Should the Court Stay or Dismiss a Case after Compelling Arbitration?

One of the hotter legal issues in arbitration is whether a court may dismiss an action after compelling arbitration of all the issues involved in the plaintiff’s claim or whether Section 3 of the FAA only permits a “stay of the action until such arbitration has been had.”  Two cases last week reached opposite results on that question.  In Gonzales v. GrubHub Holdings, Inc., 2023 U.S. Dist. LEXIS 163602 (D.D.C. September 14, 2023), Judge Moss dismisses the case.  It may be relevant to those seeking to distinguish the decision that neither party requested a stay.  In Graham v. Bloomberg L.P., 2023 U.S. Dist. LEXIS 163969 (S.D.N.Y. September 15, 2023), Judge Broderick stays the case.  The court points out that dismissal, rather than a stay, might lead to a delay in moving forward on the merits as it would allow an appeal.

Two related items are worth your look.  Jernigan v. RSS/Manchester Operations, LLC, 2023 U.S. Dist. LEXIS 164300 (E.D. Tenn. September 15, 2023)(Corker, J.), addresses the stay v. dismissal issue in cases in which the arbitrator will decide the threshold issue of arbitrability.  Were he or she to decide that the dispute was not arbitrable, the case might come back to the court for a resolution of the merits.  Therefore, Judge Corker stays the case, rather than dismissing it.  Also, SCOTUS will have an opportunity to resolve the Circuit split over whether Section 3 of the FAA even permits dismissal. The issue is raised in the petition for certiorari in Smith v. Spirrizzi, Dkt. No. 22-1218.  The Respondent’s opposition is due October 5, 2023.  While it usually is not worth monitoring a case until cert. is granted, this is an issue that justifies early tracking, as it arises in almost every case in which the court compels arbitration.  You can access the petition and, once filed, all other documents through the Petitions tab on the great SCOTUS blog, Scotusblog.com.

Judicial Review of a Standard Award

Under FINRA’s rules, the panel normally issues a standard award, without elaborating on the reasoning behind its decision. J.P. Morgan Securities LLC v. Luckett, 2023 U.S. Dist. LEXIS 164214 (W.D. Ken. September 14, 2023)(Jennings, J.), discusses the difficulties in considering a “manifest disregard” challenge to such an award.

Enforcement of an Arbitration Provision Against a Ticket Transferee

Sports and other  tickets are now sold on-line and can be resold or transferred the same way.  Naimoli v. Pro-Football, Inc., 2023 U.S. Dist. LEXIS 164632 (D. Md. September 14, 2023)(Chuang, J.), addresses the enforcement of an arbitration provision against such a transferee.  Naimoli’s cousin bought electronic tickets for a Washington Commanders game on TickPick, a third-party ticket outlet tied to Ticketmaster.  Plaintiffs were injured at the game and sued the Commanders and the stadium owners, who sought to invoke an arbitration clause contained as a clickwrap or browsewrap on the Ticketmaster website. Judge Chuang holds that there is no evidence that the cousin who bought the tickets was either the actual or apparent agent of the transferees.  Therefore, the court denies Defendants’ motion to compel arbitration. With so many customers now buying tickets on-line and through resellers, the case is well worth a read.

Have a good week.

David A. Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com