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Legal Memorandum: Stay of Proceedings Pending Arbitration

Issue: What must a party prove in order to establish a right to have a claim resolved by arbitration?

Area of Law: Alternative Dispute Resolution, Litigation & Procedure
Keywords: Stay pending arbitration; Referable to arbitration; Burden to prove
Jurisdiction: Federal
Cited Cases: 514 U.S. 938; 151 F.3d 132
Cited Statutes: 9 U.S.C. § 3
Date: 09/01/2007

It is well established that the party seeking a stay pending arbitration pursuant to 9 U.S.C. § 3 bears the burden to show the matter is properly referable to arbitration.  Am. Fin. Capital Corp. v. Princeton Elec. Prods., No. CIV. A. 95-4568 (E.D. Pa. Mar. 20, 1996); see Nederlandse Erts-Tankersmaatschappij v. Isbrandtsen Co., 339 F.2d 440, 442 (2d Cir. 1964) (defendants who seek stay have burden of establishing such stay is warranted); Miletic v. Holm & Wonsild, 294 F. Supp. 772, 774 (S.D.N.Y. 1968) (“The burden is on the party seeking a stay to satisfy the court that a matter is referable to arbitration.”).

Thus, to rule on the stay, the court must first decide whether the moving party has established that a particular matter is referable to arbitration.  To make the determination, the court must conduct a two-question inquiry into the “gateway issues”:  “(1) Did the parties seeking or resisting arbitration enter into a valid arbitration agreement? (2) Does the dispute between those parties fall within the language of the arbitration agreement?”  John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 137 (3d Cir. 1998).  Unless the evidence answers both questions in the affirmative, the matter is not referable to arbitration and the motion cannot be granted.

In considering these gateway questions, “ordinary state-law principles that govern the formation of contracts” should apply when deciding whether the parties agreed to arbitrate the dispute in question.  First Options, Inc. v. Kaplan, […]

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