Finally, some efficiency in litigation! Resolving a jurisdictional split created by the Ninth Circuit’s refusal to stay a case when appeal is taken from a decision denying a motion to compel arbitration, the United States Supreme Court recently held that a district court must pause its proceedings while an interlocutory appeal on the question of arbitrability is ongoing.
While the Court’s decision in Coinbase, Inc. v. Bielski, 599 U.S. ____ Case No. 22-105 (2023), involved a class action over cryptocurrency, the decision will have far-reaching impact on a variety of cases – including those involving individual, collective, and class claims (including employment claims) where the parties to the litigation have entered into arbitration agreements.
In Coinbase, the cryptocurrency platform filed a motion to compel arbitration of putative class action claims brought by platform users. The District Court denied the motion, and Coinbase filed an interlocutory appeal to the Ninth Circuit, citing Section 16(a) of the Federal Arbitration Act (“FAA”). Section 16(a) provides for interlocutory appeal, but it is silent on the issue of whether the court should stay litigation during such appeal. As a result, jurisdictions have differed in their determination of whether the appealing party is entitled to such a stay.
Writing for the majority, Justice Kavanaugh explained that the Court’s holding is common sense. Without a stay of the district court’s proceedings, the interlocutory appeal would have little value:
A right to interlocutory appeal of the arbitrability issue without an automatic stay of the district court proceedings is therefore like a lock without a key, a bat without a ball, a computer without a keyboard—in other words, not especially sensible.
(slip op., at 6).
The majority focused on the “longstanding tenant of American procedure” set forth in Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982): 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.’” Id. (slip op., at 3) citing Griggs, 459 U.S. at 58. When a party files interlocutory appeal to address arbitrability, the district court’s right to hear the merits of the claim, and therefore the merits themselves, are necessarily at issue in that appeal.
Parties defending claims subject to arbitration provisions now have more certainty that they will not be forced to litigate those claims even when a district court initially refuses to recognize the right to arbitration. Such judicial efficiency is surprisingly refreshing and should be a win for all litigants. The value of a well-crafted arbitration agreement has just skyrocketed.