When a trial court determines that all of the claims before it must be arbitrated, does the court have discretion to dismiss the case or must it stay the case pending arbitration if one party has requested a stay? Widening a split among the Circuits, the U.S. Court of Appeals for the Second Circuit ruled on July 28, 2015 that Section 3 of the Federal Arbitration Act (also known as the "FAA") imposes a mandatory stay when all claims have been referred to arbitration and a party has requested a stay. Katz v. Cellco P'ship, No. 14-138, 2015 U.S. App. LEXIS 13055 (2nd. Cir. July 28, 2015). The Second Circuit's opinion, which overturned a ruling by Southern District Judge Briccetti dismissing the case, marks an important clarification of the law for practitioners in the Second Circuit, and underscores the disparate approaches to this issue among the Circuits.
The Facts of the Case
In Katz, the plaintiff sued Verizon on behalf of a putative class of New York-area Verizon telephone subscribers, asserting breach of contract and consumer fraud claims arising out of a rate increase purportedly concealed as a monthly administrative charge. Katz's contract with Verizon incorporated the company's customer agreement, which contained a clause referring all disputes arising out of the agreement or Verizon's wireless services to arbitration. Verizon moved to compel arbitration and stay district court proceeding pending...
