Coinbase v. Bielski – SCOTUS Authorizes Automatic Stays Pending Decision of Arbitrability
Coinbase v. Bielski – SCOTUS Authorizes Automatic Stays Pending Decision of Arbitrability
In a recent 5-4 decision reversing the Ninth Circuit and settling a circuit split, the Supreme Court of the United States in Coinbase v. Bielski held that a district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing.
The Court’s decision reflects the majority view of the Circuit split, where courts granted the stays automatically, while the Ninth Circuit was one of three circuit courts that left the decision of the stay to the discretion of the district judge or court of appeals.
Calling it a “common sense” decision, the Justices noted that if a district court could move forward with pre-trial and trial proceedings while the appeal on arbitrability was ongoing, the continuation of proceedings in the district court largely defeated the point of the appeal.
The case concerned a putative class action filed against Coinbase, an online platform on which users can buy and sell cryptocurrencies and government-issued currencies. The class action alleged that Coinbase failed to replace funds fraudulently taken from the users’ accounts. The district court denied Coinbase’s motion to compel arbitration. Coinbase then filed an interlocutory appeal on arbitrability in the Ninth Circuit under 9 U.S.C. § 16(a). Section 16(a) expressly authorizes an interlocutory appeal from the denial of a motion to compel arbitration. Coinbase also moved to stay district court proceedings pending resolution of the arbitrability appeal. Both the district court and the Ninth Circuit declined to stay the proceedings.
The Supreme Court reversed the Ninth Circuit, finding that because an appeal on arbitrability was essentially a question to the appellate courts on whether a case belongs in court at all, automatically staying the case was appropriate.
In reaching its decision, the Court depended on its precedent in Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982). The Court emphasized that the “clear background principle” stated in Griggs describes a longstanding precedent: an appeal, including an interlocutory appeal, “divests the district court of its control over those aspects of the case involved in the appeal.” Describing this as “the Griggs principle,” the Court stated that “[b]ecause the question on appeal is whether the case belongs in arbitration or instead in the district court, the entire case is essentially ‘involved in the appeal.’” The Court also noted that congressional history indicated that an automatic stay was appropriate because Congress, when authorizing an interlocutory appeal and the accompanying automatic stay, need not explicitly discuss a stay. In comparison, when Congress wants to authorize an interlocutory appeal but not to automatically stay district court proceedings, Congress typically says so in a statutory “non-stay” provision.
The Court also noted that the benefits of arbitration—efficiency, less expense, and less intrusive discovery—would all be lost by forcing a case to move forward with pre-trial and trial proceedings. Further, absent a stay, parties could potentially be forced to settle to avoid the district court proceedings that they contracted to avoid through arbitration. The Court noted that class actions were particularly susceptible to this coercion. The Supreme Court rejected all five of Bielski’s arguments against the Griggs principle, finding that:
The Court noted, and Coinbase conceded, that the district court may still proceed with matters that are not involved in the appeal, such as the awarding of costs and attorney’s fees.
Justice Ketanji Brown Jackson, joined in full by Justices Sonia Sotomayor and Elena Kagan, and in part by Justice Clarence Thomas, dissented, emphasizing that § 16(a) does not explicitly authorize an automatic stay, and arguing that where Congress is silent, the job of managing litigation “belongs to the judge closest to a case.”
The Federal Arbitration Act allows for interlocutory appeal when a motion to compel arbitration is denied but does not explicitly require litigation be stayed. This led district courts and some circuit courts to be hesitant to stay litigation when arbitrability was being determined. The Bielski decision implements a common-sense automatic stay, allowing parties to save costs and time while determining whether the case belongs in court at all. This will broadly affect parties that use arbitration clauses in their contracts and has clarified an issue that has long affected businesses with large customer bases.