district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing. Justice Kavanaugh delivered the opinion of the Court, with Justices Roberts, Alito, Gorsuch, and Barrett joining the majority. Justice Jackson filed a dissenting opinion, in which Justices Sotomayor and Kagan joined in full, and in which Justice Thomas joined in part. The 5-4 decision has far-reaching implications for class action strategy and practice when arbitration provisions are at issue.The Underlying Dispute Concerning Whether Proceedings Must Be Stayed Pending Arbitration AppealsIn the underlying case, Coinbase filed a motion to compel arbitration based on its user agreement following the filing of a putative class action on behalf of Coinbase users who alleged the company failed to replace funds fraudulently taken from user accounts. The district court denied that motion. Coinbase filed an interlocutory appeal to the Ninth Circuit under Federal Arbitration Act, 9 U. S. C. §16(a). Section 16(a) authorizes an interlocutory appeal from the denial of a motion to compel arbitration. Coinbase also moved to stay its proceedings before the district court pending resolution of the appeal. The district court denied Coinbase’s motion to stay, and the Ninth Circuit also denied an application for a stay pending appeal.The Ninth Circuit’s decision highlighted a circuit split on the question of whether courts have discretion to deny a stay under the traditional factors or whether underlying proceedings must be automatically stayed. Six circuits—the Third, Fourth, Seventh, Tenth, Eleventh, and D.C. Circuits—have held that a non-frivolous appeal of the denial of a motion to compel arbitration divests the district court of jurisdiction, thereby automatically staying proceedings in the district court. Three circuits—the Second, Fifth, and Ninth Circuits—have held the opposite. Although the First Circuit had not specifically addressed the issue, two courts within the First Circu

On June 23, the Supreme Court held that proceedings in federal district court must be stayed during an interlocutory appeal from an order declining to enforce an arbitration agreement. Such an order can be appealed immediately under section 16(a) of the Federal Arbitration Act (FAA), 9 U.S.C §16(a). Coinbase, Inc. v. Bielski, ____ U.S. ____, No. 22-105.The appellant, Coinbase, Inc., is an online platform on which users can buy and sell cryptocurrencies. Coinbase requires its customers to sign a user agreement mandating arbitration of disputes arising out of the agreement. Bielski, a Coinbase user, filed a putative class action complaint in the U.S. District Court for the Northern District of California, alleging that Coinbase failed to replace funds fraudulently taken from his and other users’ accounts. The district court denied Coinbase’s motion to compel arbitration, and Coinbase filed an appeal to the Ninth Circuit under §16(a). Coinbase filed motions in the district court and in the Ninth Circuit requesting a stay of proceedings during the appeal, but both motions were denied.In an opinion for the Court authored by Justice Brett Kavanagh, the five-justice majority noted that §16(a), signed into law by President Ronald Reagan in 1988, is one of the rare statutes that allows a

On June 23, 2023, in Coinbase v. Bielski, the Supreme Court issued a ruling holding that a district court must stay its proceedings while an interlocutory appeal of the issue of arbitration is ongoing. The 5-4 decision resolves a circuit split on the issue, and has far-reaching implications on motions to compel arbitration.The case arose from a putative class action brought by plaintiff Abraham Bielski, on behalf of Coinbase users, in the U.S. District Court for the Northern District of California. The defendant Coinbase, an online cryptocurrency platform, file a motion to compel arbitration, contending that its User Agreement required arbitration of the dispute. The District Court denied the motion to compel arbitration. Coinbase then filed an interlocutory appeal under the Federal Arbitration Act 9 U.S.C. §16(a) to the Ninth Circuit Court of Appeals. Coinbase also moved to stay the trial proceedings in the District Court while the issue of arbitrability was determined. The Ninth Circuit denied the stay, and permitted the trial court to proceed with trial proceedings. The Supreme Court reversed and remanded this ruling.The Court considered the issue of whether a district court must stay its pre-trial and trial proceedings while an interlocutory appeal under §16(a) is ongoing. The Supreme Court ultimately determined that a district court must stay its proceedings. §16(a) authorizes the immediate interlocutory appeal of the denial of a motion to compel arbitration. Notably, §16(a) does not explicitly state whether proceedings must be stayed, but a majority of Courts of Appeals to consider the issue have held that district courts must stay trial proceedings while the interlocutory appeal is ongoing.Justice Kavanaugh, writing for the majority, primarily relied on a previous ruling,Griggs v. Provid

[co-author: Zachary Kosnitzky]On June 23, 2023, the U.S. Supreme Court issued a narrow 5-4 decision in Coinbase, Inc. v. Bielski, 2023 U.S. LEXIS 2636, at *1 (U.S. June 23, 2023), holding that a district court must stay its proceedings while an interlocutory appeal of a denial of a motion to compel arbitration is ongoing.Specifically, the Supreme Court reversed the Ninth Circuit’s decision to decline the stay brought by defendant Coinbase. Coinbase challenged the district court’s denial of its motion to compel arbitration pursuant to section 16 of the Federal Arbitration Act (FAA). 9 U.S.C. section 16(a)(1). Section 16 allows movants to seek an interlocutory appeal of the denial of a motion to compel arbitration, but it does not say whether that appeal triggers a general stay during the appeal.The circuits were split. Most circuit courts had held that an appeal of the denial of a motion to compel arbitration automatically stays the trial court proceedings. The Second, Fifth, and Ninth Circuits held that it does not. The Court resolved this split in favor of the majority view.In the majority opinion by Justice Kavanaugh, the Court relied on its interpretation of the text of section 16, as well as the Griggs principle 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.’” Furthermore, whether a case is triable is an issue that extends to “the entire case.” Therefore, according to the majority, an appeal on the question of arbitration versus trial must divest the district court of its ability

Executive Summary: On June 23, 2023, in a 5-4 decision, the U.S. Supreme Court held that district courts (i.e. federal trial courts) must stay pre-trial and trial proceedings while an appeal of a decision denying a motion to compel arbitration is pending.See Coinbase, Inc. v. Bielski, 599 U.S. ___ (2023). Although this is a non-employment case, the Court’s decision is significant for employers because it may impactthe effectiveness and enforceability of arbitration agreements under the Federal Arbitration Act.BackgroundIn Coinbase, a Coinbase user filed a putative class action complaint against the company claiming it failed to replace funds fraudulently taken from users’ accounts. Coinbase filed a motion to compel arbitration pursuant to an arbitration provision in the User Agreement that the users signed when becoming users of Coinbase.The district court denied the motion, and Coinbase filed an interlocutory appeal to the Ninth Circuit under 9 U.S.C. §16(a). Coinbase also requested the district court stay further proceedings pending a decision on the interlocutory appeal.The district court declined to issue a stay, and the Ninth Circuit also declined to stay further proceedings pending a decision on the appeal.Supreme Court DecisionThe Supreme Court agreed to review the case to resolve a split among federal appeals courts regarding whether to stay district court proceedings pending the resolution of an appeal of a denial of a motion to compel arbitration. In concluding that district court proceedings must be stayed, the Supreme Court reiterated that “[t]he Federal Arbitration Act governs arbitration agreements” and that while Section 16(a) does not indicate whether a district court must stay proceedings pending resolution of an interlocutory appeal, such answer must be yes.The Court relied heavily on its prior decision in Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982), to state that “[a]n appeal, including an interlocu

Before appealing an order on a motion or petition to compel arbitration, consider the following principles and pitfalls:FAA appellate jurisdiction extends to orders “refusing a stay of any action under section 3” and orders “denying a petition under section 4 … to order arbitration to proceed.” 9 U.S.C. § 16(a)(1)(A)-(B). Section 16 promotes appeals from orders denying arbitration and limits appeals directing arbitration, consistent with Congress’s intent to have arbitrable disputes proceed quickly to arbitration.

y 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.DecisionThe 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 qu

Although many construction contracts contain arbitration provisions, it is not always clear whether a particular dispute is subject to arbitration and, in some cases, a party may seek to litigate a dispute rather than demand arbitration. In those cases, a defendant may move to compel the dispute to arbitration and seek a stay of further proceedings in the litigation. The right to an interlocutory appeal of a federal court’s denial of a motion to compel arbitration was granted via a 1988 amendment to the Federal Arbitration Act codified at 9 U.S.C. § 16(a). But, when a court denies a motion to compel arbitration, Section 16(a) does not state that the district court proceedings must be stayed pending the appeal, and not all federal courts have agreed on the issue. The Ninth Circuit Court of Appeals, for example, has not adhered to the principle of staying proceedings during the interlocutory appeal, whereas the Seventh Circuit and Eleventh Circuit, among others, have held that district court proceedings should be stayed.On Friday, the U.S. Supreme Court, in Coinbase, Inc. v. Bielski,resolved that split and held that the “common sense” approach, and the one required by the Court’s prior holding in Griggs v. Provident Consumer Discount Co., is that “a district court [must] stay its proceedings while the interlocutory appeal on the question of arbitrability is ongoing.”The Court reached its conclusion after explaining that allowing district court proceedings to march on while the question of arbitrability is appealed would eviscerate many o

The court denied MF Global’s motion seeking leave to appeal the bankruptcy court’s arbitration order and for a stay of the arbitration pending that appeal. Allied World argued that 9 U.S.C. § 16(b) prohibits interlocutory appeals for orders compelling arbitration, and that the exception to the statute was not satisfied in this case. The listed exception, 28 U.S.C. § 1292(b), provides for district court certification of interlocutory orders for appeal to circuit courts but does not apply to appeals from bankruptcy courts to district courts under § 158(a).

he theory that allowing litigation to proceed while an appeal is pending eviscerates the benefits sought to be achieved through arbitration, such as less costly proceedings. A minority of circuits, however, including the Second, Fifth, and Ninth Circuits, have concluded that the decision whether to stay is discretionary. The Supreme Court granted Coinbase’s petition for certiorari to resolve this split.In reversing the Ninth Circuit and resolving the circuit split, the slim Supreme Court majority relied primarily on Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982). Griggs held that any appeal — including an interlocutory appeal — divests the district court of jurisdiction over those aspects of the case “involved in the appeal.” According to the majority, this “Griggs principle” requires the district court to stay its proceedings while an interlocutory appeal on arbitrability is ongoing.As the Court explained, that 1988 amendment to the Federal Arbitration Act, codified at 9 U.S.C. §16(a), permits interlocutory appeal by right from a district court order denying a party’s motion to compel arbitration — creating a rare statutory exception to the usual procedural rule that parties may not appeal before final judgment. While §16(a) does not address whether the district court proceedings must be stayed while the interlocutory appeal proceeds, the majority concluded that Griggs requires that result. The Court explained that, in appeals from orders denying motions to compel arbitration, the question on appeal is whether the case belongs in arbitration or instead in the district court. Since “the entire case is essentially ‘involved in the appeal,'” the Court reasoned, the district court has no choice but to stay its proceedings while the interlocutory appeal on arbitrability is ongoing.In the majority opinion, Justice Kavanaugh focused on the waste of resources that occurs by allowing litigation and an appeal to proceed simultaneously, stating: “From the Judiciary’s institut