On June 23, 2023, in Coinbase v. Bielski, the Supreme Court issued a ruling holding that a district court must stay its proceedings while an interlocutory appeal of the issue of arbitration is ongoing. The 5-4 decision resolves a circuit split on the issue, and has far-reaching implications on motions to compel arbitration.
The case arose from a putative class action brought by plaintiff Abraham Bielski, on behalf of Coinbase users, in the U.S. District Court for the Northern District of California. The defendant Coinbase, an online cryptocurrency platform, file a motion to compel arbitration, contending that its User Agreement required arbitration of the dispute. The District Court denied the motion to compel arbitration. Coinbase then filed an interlocutory appeal under the Federal Arbitration Act 9 U.S.C. §16(a) to the Ninth Circuit Court of Appeals. Coinbase also moved to stay the trial proceedings in the District Court while the issue of arbitrability was determined. The Ninth Circuit denied the stay, and permitted the trial court to proceed with trial proceedings. The Supreme Court reversed and remanded this ruling.
The Court considered the issue of whether a district court must stay its pre-trial and trial proceedings while an interlocutory appeal under §16(a) is ongoing. The Supreme Court ultimately determined that a district court must stay its proceedings. §16(a) authorizes the immediate interlocutory appeal of the denial of a motion to compel arbitration. Notably, §16(a) does not explicitly state whether proceedings must be stayed, but a majority of Courts of Appeals to consider the issue have held that district courts must stay trial proceedings while the interlocutory appeal is ongoing.
Justice Kavanaugh, writing for the majority, primarily relied on a previous ruling, Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982) in which the Court reinforced a “longstanding tenet of American procedure” that in the case of an appeal, a district court is divested of control over the aspects of the case involved in the appeal. Because in the case of an interlocutory appeal under §16(a), the question is whether the case belongs in arbitration or the district court, the Court explained that the entire case is essentially “involved in the appeal.” Therefore, it is illogical for the trial proceedings to continue while the court of appeals decides whether there should be a trial.
The Court underscored that its ruling would promote the ultimate benefits of arbitration. For example, if trial proceedings were permitted, the ultimate goals of arbitration would be adversely impacted including: “efficiency, less expense, [and] less intrusive discovery.” Moreover, in the face of trial proceedings, parties may be forced to settle, especially in the case of class actions, and judicial resources would be wasted when it ultimately may be determined that the case should have been arbitrated to begin with.
In response to plaintiff’s contention that the ruling would encourage frivolous appeals, the Court explained that courts have multiple tools to deter frivolous appeals. As to the claim that the ruling created a pro-arbitration rule, the court responded that the ruling merely held arbitrability appeals to the same stay standards that courts apply in other analogous contexts. In addition, plaintiff claimed that the ordinary discretionary stay factors already adequately protected parties’ rights. The court disagreed stating that many courts routinely deny stays, often discounting litigation-related considerations such as the cost and harm associated with continuing trial proceedings.
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