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Legal Memorandum: Stay of Proceedings Pending Arbitration

Issue: What have the most recent court decisions held in cases where parties sought to stay court proceedings so that arbitration might be concluded?

Area of Law: Alternative Dispute Resolution
Keywords: Stay of proceedings; Arbitration
Jurisdiction: Federal, Virgin Islands
Cited Cases: 304 U.S. 64; 360 F.2d 512; 340 F. Supp. 2d 590; 821 F.2d 191
Cited Statutes: FAA § 3; 9 U.S.C. § 3; 24 V.I.C. § 74a; 24 V.I.C. § 451b
Date: 11/01/2007

In the case of Lloyd v. HOVENSA, LLC, 369 F.3d 263 (3d Cir. 2004), the Court of Appeals for the Third Circuit held “that a stay of the action, rather than a dismissal, is appropriate pending the results of arbitration”  The Lloyd court, in reaching its conclusion that the district court did not have discretion to dismiss the case pending arbitration, but was required to stay proceedings, looked to the plain language of the Federal Arbitration Act (FAA).  Id. at 269.

The plain language of FAA § 3 also provides that a stay is only authorized if “the applicant for the stay is not in default in proceeding with such arbitration.”  9 U.S.C. § 3.  An applicant for a stay pending arbitration is considered in default if, for example, the applicant has agreed in the arbitration agreement to pay costs but fails to do so, Sink v. Aden Enters., Inc., 352 F.3d 1197, 1199-1200 (9th Cir. 2003), or takes another action that is inconsistent with the right to arbitrate, Cornell & Co. v. Barber & Ross Co., 360 F.2d 512, 513 (D.C. Cir. 1966).  The Virgin Islands statute requires any party seeking to arbitrate to make a written request to the other party.  24 V.I.C. § 74a. 

In Edwards, the Third Circuit Court of Appeals held that although the dispute resolution agreement was procedurally unconscionable, it was not substantively unconscionable.  The court of appeals rejected the conclusion of the District Court of the Virgin Islands that because of the […]

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