Chapter 9 - § 9.9 • STAY OR DISMISSAL OF CIVIL ACTION UPON ORDERING ARBITRATION

• Jurisdiction: Colorado

§ 9.9 • STAY OR DISMISSAL OF CIVIL ACTION UPON ORDERING ARBITRATION

Upon entering an order to compel arbitration, should the court dismiss the civil action or simply stay the civil action pending arbitration? In the latter event, there is an open civil action for further proceedings in connection with the arbitration, such as appointment of the arbitrator; enforcement of subpoenas; and motions to modify, correct, vacate, or confirm the arbitration award. In general, the court may retain jurisdiction to monitor the progress of arbitration,⁶⁸ although this seems contrary to the principle that a valid and unwaived arbitration clause deprives the court of jurisdiction.⁶⁹ However, the Colorado Supreme Court stated that when a motion to compel arbitration is granted, the underlying civil action should be stayed, not dismissed.⁷⁰

The U.S. District Court for the District of Colordo, in Harwest Industrial Minerals Corp. v. Twin City Fire Insurance Co.,⁷¹ further noted the U.S. Supreme Court's comment that "it may be advisable to stay litigation among the non-arbitrating parties pending the outcome of the arbitration. That decision is one left to the district court [or to the state trial court under applicable state procedural rules] as a matter of its discretion to control its docket."⁷² Acknowledging that the arbitrator's findings on the claim against Lexington may not be binding on the court as to claims against Twin City, "the arbitrator's decision . . . could 'at the least inform or aid this court's consideration of' the claims against Twin City, and considerations of judicial efficiency, avoidance of confusion, and possible inconsistent results seemingly weigh in favor of staying the claims against Twin City pending the resolution of the arbitration."⁷³

In determining whether it should stay the court claims against Twin City pending arbitration of the Lexington claims, the court indicated a need to weigh potential unfair prejudice to any party against the interests of judicial efficiency and the potential for confusion or inconsistent outcomes.⁷⁴ "Section 3 of the Federal Arbitration Act contemplates continuing supervision by the district court to ensure that arbitration proceedings are conducted within a reasonable period of time, thus preventing any impairment of the plaintiffs' right to seek relief."⁷⁵

Similarly, the federal courts generally hold that a court, upon granting a motion to stay the civil action pending arbitration, should stay the litigation...