An Analysis of an Order to Compel Arbitration: To Dismiss or Stay?
By Richard A. Bales & Melanie A. Goff.
In recent years, arbitration has become an increasingly used form of alternative dispute resolution employed to adjudicate matters between disputing parties outside of a traditional courtroom setting. In arbitration, parties who have contracted to arbitrate submit their disputes to a neutral decision-maker rather than subjecting their claims to judicial resolution. Arbitration is often favored over traditional litigation for many reasons, including the less formal atmosphere, the possibility of avoiding delay, lower expense, and relieving congested dockets in courts.
Although there is a strong public policy favoring arbitration and enforcement of agreements to arbitrate, sometimes a party to a purported arbitration agreement believes the agreement does not cover a particular dispute, or that there was no agreement to arbitrate at all. That party may sue in court for relief on the underlying dispute. The other party, if it prefers to arbitrate rather than litigate, typically will file a motion to stay or dismiss the court action pending arbitration, and courts favor resolving the issue with deference toward the public policy of enforcing arbitration, often construing arbitration provisions generously. The Federal Arbitration Act (FAA) governs arbitration agreements concerning potential disputes grounded in interstate or foreign commerce. Section 3 of the FAA directs a court to stay the litigation proceedings if it determines that the parties have agreed to arbitrate a claim brought before it and that the issue is in fact arbitrable.