Supreme Court Decision on FAA Appeals

The Supreme Court of the United States has held that any litigant –-whether or not a signatory of the agreement to arbitrate — who suffers denial of an application to stay the litigation pending arbitration, is entitled to an interlocutory appeal of that order. Section 16(a)(1) (A) of the Federal Arbitration Act, the Court held, clearly provides for such an interlocutory appeal, without reference to the contractual status of the appellant, so long as the District Court order did in fact deny a stay. The Court further held that such a litigant may not have an application for a stay denied solely on the ground that it is not a signatory to the written agreement, provided that enforcement by or against the non-party is permitted under traditional principles of state contract law. Thus the proper course of action for a federal court of appeals in confronting an appeal from an order denying a stay under Section 3 of the Federal Arbitration Act is to accept jurisdiction and, if the petitioner is not entitled to relief because it may not enforce the arbitration agreement, then the appeal should be dismissed on the merits. Arthur Andersen LLP v. Carlisle, 2009 U.S. LEXIS 3463 (U.S. May 4, 2009).