{"id":606,"date":"2023-06-25T11:00:15","date_gmt":"2023-06-25T15:00:15","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=606"},"modified":"2023-06-25T11:00:15","modified_gmt":"2023-06-25T15:00:15","slug":"u-s-supreme-court-orders-automatic-stays-of-district-court-proceedings-when-parties-appeal-denials-of-motions-to-compel-arbitration","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2023\/06\/25\/u-s-supreme-court-orders-automatic-stays-of-district-court-proceedings-when-parties-appeal-denials-of-motions-to-compel-arbitration\/","title":{"rendered":"U.S. Supreme Court Orders Automatic Stays Of District Court Proceedings When Parties Appeal Denials Of Motions To Compel Arbitration"},"content":{"rendered":"

\"\"<\/a>By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr.<\/strong><\/p>\n

Duane Morris Takeaways<\/em>:<\/strong> On June 23, 2023, the U.S. Supreme Court issued a 5-4 ruling that is welcome news to parties seeking to enforce arbitration agreements.\u00a0 In Coinbase, Inc. v. Bielski,<\/a> No. 22-105 (U.S. June 23, 2023), the Supreme Court decided that district courts must stay all proceedings after denying a motion to compel arbitration once the moving party appeals the denial.\u00a0 Such appeals are allowed on an interlocutory basis under the Federal Arbitration Act (FAA), but the FAA is silent as to a stay pending appeal.\u00a0 This ruling is significant because parties seeking to resolve claims in arbitration will no longer be required to litigate whether the district court should stay its consideration of the case until their appeal is decided.\u00a0 They also will be spared proceeding with discovery and motion practice in the district court while their appeal of the denial of arbitration is pending.\u00a0 As the majority explained in its opinion, this will further the purposes of arbitration (efficiency, less expense, and less intrusive discovery), save scarce judicial resources, and reduce pressure on defendants to settle.<\/p>\n

<\/em>Case Background<\/strong><\/p>\n

Abraham Bielski brought a class action lawsuit in the U.S. District Court for the Northern District of California against Coinbase, Inc., a company that operates an online platform where users buy and sell cryptocurrencies as well as government-issued currencies.\u00a0 Slip Op. at 1.\u00a0 Coinbase\u2019s User Agreement contained a provision requiring binding arbitration of any disputes arising from use of the platform. Id<\/em>. As a result, Coinbase moved to compel arbitration, but the district court denied its motion.\u00a0 Id<\/em>. at 1-2.\u00a0 Coinbase filed an appeal to the Ninth Circuit under 9 U.S.C. \u00a7 16(a), the FAA\u2019s provision that allows interlocutory appeals of denials of such motions.\u00a0 Id<\/em>. at 2.\u00a0 At the same time \u2013 as is customary \u2013 Coinbase moved the district court to stay proceedings pending the Ninth Circuit\u2019s decision on the arbitrability of the dispute between itself and Bielski.\u00a0 Id<\/em>.\u00a0 The district court denied the motion, so Coinbase had to expend even more resources asking the Ninth Circuit to order a stay of the district court\u2019s proceedings.\u00a0 That motion, too, was denied, based on Ninth Circuit precedent holding that a denial of a motion to compel arbitration does not automatically stay proceedings.\u00a0 Id<\/em>. (citing Britton v. Co-op Banking Group.<\/em>, 916 F.2d 1045, 1412 (9th Cir. 1990). \u00a0The U.S. Supreme Court granted certiorari to resolve a split between the circuit courts on the issue, citing Bradford-Scott Data Corp. v. Physician Computer Network, Inc.<\/em>, 128 F.3d 504, 506 (7th Cir. 1997), among other circuit court decisions contrary to the Ninth Circuit\u2019s rule.<\/p>\n

The Supreme Court\u2019s Decision<\/strong><\/p>\n

Justice Kavanaugh authored the majority opinion, which was joined by Chief Justice Roberts and Justices Alito, Gorsuch and Barrett.\u00a0 The question presented was \u201cwhether the district court must stay its pre-trial and trial proceedings while the interlocutory appeal is ongoing.\u201d\u00a0 Slip Op. at 1.\u00a0 In explaining its answer, which is \u201cyes,\u201d the majority first pointed to the section of the FAA that allows interlocutory appeals where motions to compel arbitration are denied by federal district courts, noting that it is \u201ca rare statutory exception to the usual rule\u201d precluding appeals before final judgment.\u00a0 Id.<\/em> at 1, 3.\u00a0 The Congress did not include any language in \u00a7 16(a) of the FAA relating to stays during the interlocutory appeal process.\u00a0 However, the majority placed the enactment of that section within \u201ca clear background principle prescribed by this Court\u2019s precedents\u201d \u2013 namely, that an appeal \u201cdivests the district court of its control over those aspects of the case involved in the appeal.\u201d\u00a0 Id.<\/em> (citing Griggs v. Provident Consumer Discount Co.<\/em>, 459 U.S. 56, 58 (1982).\u00a0 Indeed, Justice Kavanaugh traced that principle all the way back to a Supreme Court decision issued in 1883 entitled Hovey v. McDonald<\/em>, 109 U.S. 150, 157 (1883).<\/p>\n

The majority bluntly stated that \u201c[t]he Griggs <\/em>principle resolves this case.\u201d\u00a0 Id. <\/em>at 3.\u00a0 Relying on \u201ccommon practice\u201d and common sense, they note that leading treatises on litigation in federal courts consider issuing stays pending interlocutory appeals of denials of arbitration to be \u201cthe sounder approach\u201d and desirable.\u00a0 Id<\/em>. at 4-5.\u00a0 The Supreme Court reasoned that it makes sense that \u201cabsent an automatic stay of district court proceedings, Congress\u2019s decision in \u00a7 16(a) to afford a right to an interlocutory appeal would be largely nullified.\u201d\u00a0 Id<\/em>. at 5.<\/p>\n

Beyond this reasoning, the majority also noted the purposes of arbitration and explained that automatic stays will preserve those objectives of efficiency, reduced litigation cost, and reduced discovery burdens on the parties.\u00a0 Id<\/em>. at 6.\u00a0 Defendants in class actions in particular are subject to immense pressure to settle cases where arbitration motions are denied, presenting a \u201cpotential for coercion . . . where the possibility of colossal liability can lead to what [are] called \u2018blackmail settlements.\u2019\u201d\u00a0Id<\/em>. at 6.<\/p>\n

The majority also noted that allowing a case to proceed simultaneously in district court and the court of appeals leads to a distinct possibility that scarce judicial resources will be wasted if, for example, the parties litigate a dispute in the district court, only for the court of appeals to reverse and order that very same dispute to binding arbitration.\u00a0 Id<\/em>.<\/p>\n

Implications for Employers<\/strong><\/p>\n

As any employer knows who has been sued by a named plaintiff in a class action despite that plaintiff having signed an arbitration agreement with a class action waiver, the Supreme Court\u2019s decision in Coinbase<\/em> is a very welcome development.\u00a0 With potentially thousands of absent class members\u2019 claims at issue, a district court\u2019s denial of an employer\u2019s motion to enforce its arbitration agreement can be an earth-shattering development.\u00a0 In addition, employers with nationwide operations now have a single, uniform rule that applies to this situation, bringing certainty to the law and one common rule in each and every circuit court.\u00a0 The Supreme Court\u2019s decision is, therefore, a highly significant development in the law regarding arbitration.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr. Duane Morris Takeaways: On June 23, 2023, the U.S. Supreme Court issued a 5-4 ruling that is welcome news to parties seeking to enforce arbitration agreements.\u00a0 In Coinbase, Inc. v. Bielski, No. 22-105 (U.S. June 23, 2023), the Supreme Court decided that district … <\/p>\n

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