Alili

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

MAHMOUD O. ALILI,

Plaintiff,

Case No. 1:25-cv-634

v.

JUDGE DOUGLAS R. COLE

BLOCK INC., et al., Magistrate Judge Bowman

Defendants.

OPINION AND ORDER

Defendants Block, Inc., and PayPal Holdings, Inc., move this Court either for

dismissal (Block) or an order compelling arbitration (Block and PayPal). (Block’s Mot.

to Dismiss or Compel Arb., Doc. 15; PayPal’s Mot. to Compel Arbitration, Doc. 17).

For the reasons explained below, the Court GRANTS both motions and sends the

parties to arbitration.

BACKGROUND

Alili initiated this case on August 29, 2025. (Compl., Doc. 1). The first

complaint, which named only Block as a Defendant, alleged that Block unlawfully

“de-banked” Alili “in direct violation of the executive order signed August 7th, 2025.”

(Id. at #1). The latter apparently refers to Executive Order 14331, Guaranteeing Fair

Banking for All Americans, 90 Fed. Reg. 38925. Alili suggested that Block’s proffered

reason for the closure of the accounts was illegitimate—an “unlawful justification

based on [an] act not of the account holder but rather a third party.” (Doc. 1, #1). Alili

also alleged that Block’s actions were motivated by religious and racial animus. (Id.).

In terms of relief, Alili sought $100,000 in compensatory damages and $1,200,000 in

punitive damages, as well as “restoration of accounts” and “further monitoring of

Block.” (Id.).

After the return of an unexecuted summons, (Doc. 4), Alili moved to amend his

complaint, (Doc. 5). The Magistrate Judge determined that leave of the Court was not

yet required. So she denied Alili’s motion as moot and instead permitted him to file

his amended complaint as a matter of course. (12/2/25 Not. Order). Alili did so shortly

thereafter. (Doc. 6).

Alili’s new pleading shares some particulars with his first complaint—namely,

the allegations surrounding the termination of Alili’s accounts—but differs with

respect to others. For one, Alili names PayPal Holdings, Inc., as a new Defendant.

(Id. at #10). For another, the amended complaint clarifies that Alili’s claims are

premised on alleged violations of the Fair Credit Reporting Act (FCRA), 15 U.S.C.

§ 1681 et seq., the Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691 et seq.,

and the Fair Credit Billing Act (FCBA), 15 U.S.C. § 1666 et seq. (Doc. 6, #10).

The amended complaint also adds a new set of assertions in which Alili

expands on the third-party fraud allegations from his first complaint. He specifies

that someone opened a fraudulent account with FORA Financial, LLC, in his name,

an assertion that he says finds support in prior rounds of litigation with various

Credit Reporting Agencies (CRAs). (Id.). But while he relies on those earlier suits, he

provides no citations for, or further information about, them.1 (Id.). As the Court

1 Alili does, however, intimate that FORA Financial obtained a default judgment against him

in New York state court. (Doc. 6, #10–11).

reads the amended complaint, Defendants allegedly terminated Alili’s Cash App and

PayPal accounts based on the existence of the fraudulent FORA Financial account.

(Id.). Alili implies that these terminations were wrongful because Defendants failed

to investigate the supposed fraud, even after Alili notified them of the account’s

allegedly fraudulent origin. (Id. at #10–11).

Alili’s amendment also upped the ante on his requested relief. While Alili has

opted to stick with his $100,000 compensatory damages request and his various

nonmonetary requests, he now seeks $5,000,000 in punitive damages. (Id. at #11).

After some back and forth regarding Defendants’ deadlines to move or plead,

(see Doc. 11; 1/12/26 Not. Order; Doc. 14; 1/13/26 Not. Order), Defendants filed the

instant motions, (Doc. 15; Doc. 17). Block argues that (1) Block’s terms of service bar

Alili’s claims; (2) Alili’s allegations do not pass muster under Federal Rule of Civil

Procedure 12(b)(6); (3) venue lies in California, rather than Ohio; and (4) a mandatory

arbitration provision covers Alili’s claims. (Doc. 15-1, #43–54). PayPal, meanwhile,

trains its analysis solely on that last option—compulsory arbitration. (Doc. 17-1,

#300–04).

Alili elected not to respond to either motion by the time the rules set forth. So,

on March 6, 2026, after his deadline to respond to the Block motion had passed, the

Magistrate Judge issued an order to show cause, in which she required Alili to explain

why Block’s Motion to Dismiss (Doc. 15) should not be construed as unopposed. (Doc.

19). And just over four months later, Alili has yet to respond to either motion. So the

matter is ripe for review.

LEGAL STANDARD

PayPal’s sole request for relief is an order compelling arbitration. Block, on the

other hand, seeks various forms of relief, including dismissal under Rule 12(b)(6), in

addition to, or instead of, an arbitration order. The legal standard that matters,

though, is principally the one relating to review of motions to compel arbitration. That

is because the Court starts, and largely ends, its analysis with Defendants’ shared

request—that the Court send this matter to arbitration. The Court starts there

because arbitrability is a “gateway” issue, meaning courts should address “the

arbitrability of the plaintiff’s claim at the outset of the litigation.” Southard v.

Newcomb Oil Co., LLC, No. 19-5187, 2019 WL 8111958, at *4 (6th Cir. Nov. 12, 2019)

(emphasis in original) (citation omitted). Thus, “motions to compel arbitration must

be resolved before the resolution of any other motion.” Id. at *5; see also Dahdah v.

Rocket Mortg., LLC, No. 22-11863, 2023 WL 11944898, at *1–2 (E.D. Mich. Nov. 17,

2023) (granting motion for reconsideration where the court had granted a motion to

dismiss before considering a motion to compel arbitration), rev’d on other grounds,

166 F.4th 556 (6th Cir. 2026). And the Court ends there because it concludes that

arbitration is warranted.

In deciding whether to compel arbitration, the Court begins with the Federal

Arbitration Act’s (FAA) command that “[a] written provision in … a contract

evidencing a transaction involving commerce to settle by arbitration a controversy

thereafter arising out of such contract or transaction … shall be valid, irrevocable,

and enforceable.” 9 U.S.C. § 2. Because “‘arbitration is a matter of contract’ … ‘courts

must rigorously enforce arbitration agreements according to their terms.’” In re

StockX Customer Data Sec. Breach Litig., 19 F.4th 873, 878 (6th Cir. 2021) (quoting

Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013)).

Consistent with that, the FAA “allows a party to an arbitration agreement to

petition a federal court for enforcement.” Memmer v. United Wholesale Mortg., 135

F.4th 398, 404 (6th Cir. 2025) (citing 9 U.S.C. § 4). But before granting a motion to

compel arbitration, the Court must conclude “that (1) the parties agreed to arbitrate;

(2) the claims asserted fall within the scope of the arbitration agreement; and

(3) Congress did not intend for those claims to be non-arbitrable.” Id. (citing Fazio v.

Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003)). So those are the issues the

Court addresses below.

LAW AND ANALYSIS

A. Choice of Law.

Before turning to the motion-to-compel analysis, though, the Court pauses to

briefly address an antecedent issue: choice of law. That’s because the first two prongs

of that analysis—formation and scope—are “presumptively questions of state law

governed by the relevant state’s contract law.” AtriCure, Inc. v. Meng, 12 F.4th 516,

522 (6th Cir. 2021) (cleaned up) (citations omitted).

Here, the case involves two separate agreements governed by separate bodies

of contract law. The first agreement, arising from Alili’s assent to Block’s terms of

service, contains a choice-of-law provision that specifies California law. (Doc. 15-3,

#151 (2022 terms of service); Doc. 15-4, #288 (2024 terms of service)).2 As a result,

Block argues that California law governs its dispute with Alili. (Doc. 15-1, #44–45

n.2). The PayPal agreement, by contrast, selects Delaware law. (Doc. 17-2, #381 (2020

user agreement); id. at #446 (2021 user agreement)).3 And so PayPal says that its

dispute with Alili is governed by Delaware law. (Doc. 17-1, #301 n.3).

But the Court is not altogether convinced that those provisions control.

Admittedly, the Defendants’ argument is not entirely without support. See, e.g.,

Memmer, 135 F.4th at 404 (applying Michigan law to the analysis based on

contractual choice-of-law provision). At the same time, though, giving effect to the

choice-of-law provisions while analyzing whether the parties in fact formed a contract

would “presume as valid the very agreement in dispute.” Page v. GameStop Corp.,

No. 24-3428, 2025 WL 637441, at *2 (6th Cir. Feb. 27, 2025). Fortunately, however,

the Court can sidestep here what otherwise might have been a thorny choice-of-law

analysis. Both Defendants’ motions are unopposed, and both apply either California

or Delaware law (respectively) throughout. (See Doc. 15-1; Doc. 17-1). The unopposed

part of that matters—courts “regularly rely on the litigants’ agreement about the

governing law (or, more often, on one litigant’s failure to dispute the issue) to avoid

2 Alili created several Cash App accounts from 2020 through 2024. (See Reyes Decl., Doc. 15-

2, #59 & n.1). Block has provided copies of Cash App’s terms of service as of May 22, 2022,

(Doc. 15-3), and February 7, 2024, (Doc. 15-4). “While certain visual elements, such as font

size or color, may differ slightly, all material content, including the fields and text, remain

unchanged and accurately reflect the information that was displayed to Alili.” (Doc. 15-2,

#62).

3 Alili opened two PayPal accounts—one on September 11, 2020, and another on May 14,

2021. (Psota Decl., Doc. 17-2, #308). The choice-of-law provisions in the 2020 and 2021

versions of the user agreement are identical. (Compare id. at #381, with id. at #446).

deciding what could be knotty choice-of-law questions.” Masco Corp. v. Wojcik, 795 F.

App’x 424, 427 (6th Cir. 2019) (collecting cases). So, given the lack of any live dispute

about the governing law, the Court applies the law of the state each Defendant

requests in their briefing, but does so “without resolving any choice-of-law questions.”

AtriCure, 12 F.4th at 525 (citing Masco Corp., 795 F. App’x at 427).

B. Alili Has Formed Agreements to Arbitrate with Defendants.

With the governing law settled, consider formation. The Court analyzes Alili’s

agreements with Block and PayPal in turn.

1. Alili Has Formed an Agreement to Abitrate with Block.

The Court applies California law to the Block agreement, and “[u]nder

California law the basic requirements for an enforceable contract are (1) parties

capable of contracting, (2) the consent of those parties, (3) a lawful object, and

(4) adequate consideration.” Santana v. Studebaker Health Care Ctr., LLC, 343 Cal.

Rptr. 3d 480, 488 (Cal. Ct. App. 2026) (citations omitted). Each element is satisfied

here.

First, California law provides that “[a]ll persons are capable of contracting,

except minors, persons of unsound mind, and persons deprived of civil rights.” Cal.

Civ. Code § 1556. And there is no suggestion that those exempted categories extend

to either Alili or Block. So the parties had the capacity to form the agreement.

Second, Alili consented to Block’s terms of service when he opened accounts on

Block’s Cash App application on September 7, 2020, July 23, 2022, June 20, 2024,

and September 19, 2024. (Doc. 15-2, #58–60 & n.1). Opening these accounts required

Alili to click a “Next” button. (Id. at #59). And before Alili proceeded to do so, he was

informed that, “[b]y entering and tapping Next, you agree to the [hyperlinked] Terms,

E-Sign Consent, & Privacy Notice.” (Id.).

California has a well-developed taxonomy for contracts allegedly formed over

the internet. Such contracts “are classified by the way in which the user purportedly

gives their assent to be bound by the associated terms: browsewraps, clickwraps,

scrollwraps, and sign-in wraps.” Godun v. JustAnswer LLC, 135 F.4th 699, 708 (9th

Cir. 2025) (internal quotation marks omitted) (citing Keebaugh v. Warner Bros. Ent.

Inc., 100 F.4th 1005, 1014 (9th Cir. 2024)); see also Dahdah v. Rocket Mortg., 166

F.4th 556, 566–76 (6th Cir. 2026) (explaining these distinctions at length). “Here, a

link to the Terms of Service was provided to [Alili] but [he was] not required to

separately indicate that [he] had read or agree[d] with those terms before using

[Block’s] services.” Id. So the Court employs the “inquiry-notice ‘sign-in wrap’

analytical framework.” Godun, 135 F.4th at 708–09 (citation omitted). Under that

framework, “contracts are formed between website users and operators only where

‘(1) the website provides reasonably conspicuous notice of the terms to which the

consumer will be bound; and (2) the consumer takes some action, such as clicking a

button or checking a box, that unambiguously manifests his or her assent to those

terms.’” Id. at 709 (citations omitted).

Whether a notice is “reasonably conspicuous” turns on whether it is

(1) “displayed in a font size and format such that the court can fairly assume that a

reasonably prudent Internet user would have seen it,” and (2) the “full context of the

transaction, such as whether the type of transaction contemplates entering into a

continuing, forward-looking relationship that would be governed by terms and

conditions.” Id. at 709-10 (cleaned up). “A hefty dose of common sense goes a long

way’ in analyzing those two considerations. Jd. at 710. Whether a consumer has put

forth an “unambiguous manifestation of assent” turns on whether the consumer was

“explicitly advised that the act of clicking will constitute assent to the terms and

conditions of an agreement.” /d. (emphasis and citations omitted).

Here, the notice screen that Alili confronted upon signing up for Block’s

services largely speaks for itself:

1223 $ 27 ¢ eA

?

Enter your phone or email

+1 (555) 555-5555]

By entering and tapping Next. you agree to the

1 asc 3 oer =

4A cu 5 eke 6 no ws

7 Pars 8 mw Q wxvz &)

Vv @ a Ht

(Doc. 15-2, #60). While the notice text is smaller than the other text on the screen, it

is sandwiched near the center of the screen between the “Next” button that Alili

needed to click to proceed, and the field in which he would have typed his phone

number. The gray-on-white presentation of the text favors a finding of

conspicuousness. Cf. Godun, 135 F.4th at 712 (“Th[e] gray-on-gray presentation also

suggests that the advisal is inconspicuous.”). And the context of the transaction

suggests an ongoing or forward-looking relationship because Cash App is a

smartphone application, which suggests ongoing use governed by terms of service.

See Keebaugh, 100 F.4th at 1020 (“An app is different from a typical one-and-done

interaction between the user and a traditional website—the app’s presence on the

phone until deleted carries the connotation that the user will also have ongoing access

to that app unless something material changes.”). So looking at the notice with a

“hefty dose of common sense,” it was “reasonably conspicuous.” Godun, 135 F.4th at

709–10.

Additionally, Alili “unambiguously” manifested consent to the reasonably

noticed terms of service. Id. That’s because the notice states that the user agrees to

be bound by “tapping Next,” (Doc. 15-2, #60), and thereby “explicitly notif[ies] [the]

user of the legal significance of the action [he] must take to enter into a contractual

agreement,” Berman v. Freedom Fin. Network, 30 F.4th 849, 858 (9th Cir. 2022). So

the second element of formation—consent—is satisfied.

Third, Alili’s agreement with Block clearly had a “lawful object.” Santana, 343

Cal. Rptr. 3d at 488. “The object of a contract is the thing which it is agreed, on the

part of the party receiving the consideration, to do or not to do.” VFLA Eventco, LLC

v. William Morris Endeavor Ent., LLC, 318 Cal. Rptr. 3d 844, 863 (Cal. Ct. App. 2024)

(quoting Cal. Civ. Code § 1595). Neither party to this contract agreed “to do or not to

do” something unlawful. Id. So this requirement is met.

Fourth, there was “adequate consideration” for Alili’s agreement with Block.

In exchange for access to Block’s Cash App application, Alili agreed to be bound by

Block’s terms of service. That’s enough. See Cal. Civ. Code. § 1605 (“Any benefit

conferred, or agreed to be conferred, upon the promisor, by any other person, to which

the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be

suffered, by such person, other than such as he is at the time of consent lawfully

bound to suffer, as an inducement to the promisor, is a good consideration for a

promise.”).

In short, each of California’s elements for contract formation are met here, so

Alili has agreed to be bound by Block’s terms of service. And because those terms

include an arbitration provision, (see Doc. 15-3, #143–51; Doc. 15-4, #276–88), Alili

has agreed to arbitrate this dispute if the dispute falls within the scope of the

arbitration provision—a question to which the Court turns shortly.4

4 Though he has not raised the argument (or indeed any argument), Alili could not resist this

conclusion merely because this is a “container” contract—i.e., a broader contractual

agreement of which the arbitration provision is but one part. Generally, a party “cannot be

excused from complying with the arbitration provision if [he] simply failed to read the

contract.” Inland Bulk Transfer Co. v. Cummins Engine Co., 332 F.3d 1007, 1016 (6th Cir.

2003) (citations omitted). So even if Alili had argued, for example, that he did not read the

arbitration provision, that fact would not change the analysis.

2. Alili Has Formed an Agreement to Arbitrate with PayPal, too.

Next up is Alili’s agreement with PayPal. Here, too, Alili has assented to a

contract that contains a mandatory arbitration provision. Under Delaware law, “a

valid contract exists when (1) the parties intended that the contract would bind them,

(2) the terms of the contract are sufficiently definite, and (3) the parties exchange

legal consideration.” Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010).

First, Delaware contract law has not developed quite the same label-driven,

category-specific approach to internet contracts as California. Instead, Delaware

broadly distinguishes between “browsewrap” agreements, which are generally

“impermissible,” and “clickwrap” agreements, which “are routinely recognized by

courts and are enforceable under Delaware law.” Doe v. Massage Envy Franchising,

LLC, No. S20C-05-025, 2020 WL 7624622, at *3 (Del. Super. Ct. Dec. 21, 2020).

Here, Alili opened two PayPal accounts—one on September 11, 2020, and

another on May 14, 2021. (Psota Decl., Doc. 17-2, #308). When Alili opened both

accounts, he checked a box “next to text that provided: ‘You have also read and agree

to the User Agreement and Privacy Statement.’” (Id. (emphasis omitted)) “The words

‘User Agreement’ were a hyperlink set forth in bolded, bright blue font that, if clicked,

would immediately present the user with the User Agreement’s full text.” (Id.

(emphasis omitted)). Further, Alili needed to click an “Agree and Create Account”

button to proceed. (Id.). So Alili’s screen would have looked like this:

©

Add your address

Use the one that’s on your bills

Street address

Apt., ste., bldg.

City State Vv

ZIP code

You have read and agree to the E-Communication

Delivery Policy, which provides that PayPal is an online

service and that you will receive all account notices and

information electronically via your primary email

address. You have also read and agree to the User

Agreement and Privacy Statement.

You give us permission to contact you about your

PayPal branded accounts using automated calls or texts

to the mobile phone number you provided to: service

your accounts, investigate fraud, or collect a debt, but

not for telemarketing. If you don't want to receive

automated calls or texts, you can change your

preferences at the end of this sign up process or in your

account settings at any time.

©1995-2021 PayPal, Inc. All rights reserved

Privacy Legal Contact Feedback

Ud. at #309). Just like the Block agreement, PayPal’s user agreement contains an

arbitration provision. (Ud. at #437—-38). The provision says in pertinent part that

“[Alili] and PayPal each agree that any and all disputes or claims that have arisen or

may arise between [Alili] and PayPal ... shall be resolved exclusively through final

and binding arbitration.” Ud. at #438).

As the Northern District of California held when analyzing this very

agreement, “the arbitration agreement is part of a valid clickwrap agreement under

Delaware law.” Cheng v. PayPal, Inc., No. 21-cv-3608, 2022 WL 126305, at *3 (N.D.

Cal. Jan. 13, 2022). The Court agrees not only with the Northern District’s result, but

also its reasoning. “[Alili] was required to click two items indicating his assent to the

18

[user agreement],” which is sufficient to establish a “valid clickwrap agreement

containing an arbitration clause.”5 Id. (emphasis in original).

Second, the contract terms are “sufficiently definite.” Osborn, 991 A.2d at 1158.

On this point, Delaware follows the Restatement (Second) of Contracts, “which

suggests that terms are sufficiently definite if they provide a basis for determining

the existence of a breach and for giving an appropriate remedy.” Eagle Force

Holdings, LLC v. Campbell, 187 A.3d 1209, 1232 (Del. 2018) (internal quotation

marks and citation omitted). Thus, “[a] contract is sufficiently definite and certain to

be enforceable if the court can—based upon the agreement’s terms and applying

proper rules of construction and principles of equity—ascertain what the parties have

agreed to do.” Id. Here, what the parties “agreed to do” is clear, at least for purposes

of this dispute: PayPal offered its services in exchange for Alili’s assent to be bound

by PayPal’s user agreement.

Third, there is “legal consideration” for basically the same reason—the service-

for-promise structure of the agreement constitutes bargained-for consideration.

Osborn, 991 A.2d at 1158.

So again, an agreement with an embedded arbitration provision exists between

Alili and PayPal.

5 The Northern District qualified this language with the adverb “presumptively,” but that is

only because the plaintiff in Cheng argued unconscionability. See 2022 WL 126305, at *3–5.

Alili, who would have borne the burden of establishing unconscionability in this case, see,

e.g., Eastham v. Chesapeake Appalachia, L.L.C., 754 F.3d 356, 365 (6th Cir. 2014) (citation

omitted), did not respond to either of the motions before the Court. Even if he had, though,

the argument likely would have failed under Delaware law for the reasons the Cheng court

explained. See 2022 WL 126305, at *3–5.

C. Alili’s Claims Fall Within the Scope of the Arbitration Agreements.

With the existence of the Block and PayPal agreements settled, the Court

considers another question: what kinds of disputes do the agreements cover? Each

agreement answers with plain text: “any and all disputes.”6 (Doc. 15-3, #143; Doc. 15-

4, #276 (capitalization omitted); Doc. 17-2, #371, 438). Both California and Delaware

contract law give effect to these terms in their ordinary signification. See Lloyd’s

Underwriters v. Craig & Rush, Inc., 32 Cal. Rptr. 2d 144, 146 (Cal. Ct. App. 1994)

(“We interpret the intent and scope of the agreement by focusing on the usual and

ordinary meaning of the language used and the circumstances under which the

agreement was made.” (citation omitted)); Exelon Generation Acquisitions, LLC v.

Deere & Co., 176 A.3d 1262, 1267 (Del. 2017) (“Because Delaware adheres to an

objective theory of contracts, the contract’s construction should be that which would

be understood by an objective, reasonable third party.” (cleaned up)). And the same

rule applied to the same language yields the same conclusion: the general terms “any”

and “all” are broad enough to sweep in this dispute.

D. Congress Did Not Intend for Claims Like Alili’s to Be Non-Arbitrable.

Finally, the Court considers whether Congress intended for Alili’s claims to be

non-arbitrable. Memmer, 135 F.4th at 404 (citing Fazio, 340 F.3d at 392). In short,

the answer is no. Courts have roundly recognized that Congress fully intended for the

FAA to cover FCBA, FCRA, and ECOA claims. See, e.g., Nykoriak v. Experian Info.

6 Subject to some exceptions not relevant here. (See Doc. 15-3, #143; Doc. 15-4, #276; Doc. 17-

2, #371, 438).

Sols., LLC, No. 21-cv-12227, 2022 WL 4455548, at *4 (E.D. Mich. Sep. 23, 2022)

(FCBA and FCRA claims); Ahmed v. Citibank, N.A., No. 19-cv-4439, 2020 WL

2988666, at *8 (E.D.N.Y. June 2, 2020) (ECOA claims).

* * *

Alili’s claims must proceed to arbitration. The only question that remains is

whether the appropriate course for this suit in the interim is dismissal or a stay.

Though neither party notes it, the Supreme Court recently answered that question

in an opinion that controls here, holding that § 3 of the FAA mandates a stay when a

party requests one. Smith v. Spizzirri, 601 U.S. 472, 475–76 (2024) (“When a federal

court finds that a dispute is subject to arbitration, and a party has requested a stay

of the court proceeding pending arbitration, the court does not have discretion to

dismiss.”). Here, while both Defendants seem to principally seek dismissal, what they

actually requested was a dismissal or a stay. (Doc. 15-1, #50; Doc. 17-1, #304).

One might be tempted to conclude that, where Defendants seek a stay only as

an alternative to dismissal, a dismissal is still a permissible course. But as the Court

reads FAA § 3 and Smith, that is not the case. The statute provides that the court

“shall on application of one of the parties stay the trial of the action until such

arbitration has been had in accordance with the terms of the agreement, providing

the applicant for the stay is not in default in proceeding with such arbitration.” 9

U.S.C. § 3. While Defendants’ stay requests might seek that relief in the alternative,

they are nonetheless “application[s]” for a “stay.” Id. And as the Supreme Court

stated with regard to § 3 itself, “the use of the word ‘shall’ creates an obligation

impervious to judicial discretion.’” Smith, 601 U.S. at 476 (quoting Lexecon Inc. v.

Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998)).

Statutory structure lends support to the same conclusion. “When a court denies

a request for arbitration, § 16 of the FAA authorizes an immediate interlocutory

appeal.” Id. at 477–78 (citing 9 U.S.C. § 16(a)(1)(C)). “[B]y contrast, Congress made

clear that, absent certification of a controlling question of law by the district court

under 28 U.S.C. § 1292(b), the order compelling arbitration is not immediately

appealable.” Id. at 478 (citing 9 U.S.C. § 16(b)). As the Supreme Court recognized,

dismissal would undercut the pro-arbitration thrust of these sections, id., as it would

allow immediate appeal of the order compelling arbitration,

Finally, “staying rather than dismissing a suit comports with the supervisory

role that the FAA envisions for the courts.” Id. That supervisory role may include, for

example, “appointing an arbitrator,” “enforcing subpoenas,” and “facilitating recovery

on an arbitral award.” Id. (citing 9 U.S.C. §§ 5, 7, 9). In light of the role that Congress

envisioned for the federal courts under the FAA, “[k]eeping the suit on the court’s

docket makes good sense.” Id.

In sum, text and structure, as well as the judiciary’s role within the overall

statutory scheme, suggest that it is better to read Smith as covering Defendants’ stay

requests here. The Ninth Circuit has reached the same conclusion under similar

circumstances. See Herrera v. Cathay Pac. Airways Ltd., 104 F.4th 702, 711 (9th Cir.

2024) (“Since [Smith] made clear that a district court does not have discretion to

dismiss the action when granting a motion to compel arbitration under 9 U.S.C. § 3,

the court is compelled to grant Cathay Pacific’s alternative request for a stay.”). The

Court therefore GRANTS Defendants’ motions but STAYS this matter pending

arbitration and DENIKS the rest of Block’s requested relief as MOOT.”

CONCLUSION

The Court GRANTS Block’s Motion to Dismiss (Doc. 15), which the Court

reads as an application for a stay for the reasons above, as well as PayPal’s Motion to

Compel (Doc. 17). Consistent with that, the Court STAYS this matter pending

arbitration proceedings.

SO ORDERED.

‘

July 13, 2026

DATE DOUGLAS R. COLE

UNITED STATES DISTRICT JUDGE

7 Although Smith left open the possibility of dismissal “if there is a separate reason to dismiss,

unrelated to the fact that an issue in the case is subject to arbitration,” the Court concludes

that it cannot, for instance, grant Block’s request to dismiss under 12(b)(6). 601 U.S. at 476

n.2. The specific example that Smith provided was dismissal for lack of subject-matter

jurisdiction. Jd. That makes sense. Because Article ITI courts are of limited jurisdiction, they

may “entertain an action brought under the FAA only if the action has an ‘independent

jurisdictional basis.” Badgerow v. Walters, 596 U.S. 1, 8 (2022) (quoting Hall St. Assocs.,

L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008)). So a court without such a basis would lack

the authority to compel arbitration in the first place. But this same line of reasoning does not

extend to a motion under Federal Rule of Civil Procedure 12(b)(6) once a court determines

that a valid arbitration agreement covers a plaintiff’s claims. Rule 12(b)(6) motions are

directed at the merits of a dispute, which, in this context, the arbitrator must decide. The

Court is not necessarily suggesting that the Supreme Court’s remarks in Smith apply only to

jurisdictional defects. But they have little bearing here.

18