by Lionel M. Schooler, FCIArb
Jackson Walker LLP1

Introduction. In Yanez v. Dish Network, LLC, _____ F.4th _____, 2025 WL 1671611 (5th Cir. 2025), the United States Court of Appeals for the Fifth Circuit confronted for the first time the scope and applicability of the Supreme Court’s recent decision in Smith v. Spizzirri, 601 U.S. 472 (2024).

Background. The underlying facts of this case reveal a story about an arbitration process gone stale.

Mr. Yanez sued his employers (Dish Network and Echosphere) for employment discrimination in state court. In response, the employers removed the lawsuit to federal court, and then successfully moved to compel arbitration of Mr. Yanez’s claims. The lawsuit was stayed pending the outcome of the arbitration. Given that the arbitration clause required arbitration to be conducted in El Paso, Texas, the case was transferred to that court.

The arbitration process proceeded so slowly that the District Court issued three show-cause notices requiring updates on the status of the proceeding. The parties did not file a response to the third such notice. As a result, the District Court dismissed the case without prejudice. Mr. Yanez then filed a Rule 59(e) motion to alter the result because, with the significant passage of time that had occurred, he was concerned that his claims were essentially timebarred.

Before the District Court ruled on that motion, the United States Supreme Court issued its decision in Smith v. Spizzirri. Spizzirri established the principle that in a case involving a dispute subject to arbitration, a district court is obliged to issue a stay, rather than to dismiss a case, presuming there is no “valid separate reason” to dismiss. Even with this principle in place, the District Court subsequently denied Mr. Yanez’s Rule 59(e) motion, claiming there was a valid reason to persist with dismissal of the case.

Issues Presented. The issues confronting the Fifth Circuit were the following:

(a) Whether the Court of Appeals had jurisdiction to consider the issues raised;

(b) Whether the District Court correctly compelled the matter to arbitration in the
first place; and

(c) Whether the District Court had authority to dismiss the case under the existing
circumstances.

Jurisdiction Issue. As described by the Fifth Circuit, the jurisdictional question arose because the Appellees contended that if the Court of Appeals determined that the District Court should not have dismissed the case, then the Court would allegedly lack jurisdiction over an appeal of an order granting a motion to compel arbitration.

The Fifth Circuit rejected this argument. Recognizing that appellate jurisdiction can be affected by whether a case involves an interlocutory order, the Fifth Circuit pointed out that in this case, the District Court had entered a final judgment, enabling the appellate court to review the merits of the appeal. In so doing, the Fifth Circuit noted that the Spizzirri Court had explicitly stated that where a party requests a stay of litigation, a District Court’s dismissal of a case subject to arbitration “triggers the right to an immediate appeal.”

Arbitrability Issue. Turning next to the issue of arbitrability, the Fifth Circuit conducted a de novo review of the record, and determined that the arbitration agreement was valid, supported by adequate consideration, and enforceable. It therefore affirmed the District Court’s ruling on arbitrability.

Authority to Dismiss the Case. This brought the Fifth Circuit to the final issue: whether the District Court was authorized to dismiss the lawsuit in its entirety. The Court initially noted that the District Court had characterized its ruling as being “without prejudice.” The Court rejected this characterization, accepting Mr. Yanez’s argument that given the expiration of the statute of limitations, the dismissal was effectively a dismissal with prejudice. It therefore proceeded under the principle that this dismissal “with prejudice” was subject to a heightened standard of review.

Turning to the substantive issue in question, the Court noted that when the dismissal occurred, it was a valid action by the District Court given the then-existing Fifth Circuit principle that permitted dismissal when all of the issues raised before the District Court were required to be submitted to arbitration.

The Court recognized that Spizzirri undercut the applicability of this standard. The Court specifically noted the Supreme Court’s pronouncement that upon a District Court’s determination of arbitrability, coupled with a party’s request to stay the litigation, a District Court has no discretion to dismiss the suit on the basis that all substantive claims are arbitrable.

Further delving into the interstices of Spizzirri, the Court noted that the Supreme Court had carved out an exception to the prohibition on dismissal in a situation where there might be a “separate reason” for dismissal unrelated to the issue of arbitrability. The Court acknowledged that in issuing its dismissal order, the District Court had specifically invoked the “separate reason” theory on the basis of the parties’ failure to file a required joint status update.

Thus confronted with a District Court’s invocation of a “separate reason” for dismissal against the backdrop of the Spizzirri doctrine, the Court clarified that a dismissal for a “separate reason” did not empower a District Court to dismiss for any separate reason. Rather, the Court stated that such “separate reason” had to satisfy the heightened standard of dismissal previously applicable in Fifth Circuit case law.

To the Court, an analysis of this “heightened standard” required consideration of two criteria: a “clear record of delay or contumacious conduct by the plaintiff,” combined with the absence of a lesser sanction that would better serve the interests of justice.

Superimposing this heightened standard upon the record before it, the Court determined that there was no indication of the plaintiff’s having caused any delay, nor intentional delay, nor prejudice to the opposing parties, nor “a stubborn resistance to authority.” The Court further noted that in this case, the District Court had not warned the parties of the potential imposition of a death penalty sanction for failure to meet a status report deadline.

On this record, therefore, the Court held that the dismissal in this case, a dismissal that was effectively with prejudice, was an abuse of discretion. The Court accordingly reversed the dismissal as an abuse of discretion, and remanded the case to the District Court for further proceedings.

Conclusion. Prior to the Spizzirri decision, a mere finding by a district court of arbitrability of all matters in dispute justified dismissal of the entire lawsuit, imposing upon the parties not only the obligation to arbitrate their dispute, but also then to return for judicial evaluation of post-arbitration issues (such as confirmation or vacatur), a dismissal policy apparently solely designed to shrink a district court’s pending docket. The Supreme Court’s Spizzirri decision blazed a new path for litigants subject to compulsion to arbitrate by making clear that sending a dispute to arbitration does not, standing alone, justify dismissal of the lawsuit. As the Fifth Circuit has now demonstrated in Yanez, the circumstances under which dismissal can occur in such a situation are narrow, and must be precisely followed.