June 30, 2023

Coinbase, Inc. v. Bielski

In a putative class action by users of a cryptocurrency platform, the defendant moved to compel arbitration based on the arbitration provision in its user agreement. The district court refused to compel arbitration, and defendant filed an interlocutory appeal under 9 U.S.C. § 16(a), which permits such an appeal from the denial of a motion to compel arbitration. Defendant moved to stay district court proceedings while the appeal was pending, but both the district court and the Ninth Circuit Court of Appeals denied a stay. Defendant sought review in the United States Supreme Court, noting that other courts of appeals have held that appeals from orders denying motions to compel arbitration automatically stay district court proceedings pending appeal.

The Supreme Court held that when a party files an interlocutory appeal under § 16(a) challenging the denial of a motion to compel arbitration, the district court must stay its proceedings pending appeal. The Court relied on Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982), which held that an interlocutory appeal divests the district court of its authority over the aspects of the case on appeal. The Court reasoned that when the question on appeal is whether the case belongs in arbitration, the entire case is “involved in the appeal,” requiring a stay. The Court added that staying district court proceedings in these circumstances protects the benefits of arbitration, including efficiency and cost-savings, by preventing proceedings that might be unnecessary if the case belongs in arbitration; prevents “forced” settlements that can arise from defendants’ desire to avoid costly district court proceedings, especially in putative class actions; and conserves judicial resources.

The Court was not persuaded by petitioner’s arguments against requiring an automatic stay. For instance, nothing supported the idea that such stays would result in frivolous appeals, and courts of appeals have tools to address frivolous appeals in any event. The Court also disagreed that district courts should retain discretion whether to stay proceedings pending appeal, noting that district courts have denied stays during § 16(a) appeals.