In Coinbase, Inc. v. Bielski, the United States Supreme Court resolved a circuit split on whether district courts should stay proceedings while an interlocutory appeal of a denial of a motion to compel arbitration is ongoing. The Supreme Court held that they should.
Abraham Bielski filed a putative class action lawsuit against Coinbase, Inc. in United States District Court: Northern District of California, alleging that Coinbase failed to replenish funds fraudulently withdrawn from users’ accounts. Coinbase filed a motion to compel arbitration based on the User Agreement, which provides for the resolution of disputes through binding arbitration. The District Court denied the request to compel arbitration. Coinbase filed an interlocutory appeal with the Court of Appeals for the Ninth Circuit under the Federal Arbitration Act, 9 USC ยง 16(a), and decided to stay the District Court proceedings pending appeal. The District Court denied Coinbase’s motion to stay, and the Ninth Circuit Court of Appeals upheld the District Court’s decision not to stay the proceeding based on Ninth Circuit precedent, which states that an appeal to the denial of a motion to compel arbitration does not automatically suspend district court proceedings. Most other Appellate Courts, however, have held that a district court must stay proceedings while an interlocutory appeal of a motion to compel arbitration is pending. Thus, the Supreme Court granted certiorari to settle the division of the circuit.
In a 5-4 decision authored by Justice Kavanaugh, the Supreme Court reversed the Ninth Circuit and held that district courts must stay proceedings while an interlocutory appeal on the issue of arbitrability is ongoing.
The Court acknowledged that the Federal Arbitration Act does not specifically say whether district court proceedings must be suspended pending resolution of an interlocutory appeal. Yet the Court, citing Griggs v. Provident Consumer Discount Company., 459 US 56 (1982), held that a clear underlying principle against which Congress enacted the Federal Arbitration Act was that an appeal removes a district court from its jurisdiction over any aspect of a case involved in the appeal. When the question of the arbitrability of a case is on appeal, the entire case is involved in the appeal by definition, and therefore the district court proceedings must be stayed. The Court explained that its decision reflects common sense, as any other decision would fail to protect the most basic benefits of arbitration: efficiency, less expense and less intrusive discovery. Without a stay, parties could be coerced into settling, especially in class actions, to avoid costly lawsuits. The Court also recognized that, without a stay, the district court will waste judicial resources that could be devoted to other matters.
The dissent, authored by Judge Jackson, criticized the majority for departing from the traditional approach which, according to Judge Jackson, grants the trial judge the discretion to determine whether the underlying case should be stayed. Judge Jackson argued that the majority continued to invent new rules that perpetually favored defendants seeking arbitration.
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While this is a consumer class action case, it does apply to California labor litigation. California state courts already require lower court courts to stay proceedings while the denial of a motion to bind arbitration is pending appeal, including in employment cases. Under Bielskifederal courts of the Ninth Circuit must stay litigation in which an employer appeals the denial of a motion to compel arbitration.
* Mahmood Jeewa is a summer associate at the company’s Century City office.