Coinbase, Inc. V. Bielski: Interlocutory Appeals On The Question Of Arbitrability Automatically Stay District Court Proceedings

• Published date: 30 June 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Class Actions, Trials & Appeals & Compensation
• Law Firm: Katten Muchin Rosenman LLP
• Author: Mr David L. Goldberg, J Matthew W. Haws and Anna Porter

On Friday, the Supreme Court ruled five to four that a district court is required to stay pre-trial and trial proceedings while a decision on interlocutory appeal as to the question of arbitrability is ongoing.¹ In an opinion by Justice Brett Kavanaugh, the Court resolved a circuit split over whether a district court must stay proceedings pending interlocutory appeal.

Background

Respondent Abraham Bielski (Bielski) filed a class action complaint against Petitioner Coinbase, Inc. (Coinbase), alleging violations of the Electronic Funds Transfer Act and Regulation E after a scammer transferred assets out of his Coinbase account.² Coinbase moved to compel arbitration based on an agreement to arbitrate disputes over the account present in the Coinbase user agreement.³ The District Court denied the motion after finding the agreement unconscionable, and Coinbase exercised its right to interlocutory appeal provided by Section 16(a) of the Federal Arbitration Act (FAA)⁴ and sought a stay of proceedings pending appeal, which the District Court denied. On appeal before the Ninth Circuit, Coinbase again sought a stay of the District Court proceedings. First, Coinbase urged the Ninth Circuit to reconsider its 1990 decision that refused to grant automatic stays pending interlocutory appeals on arbitrability.⁵ Second, Coinbase argued that it satisfied the four-factor standard that governs discretionary stays.⁶ The Ninth Circuit denied the motion for a stay pending appeal, and Coinbase filed a petition for certiorari.

Prior to Friday's decision, the circuits were split over whether to grant automatic stays pending appeals related to arbitrability. The minority position, first adopted in 1990 by the Ninth Circuit, held that district court proceedings could move forward while an interlocutory appeal over arbitrability was ongoing unless the district court, in its discretion, granted a stay.⁷ The Second and Fifth Circuits adopted this position, reasoning that, as "[a]n appeal of a denial of a motion to compel arbitration does not involve the merits of the claims pending in the district court," the district court retains jurisdiction despite the appeal.⁸ The Seventh Circuit was the first to articulate the majority position in a 1997 decision, reasoning that "[w]hether the litigation may go forward in the district court is precisely what the court of appeals must decide," such that the appeal divests the court of jurisdiction pending a decision.⁹ The Third, Fourth, Tenth...