On Tuesday May 16th, the U.S. Supreme Court ruled that a federal district court does not have discretion to dismiss a case where all claims are subject to arbitration and a party has requested a stay. This resolves a long-standing circuit split. 

The case, Smith et al. v Spizzirri et al., involves federal and state employment law claims brought by on-demand delivery service drivers.  No. 22-1218, slip. op. (U.S. May 16, 2024).  The U.S. District Court of Arizona compelled arbitration of all claims and dismissed without prejudice.  The Ninth Circuit affirmed.  Forrest v. Spizzirri, 62 F.4th 1201, 1205 (9th Cir. 2023).  In a brief decision, the Court reversed and ruled that “[w]hen a federal court finds that a dispute is subject to arbitration, and a party has requested a stay of the court proceeding pending arbitration, the court does not have discretion to dismiss the suit on the basis that all the claims are subject to arbi­tration.”  Slip. Op. at 3. 

The Court based its ruling on the text, structure, and purpose of Section 3 of the Federal Arbitration Act (“FAA”).  The Court held that the plain text of the FAA mandates a stay (“the court shall. . . stay the trial”) and that the long-standing legal meaning of a “stay” is a “temporary suspension.”  Slip. Op. at 2.  The Court also found support in the surrounding text of the FAA.  For the Court, words like “until” (“stay the trial of the action until [arbitration is concluded]”) contemplate that parties may return to federal court if arbitration breaks down or does not bring resolution.  The Court also explained that the FAA’s structure and purpose counseled this result.  While the FAA allows for interlocutory appeals when arbitration is denied, it does not grant appeals when arbitration is compelled.  Allowing a district court to dismiss a case compelled to arbitration would trigger an appeal right not intended by the FAA.  Finally, in the eyes of the Court, allowing a district court to dismiss cases would eliminate the district court’s “supervisory role” over arbitration.  Slip. Op. at 2. 

This decision will require many district courts to change course and order stays where they may have exercised discretion to dismiss in the past.  The Court’s ruling, however, was based entirely on an interpretation of Section 3 of the FAA and applies only when a party has requested a stay.  This leaves open the question of whether a district court has the inherent authority to dismiss a case when the moving party does not directly invoke Section 3 or does not request a stay. 

Photo of Kathryn Cahoy Kathryn Cahoy

Kate Cahoy co-chairs the firm’s Class Actions Litigation Practice Group and serves on the leadership committee for the firm’s Technology Industry Group. She defends clients in complex, high-stakes class action disputes and has achieved significant victories across various industries, including technology, entertainment, consumer…

Kate Cahoy co-chairs the firm’s Class Actions Litigation Practice Group and serves on the leadership committee for the firm’s Technology Industry Group. She defends clients in complex, high-stakes class action disputes and has achieved significant victories across various industries, including technology, entertainment, consumer products, and financial services. Kate has also played a key role in developing the firm’s mass arbitration defense practice. She regularly advises companies on the risks associated with mass arbitration and has a proven track record of successfully defending clients against these challenges.

Leveraging her success in class action litigation and arbitration, Kate helps clients develop strategic and innovative solutions to their most challenging legal issues. She has extensive experience litigating cases brought under California’s Section 17200 and other consumer protection, competition, and privacy laws, including the Sherman Act, California Consumer Privacy Act (CCPA), California Invasion of Privacy Act (CIPA), Wiretap Act, Stored Communications Act, Children’s Online Privacy Protection Act (COPPA), Video Privacy Protection Act (VPPA), along with common law and constitutional rights of privacy, among others.

Recent Successes:

  • Represented Meta (formerly Facebook) in a putative nationwide advertiser class action alleging violations under the California Unfair Competition Law (UCL) related to charges from allegedly “fake” accounts. Successfully narrowed claims at the pleadings stage, defeated class certification, opposed a Rule 23(f) petition, won summary judgment, and defended the victory on appeal to the Ninth Circuit. The Daily Journal selected Covington’s defense of Meta as one of its 2021 Top Verdicts, and Law.com recognized Kate as a Litigator of the Week Shoutout.
  • Defeated a landmark class action lawsuit against Microsoft and OpenAI contending that the defendants scraped data from the internet for training generative AI services and incorporated data from users’ prompts, allegedly in violation of CIPA, the Computer Fraud and Abuse Act (CFAA), and other privacy and consumer protection laws.

Kate regularly contributes to the firm’s blog, Inside Class Actions, and was recently featured in a Litigation Daily interview titled “Where Privacy Laws and Litigation Trends Collide.” In recognition of her achievements in privacy and antitrust class action litigation, the Daily Journal named her as one of their Top Antitrust Lawyers (2024), Top Cyber Lawyers (2022), and Top Women Lawyers in California (2023). Additionally, she received the Women of Influence award from the Silicon Valley Business Journal and was recognized by Daily Journal as a Top Attorney Under 40.

Photo of Isaac Chaput Isaac Chaput

Isaac Chaput handles complex commercial litigation, class actions, and mass torts.

Isaac represents clients across a range of industries with a particular focus on technology and life sciences. Their practice encompasses privacy, product liability, trademark, trade secret, antitrust, breach of contract, and other…

Isaac Chaput handles complex commercial litigation, class actions, and mass torts.

Isaac represents clients across a range of industries with a particular focus on technology and life sciences. Their practice encompasses privacy, product liability, trademark, trade secret, antitrust, breach of contract, and other commercial matters. Isaac has significant first-chair experience, having examined witnesses at trial, taken dozens of depositions, and argued numerous trial court motions and appeals. Clients value Isaac’s creative, practical, and business-focused advice throughout the litigation lifecycle. They also frequently provide pre-litigation advice to clients facing potential commercial disputes, helping their clients obtain favorable resolutions while avoiding litigation. Isaac maintains an active pro bono practice, including representing transgender and non-binary individuals in civil rights cases.

Isaac is a co-chair of Covington’s LGBTQ+ affinity group and deeply involved in the firm’s efforts to recruit and mentor diverse attorneys, including LGBTQ+ attorneys.

Watch: Isaac and members of the Class Actions practice discuss trends in technology industry class actions, as part of our Navigating Class Actions video series.