Legal Memorandum: Stay of Proceedings Pending Arbitration

Issue: Under federal law as applied in the U.S. Virgin Islands, should a court stay court proceedings pending the outcome of an arbitration or should the court dismiss?

Area of Law: Alternative Dispute Resolution
Keywords: Stay of judicial proceedings; Arbitration; Dismissal
Jurisdiction: Federal, Virgin Islands
Cited Cases: 369 F.3d 263; 360 F.2d 512
Cited Statutes: None
Date: 11/01/2007

In support of its Motion to Stay Proceedings, Defendant cites the case of Lloyd v. HOVENSA, LLC, 369 F.3d 263 (3d Cir. 2004), in which 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.”  Defendant correctly cites the Lloyd court’s holding, but Lloyd does not change the result the Court must reach here—denial of the Motion to Stay.  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).  As has already been shown, Defendant has failed to comply with the Virgin Islands statute requiring any party seeking to arbitrate to make a written request to the […]

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