Supreme Court Requires Stay Of Litigation Pending Appeal Of A Denial Of A Motion To Compel Arbitration

• Jurisdiction: United States,Federal
• Law Firm: Ford & Harrison LLP
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Employee Rights/ Labour Relations, Arbitration & Dispute Resolution, Class Actions, Trials & Appeals & Compensation
• Author: Richard Bahrenburg
• Published date: 03 July 2023

Executive Summary: On June 23, 2023, in a 5-4 decision, the U.S. Supreme Court held that district courts (i.e. federal trial courts) must stay pre-trial and trial proceedings while an appeal of a decision denying a motion to compel arbitration is pending. See Coinbase, Inc. v. Bielski, 599 U.S. ___ (2023). Although this is a non-employment case, the Court's decision is significant for employers because it may impact the effectiveness and enforceability of arbitration agreements under the Federal Arbitration Act.

Background

In Coinbase, a Coinbase user filed a putative class action complaint against the company claiming it failed to replace funds fraudulently taken from users' accounts. Coinbase filed a motion to compel arbitration pursuant to an arbitration provision in the User Agreement that the users signed when becoming users of Coinbase. The district court denied the motion, and Coinbase filed an interlocutory appeal to the Ninth Circuit under 9 U.S.C. '16(a). Coinbase also requested the district court stay further proceedings pending a decision on the interlocutory appeal. The district court declined to issue a stay, and the Ninth Circuit also declined to stay further proceedings pending a decision on the appeal.

Supreme Court Decision

The Supreme Court agreed to review the case to resolve a split among federal appeals courts regarding whether to stay district court proceedings pending the resolution of an appeal of a denial of a motion to compel arbitration. In concluding that district court proceedings must be stayed, the Supreme Court reiterated that "[t]he Federal Arbitration Act governs arbitration agreements" and that while Section 16(a) does not indicate whether a district court must stay proceedings pending resolution of an interlocutory appeal, such answer must be yes. The Court relied heavily on its prior decision in Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982), to state that "[a]n appeal, including an interlocutory appeal, divests the district court of its control over those aspects of the case involved in the appeal," and in reasoning that "[a]bsent an automatic stay of district court proceedings, Congress's decision in '16(a) to afford a right to an interlocutory appeal would be largely nullified."

The Supreme Court further noted that:

If the district court could move forward with pre-trial and trial proceedings while the appeal on arbitrability was ongoing...