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The Supreme Court recently granted certiorari in a case to resolve a circuit split that has serious implications for companies who are unsuccessful in their efforts to enforce arbitration provisions in federal district courts.
In Coinbase, Inc. v. Bielski, No. 22-105, the defendant moved to compel arbitration in two putative class actions. The motions to compel were denied, and the defendant sought stays while it appealed the denials—which the Federal Arbitration Act gives defendants an automatic right to do. See 9 U.S.C. § 16. Both motions to stay were denied, and the Ninth Circuit affirmed both decisions.
Federal appellate courts are divided over whether litigation must be stayed when a defendant appeals a denial of its motion to arbitrate. The Ninth Circuit was the first to address the issue in 1990 when it held a stay is not required, and the Second and Fifth Circuits followed its lead. Six other circuits—the Third, Fourth, Seventh, Tenth, Eleventh and D.C. Circuits—have all come to the opposite conclusion, holding that an appeal strips the district court of jurisdiction, and the litigation must be stayed until the appeal is resolved.
The Court’s decision could have a significant impact on companies’ risk assessment when seeking to enforce arbitration provisions. In circuits that do not automatically stay proceedings while an appeal of an adverse arbitration ruling is pending, companies face greater cost and higher administrative burden when required to proceed in litigation at the district court while simultaneously appealing the denial of their motion to compel arbitration.
The Court has not yet set a date for argument, but is likely to hear the case in the spring. We will continue to monitor the proceedings and will provide updates on Inside Class Actions.
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