Background
BSI Group LLC and International Business Solutions Group, LLC sued Solid Financial Technologies, Inc. and other defendants over alleged unauthorized withdrawals and failures to process third-party payments. The defendants moved to compel arbitration under an agreement involving Evolve Bank & Trust.
In an earlier appeal, the Eighth Circuit remanded for a jury trial on the narrow question whether a pop-up or other aspects of EZBanc’s website showed that BSI agreed to be bound by the Evolve agreement. On remand, the district court ordered arbitrability and merits discovery to proceed together, contemplated dispositive motions before the arbitrability trial, and scheduled an immediate merits trial if the jury found no agreement to arbitrate. Solid sought to stay all merits-related deadlines and the merits trial, but the district court denied that request.
The Court’s Holding
The Eighth Circuit reversed. It held that 9 U.S.C. § 4 requires a disputed question about the existence of an arbitration agreement to be tried “summarily,” meaning without delay. Allowing merits discovery, merits-related dispositive motions, and preparations for a merits trial to proceed before arbitrability is resolved would conflict with the statute’s text and purpose and could eliminate arbitration’s asserted benefits.
The court also rejected BSI’s argument that Solid waived arbitration by complying with the district court’s direction to propose new deadlines. Solid moved to compel arbitration before answering, promptly sought a stay after remand, and never moved to dismiss on the merits. Its compliance with a court directive did not substantially invoke the litigation machinery. The court remanded with instructions that all activity concerning the underlying merits await determination of the proper forum.
Key Takeaways
- When formation of an arbitration agreement is genuinely disputed, § 4 requires the court to conduct the arbitrability trial without delay.
- Merits discovery, merits dispositive motions, and the merits trial must wait until the court determines whether the dispute belongs in arbitration or federal court.
- A party does not waive arbitration merely by complying with court-ordered scheduling instructions when it has consistently and promptly asserted its arbitration right.
Why It Matters
The decision limits district courts’ ability to combine merits proceedings with litigation over whether an arbitration agreement exists. Even when arbitrability and merits discovery may overlap, the statutory requirement for a prompt arbitrability determination takes priority.
For litigants, the opinion underscores the importance of asserting arbitration at the earliest feasible opportunity and avoiding merits-based motions while arbitrability remains unresolved.