), When Arbitration Is Compelled to Determine Arbitrability, Then Only a Stay Is Apt

Mercadante v. XE Servs., LLC, 2015 U.S. Dist. LEXIS 4686 (D.D.C. Jan. 15, 2015):

The Court need not resolve the question of whether the Court would dismiss the case if it were compelling arbitration on all of the substantive claims in this action. Compare White v. Four Seasons Hotels & Resorts, 999 F. Supp. 2d 250, 261-62 (D.D.C. 2013) (staying case), with Ryan v. BuckleySandler, LLP, No. CV 13-01816, --- F.Supp.3d ---, 2014 WL 4748241, at *7 (D.D.C. Sept. 25, 2014) (dismissing case). Nor does the Court need to address the circuit split regarding the question whether district courts have the discretion to dismiss an action upon compelling arbitration on all claims. See BuckleySandler, 2014 WL 4748241, at *5 (noting that the D.C. Circuit Court of Appeals has not yet definitively resolved this issue). Because the Court compels arbitration with respect to the question of arbitrability, it remains plausible that the Court may yet be required to consider some or all of the claims in this action on the merits. Therefore, dismissing this action would be premature. See, e.g., Boateng v. Gen. Dynamics Corp., 473 F. Supp. 2d 241, 252 (D. Mass. 2007) (staying action upon compelling arbitration with respect to arbitrability).

The language used by several of the Circuits that permit dismissal of an action upon compelling [*40]  arbitration suggests that such discretion may not extend to circumstances where a district court compels arbitration on arbitrability. See Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001) ("BSR's motion to dismiss was not a proper § 3 motion because the sole remedy available under § 3 is a stay. Notwithstanding the terms of § 3, however, dismissal is a proper remedy when all of the issues presented in a lawsuit are arbitrable.") (emphasis added); Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) ("The weight of authority clearly supports dismissal of the case when all of the issues raised in the district court must be submitted to arbitration.") (emphasis in original); Sparling v. Hoffman Const. Co., 864 F.2d 635, 638 (9th Cir. 1988) ("This court held that 9 U.S.C. section 3 ... does not preclude summary judgment when all claims are barred by an arbitration clause.") (emphasis added); see also Sher v. Goldman Sachs, No. CIV. CCB-11-2796, 2012 WL 1377066, at *6 (D. Md. Apr. 19, 2012) ("Importantly, Choice Hotels prescribes the dismissal of actions where the district court finds all claims to be arbitrable. In this case, the court has found that the arbitrator should decide whether TMST's claims are arbitrable. Therefore, the court will stay the action rather than dismiss it while the arbitrator makes that determination.") (emphasis in original). But see Innospec Ltd. v. Ethyl Corp., No. 3:14-CV-158-JAG, 2014 WL 5460413, at *4 (E.D. Va. Oct. 27, 2014) (applying Choice [*41]  Hotels International and dismissing without prejudice upon compelling arbitration on arbitrability). In this action, the Court has not yet decided that any of the individual claims brought by Plaintiffs are arbitrable-let alone all of those claims; the Court has only decided that an arbitrator must decide whether Plaintiffs' claims are arbitrable. Accordingly, the Court concludes that dismissal at this point is not appropriate.

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