Chapter 9 - § 9.7 • JUDICIAL PROCEDURE FOR DETERMINING A MOTION TO STAY OR COMPEL ARBITRATION

• Jurisdiction: Colorado

§ 9.7 • JUDICIAL PROCEDURE FOR DETERMINING A MOTION TO STAY OR COMPEL ARBITRATION

§ 9.7.1—Application For And Procedure To Compel Arbitration And Stay Litigation

Under §§ 3 and 6 of the FAA, the proceeding is commenced by a motion to the court, which is made and heard in the manner for the making and hearing of motions. Five days' notice of the application must be given to a party refusing to arbitrate, with service in the manner provided by the Federal Rules of Civil Procedure.³⁷ If the making of the agreement to arbitrate or the failure to comply therewith is not in issue, the court shall order the parties to arbitrate in accordance with their agreement. If the making of the arbitration agreement or failure to arbitrate is in issue, the court proceeds to summary trial, to the court or with a jury. Those issues are then determined, and an appropriate order is issued.

The procedures under CRUAA § 207 are analogous. The CRUAA, C.R.S. § 13-22-206(4) (2016), provides:

(4) If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.

The word "may" suggests that the arbitrator can decide to stay the arbitration, pending the court's determination of the challenge to arbitration. Query whether this stay takes priority over the parties' agreed deadline for the arbitration.

If a plaintiff files a civil action, and the defendant believes the claim is subject to an arbitration agreement, the typical response is for the defendant to file a motion to stay civil action and to compel arbitration. It is unclear whether Rule 12 of the Rules of Civil Procedure applies to this motion, or whether the defendant must join any other Rule 12(b) motions it has with respect to the civil action. However, this author respectfully submits that in order to expedite the arbitration process, a motion to compel arbitration ought to be permitted without joining other Rule 12(b) motions, and without waiving them.

Arbitration has also been enforced outside the provisions of the CRUAA and FAA. For example, upon application, a court issued an injunction against continuing an arbitration.³⁸

The statutes do not mandate that a demand for arbitration be made before an application for a stay of the civil action is filed.³⁹

After the court has entered a stay of a civil action and/or an order compelling arbitration, who has the duty to commence the arbitration in order for the claims to be pursued? If the defendant in a civil action seeks or obtains an order staying the litigation and compelling arbitration, he or she has no duty to commence the arbitration — that is the duty of the party seeking relief.⁴⁰ If a court grants a motion to compel arbitration and, if the plaintiff does not thereafter commence arbitration, the court may dismiss with prejudice the civil action, analogizing it to dismissal for failure to prosecute.⁴¹

Upon a motion to stay litigation and compel arbitration, the court has discretion as to whether to stay discovery pending resolution of the motion. Factors to be weighed include: "(1) the interest of Plaintiff; (2) the burden on Defendants in going forward; (3) the Court's convenience; (4) the interest of non-parties, and (5) the public interest in general."⁴²

See also § 9.8.

The Third Circuit, in Guidotti v. Legal Helpers Debt Resolution, LLC,⁴³ attempted to define when a motion to compel should be treated like a motion to dismiss (and discovery not allowed) and when it should be treated like a motion for summary judgment (and discovery generally allowed):

[W]hen it is apparent, based on "the face of a complaint, and documents relied upon in the complaint," that certain of a party's claims "are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery's delay." But if the complaint and its supporting documents are unclear regarding the agreement to arbitrate, or if the plaintiff has responded to a motion to compel arbitration with additional facts sufficient to place the agreement to arbitrate in issue, then "the parties should be entitled to discovery on the question of arbitrability before a court entertains further briefing on [the] questions." After limited discovery, the court may entertain a renewed motion to compel arbitration, this time judging the motion under a summary judgment standard. In the event that summary judgment is not warranted because . . . there is "a genuine dispute as to the enforceability of the arbitration clause," the "court may then proceed summarily to a trial regarding 'the making of the arbitration agreement. . . .'"⁴⁴

Discovery Pending Determination of the Motion

There are two types of discovery during the pendency of the motion:

1) Discovery relevant to determining the arbitrability motion; and
2) Discovery on the merits of the dispute.

Sometimes discovery is necessary with respect to the federal issues in the motion. For example, facts relevant to the signatory's authority to sign the arbitration agreement, the facts behind the alleged duress in executing the agreement, etc. As with any motion, the court can allow discovery relevant to the fact issues is raised by the motion.

With respect to discovery on the merits during the pendency of the motion, courts take different approaches: allow no discovery (particularly if the court is going to expedite determination of the motion), allow regular discovery to proceed, or allow essential discovery to proceed. The court will be particularly alert to what discovery can occur if the dispute goes to arbitration.

§ 9.7.2—Grounds For Motion To Compel Arbitration

In order to compel arbitration, "a party need only show: (1) an agreement to arbitrate, (2) a dispute within the scope of the arbitration, and (3) a refusal by the opposing party to proceed to arbitration."⁴⁵ Upon so alleging, the language of the statutes applies. See the previous sections in this chapter.

The FAA and CRUAA permit a party to apply to a court to compel the opposing party, who has agreed to arbitrate, to arbitrate in accordance with the arbitration agreement of the parties, and to stay any litigation pending that arbitration.⁴⁶ These provisions require the court to order arbitration unless an arbitrability issue raised by the opposing party is found in the opposing party's favor.⁴⁷

§ 9.7.3—Procedure To Assert Arbitrability Issues

If an arbitration is commenced, and a respondent wishes to assert an arbitrability defense (dispute not subject to the arbitration), it appears the respondent might be able present the defense to the arbitrator, and, if denied, immediately move a court to stay the arbitration on the same ground.⁴⁸ However, the weight to be given the arbitrator's decision is unclear. Perhaps the motion to the court is more in the nature of an appeal.

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