Last week, the U.S. Supreme Court held that litigation before the district court must be halted when a party appeals a denial of a motion to compel arbitration. In Coinbase v. Bielski, the courtresolved a split among lower courts as to whether a stay of the proceedings was required during an interlocutory appeal on the question of arbitrability. This decision impacts countless business and consumer contracts containing arbitration clauses governed by the Federal Arbitration Act.
Pointing to its holding in Griggs v. Provident Consumer Discount Co. – that an interlocutory appeal “divests the district court of its control over those aspects of the case involved in the appeal,” – the court concluded that “[b]ecause the question on appeal is whether the case belongs in arbitration or instead in the district court, the entire case is essentially ‘involved in the appeal,’” and, therefore, must be stayed.
In her dissent, Justice Kentaji Brown Jackson (joined by Justices Sonia Sotomayor and Elena Kagan in full and by Justice Clarence Thomas in part) argued that the majority’s decision departs from the “traditional approach,” whereby the trial judge “makes a particularized determination upon request, based on the facts and circumstances of that case, as to whether the remaining part of the case should continue unabated or be paused (stayed) pending appeal.”
Strategically, the court’s decision grants significant leverage to parties seeking to compel arbitration, particularly in “close call” cases where the existence or enforceability of an agreement to arbitrate is hotly disputed. On one hand, if a motion to compel arbitration is granted, litigants so situated will get exactly what they seek. But if a court denies a motion to compel, then the party wishing to arbitrate will be able to forestall discovery and the district court proceedings for several months (at least) while awaiting a decision from the appellate court. The Coinbase decision should prompt a shift in litigants’ strategic calculus and may lead to more frequent appeals of decisions denying motions to compel arbitration.
The court’s decision also raises question about proceedings before the district court in class actions where a petition for interlocutory appeal is granted under Rule 23(f). Under the “Griggs principle” discussed in Coinbase, the district court would lose jurisdiction over “those aspects of the case involved in the appeal,” potentially mandating a stay of all class discovery (and forcing a rethinking of the discretion afforded in the rule itself).
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