June 23, 2023
Today, in a 5-4 decision written by Justice Kavanaugh, the Supreme Court in Coinbase, Inc. v. Bielski held that an appeal from a denial of a motion to compel arbitration in federal court automatically stays district court proceedings pending appeal, resolving a split among the courts of appeals.
The majority found the Court’s prior decision in Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982), to be decisive. In Griggs, the Court held that an appeal “divests the district court of its control over those aspects of the case involved in the appeal.” Applying that principle to an interlocutory appeal of an order denying a motion to compel arbitration, the Court observed that “the question on [such an] appeal is whether the case belongs in arbitration or instead in the district court,” and thus “the entire case is essentially ‘involved in the appeal.’” Accordingly, the principle from Griggs controlled and required an automatic stay of all proceedings pending resolution of an appeal from an order denying arbitration. The Court further reasoned that “[a]bsent an automatic stay of district court proceedings, Congress’s decision in §16(a) [of the Federal Arbitration Act] to afford a right to an interlocutory appeal would be largely nullified.”
The Court’s decision provides much needed clarity on an important issue and preserves the benefits parties bargain for by entering into an arbitration agreement. As the majority noted, and as discussed by Weil in its amicus brief on behalf of the Chamber of Commerce and the NFIB Small Business Legal Center in support of Coinbase, those benefits are “efficiency, less expense, less intrusive discovery, and the like.” Litigants seeking to enforce arbitration agreements can now rest assured they will not be required to potentially forgo those benefits at the discretion of the district court judge in order to appeal an order denying a motion to compel arbitration. This is particularly impactful in putative class actions, where the “colossal” cost and burden of having to proceed through discovery during the interlocutory appeal might otherwise lead to coercive settlements.
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