On June 23, 2023, the Supreme Court published a slip opinion decision in Coinbase, Inc. v. Bielski, No. 22-105 (U.S. June 23, 2023), which resolved a circuit split over whether a district court must stay proceedings pending interlocutory appeal to compel arbitration. Reversing the Ninth Circuit’s decision by majority opinion, the Supreme Court held that the district court must stay pre-trial and trial proceedings while the issue of arbitrability is litigated on an interlocutory appeal.

The underlying case is a putative class action brought by Coinbase users, who allege that Coinbase failed to replace funds that were fraudulently taken from users’ accounts. Coinbase filed a motion to compel arbitration pursuant to the terms of its User Agreement, which provides for binding arbitration.  The District Court denied the motion to compel arbitration, and Coinbase filed an interlocutory appeal to the Ninth Circuit under Section 16(a) of the Federal Arbitration Act.

Coinbase also moved to stay the court proceedings pending the outcome of the interlocutory appeal. The District Court denied that motion. The Ninth Circuit agreed with the District Court, following its own precedent that appeals from a denial of a motion to compel arbitration do not automatically stay the court proceedings.

The Supreme Court granted certiorari to address the sole question of “whether a district court must stay its proceedings while the interlocutory appeal on arbitrability is ongoing.” The Court held that “[t]he answer is yes.”

In reaching its decision, the Court relied on the Griggs principle, which states that an interlocutory appeal “divests the district court of its control over those aspects of the case involved in the appeal.”  Because the question on appeal is whether the case belongs in arbitration or district court, the Court determined that the entire case is “involved in the appeal.”

The Court reasoned that it is not sensible for district courts to go forward with trials while the appellate courts debate whether the issues should be arbitrated. If litigants were required to move forward with pre-trial and trial proceedings while there is an ongoing appeal on arbitrability, then many of the benefits of arbitration, (i.e., judicial efficiency, cheaper cost, less intrusive discovery, etc.) would be lost. The Court further noted that allowing the case to proceed in court may result in the “worst possible outcome” where parties are required to litigate the dispute in court only to have it later ordered to arbitration.

Questions about this article or parties’ obligations to arbitrate claims can be submitted to Frank J. Cuccio and Patrick J. Medeo.

The authors thank Summer Law Clerk Madeline Humphrey for her assistance with this article.

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