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9 USCS § 3 § 3. Stay of Proceedings Where Issue Therein Referable To

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9 USCS § 3 § 3. Stay of Proceedings Where Issue Therein Referable To 9 USCS § 3 Current through PL 115-9, approved 3/13/17. United States Code Service - Titles 1 through 54 > TITLE 9. ARBITRATION > CHAPTER 1. GENERAL PROVISIONS § 3. Stay of proceedings where issue therein referable to arbitration If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration. History (July 30, 1947, ch 392, § 1,61 Stat. 670.) Prior law and revision: This section is based on Act Feb. 12, 1925, ch 213, § 3, 43 Stat. 883 (§ 3 of former Title 9). Annotations Case Notes I. IN GENERAL 1. Generally 2. Constitutionality 3. Purpose 4. Construction of statute 5. Application 6. --On cases commenced in state court 7. Relationship with other laws II. STAY OF PROCEEDINGS A. In General 8. Generally 9. What constitutes stay 10. Court discretion, generally 11. --Under particular circumstances 12. Effect of stay, generally Scott Wales Page 2 of 132 9 USCS § 3 13. --Under particular circumstances 14. Existence of non-arbitrable claims, generally 15. --Under particular circumstances 16. Stay request by non-party 17. Stay of related proceedings 18. Stay of administrative action 19. Stay of state court action 20. Stay of discovery 21. Miscellaneous B. Agreement In Writing 22. Generally 23. Construction of agreement 24. Whether arbitration has been agreed to 25. Conditions precedent 26. Particular agreements C. Grounds to Grant or Deny Stay 27. Generally 28. Applicant not in default in proceeding 29. Costs 30. Class Actions 31. Fraud 32. Participation in court proceeding, generally 33. --Particular circumstances 34. Prejudice 35. Timeliness of request for arbitration 36. Third parties involved 37. Unconscionability 38. Waiver 39. Miscellaneous D. Remedies Other Than Stay 40. Generally 41. Dismissal 42. Injunction III. ISSUES AND MATTERS REFERABLE A. In General 43. Generally 44. Admiralty and maritime 45. Anti-trust 46. Bankruptcy 47. Breach of contract 48. Consumers 49. Contractor and surety 50. ERISA 51. Franchises 52. Insurance 53. Intellectual property Scott Wales Page 3 of 132 9 USCS § 3 54. Loans and credit 55. Sales and mergers 56. Tort 57. Miscellaneous B. Employment 58. Generally 59. Collective bargaining 60. Discrimination 61. Fair Labor Standards Act 62. Securities employees 63. Other particular matters C. Securities 64. Generally 65. Commodity futures trading 66. Investor claims 67. Pendent state claims 68. Other particular matters IV. PRACTICE AND PROCEDURE A. In General 69. Generally 70. Burden of proof 71. Evidence 72. Jury trial 73. Res judicata B. Jurisdiction 74. District Court 75. Appellate court 76. State court 77. Location of arbitration 78. Entity that determines issues C. Appeals 79. Generally 80. Interlocutory nature of stay orders 81. Orders appealable I. IN GENERAL 1. Generally No language of Arbitration Act indicates that 9 USCS § 4 petition to compel arbitration must be made in action where § 3 motion to stay was made. Municipal Energy Agency v Big Rivers Electric Corp. (1986, CA5 Miss) 804 F2d 338. If arbitration is indicated by contract, then stay is required by statute. Pearce v E.F. Hutton Group, Inc. (1987, App DC) 264 US App DC 246, 828 F2d 826. Scott Wales Page 4 of 132 9 USCS § 3 Arbitration agreements are purely matters of contract, and effect of 9 USCS § 3 is to make contracting party live up to his agreement by disallowing him to refuse to perform his contract when it becomes disadvantageous to him. Tepper Realty Co. v Mosaic Tile Co. (1966, SD NY) 259 F Supp 688. Under Federal Arbitration Act (9 USCS §§ 1 et seq.) federal court is empowered to stay its proceedings where issue involved is referable to arbitration under agreement to arbitrate found in contract evincing transaction in commerce. Lawson Fabrics, Inc. v Akzona, Inc. (1973, SD NY) 355 F Supp 1146, affd without op (1973, CA2 NY) 486 F2d 1394. When arbitration is compelled, district court must stay proceedings pending arbitration, pursuant to 9 USCS § 3. Bullard v Capital One, F.S.B. (2003, ND Fla) 288 F Supp 2d 1256, 17 FLW Fed D 47. Court's power to stay under 9 USCS § 3 is not conditioned on power to compel arbitration under 9 USCS § 4. B-S Steel of Kan. v Tex. Indus. (2004, DC Kan) 321 F Supp 2d 1214, 2004-2 CCH Trade Cases P 74477. 2. Constitutionality In passing upon application for stay while parties arbitrate, federal court may consider only issues relating to making and performance of agreement to arbitrate; consequently, issue of fraudulent inducement of contract as whole should be arbitrated, and this ruling is constitutional, since Congress may prescribe how federal courts are to conduct themselves in connection with subject matter over which Congress has power to legislate and rule in Erie R. Co. v Tompkins ((1938) 304 US 64, 82 L Ed 1188, 58 S Ct 817, 11 Ohio Ops 246, 114 ALR 1487) does not apply. Prima Paint Corp. v Flood & Conklin Mfg. Co. (1967) 388 US 395, 87 S Ct 1801, 18 L Ed 2d 1270 (criticized in Aviall, Inc. v Ryder Sys. (1996, SD NY) 913 F Supp 826) and (criticized in Shaffer v Jeffery (1996, Okla) 915 P2d 910) and (criticized in Allstar Homes v Waters (1997, Ala) 711 So 2d 924) and (criticized in Investment Mgmt. & Research, Inc. v Hamilton (1998, Ala) 1998 Ala LEXIS 92) and (criticized in Marks v Bean (2001, Ky App) 57 SW3d 303) and (criticized in Cheek v United Healthcare of the Mid- Atl., Inc. (2003) 378 Md 139, 835 A2d 656, 20 BNA IER Cas 961) and (criticized in Guang Dong Light Headgear Factory Co. v ACI Int'l, Inc. (2005, DC Kan) 2005 US Dist LEXIS 8810) and (criticized in Morgan Keegan & Co. v Force (2007, Ky App) 2007 Ky App LEXIS 203) and (criticized in Reynolds v Credit Solutions, Inc. (2008, ND Ala) 541 F Supp 2d 1248). Power to enact 9 USCS § 3 derives from Article III, Section 2 of Constitution. Bernhardt v Polygraphic Co. of America, Inc. (1955, CA2 Vt) 218 F2d 948, 27 CCH LC P 68963, revd on other grounds (1956) 350 US 198, 76 S Ct 273, 100 L Ed 199, 29 CCH LC P 69689. Appointments Clause of Constitution (Art II, § 2, cl 2) does not bar United States from submitting to binding arbitration. Tenaska Washington Partners, L.P. v United States (1995) 34 Fed Cl 434. 3. Purpose Stay of proceedings pending arbitration provided by 9 USCS § 3 is clearly remedy intended for defendant who wants to compel plaintiff to arbitration, but not for plaintiff whose invocation of federal district court's jurisdiction must be under 9 USCS §§ 201 et seq. (Convention on the Recognition and Enforcement Scott Wales Page 5 of 132 9 USCS § 3 of Foreign Arbitral Awards). Metropolitan World Tanker, Corp. v P. N. Pertambangan Minjakdangas Bumi Nasional (P. M. Pertamina) (1975, SD NY) 427 F Supp 2. One purpose of United States Arbitration Act was to facilitate settlement of disputes and avoid delay caused by litigation; therefore, party may be found in default pursuant to 9 USCS § 3 if claimed right to arbitration would result in furthering delays. Trade Arbed, Inc. v S/S Ellispontos (1980, SD Tex) 482 F Supp 991. 4. Construction of statute Question of whether, in contract involving commerce, there is agreement to arbitrate issue or dispute upon which suit has been brought is governed by federal law, and concomitantly, questions of interpretation and construction of such arbitration agreements are similarly to be determined by reference to federal law. Becker Autoradio U.S.A., Inc. v Becker Autoradiowerk GmbH (1978, CA3 Pa) 585 F2d 39. Arbitration Act requires separation of arbitral "issues" from non-arbitral ones; there is no difference between "claim" referred to in precedent and "issue" referred to in statute. Summer Rain v Donning Company/Publishers, Inc. (1992, CA4 Va) 964 F2d 1455, amd (1992, CA4 NC) slip op. Federal Arbitration Act, 9 USCS §§ 1-16, did not prevent district court from granting preliminary injunction extending asset freeze in fraudulent transfer case prior to deciding motion to compel arbitration; 9 USCS §§ 3 and 4 spoke only to situations that would arise after court had decided that arbitration must ensue. Janvey v Alguire (2010, CA5 Tex) 628 F3d 164. District court did not err in granting plaintiff receiver preliminary injunction to freeze funds transferred to defendant employees from alleged Ponzi scheme firm before deciding if employees were entitled to arbitration, as 9 USCS §§ 3, 4, spoke only to situations after court had decided arbitration must ensue and did not provide guidance on whether preliminary injunction could issue before deciding arbitrability. Janvey v Alguire (2011, CA5 Tex) 647 F3d 585. Case law interpreting 9 USCS § 3 makes clear that language is to be read literally; thus, so long as (1) there is agreement to arbitrate, and (2) at least one of issues involved in suit is within scope of arbitration agreement, stay is to be granted as matter of course, except in rare cases. China Union Lines, Ltd. v American Marine Underwriters, Inc. (1978, SD NY) 458 F Supp 132. Section 3 of Federal Arbitration Act, 9 USCS § 3, does not require all counts in complaint to be arbitrable.
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