The Supreme Court, in a 5–4 ruling, has resolved a circuit split on the issue of litigation stays pending appeal of denials of motions to compel arbitration.  In the underlying putative class action, Bielski et al v. Coinbase, Inc., 3:21-cv-07478 (N.D. Cal.), Coinbase moved to compel arbitration of the plaintiffs’ claims, but the motion was denied by the district court.  The Ninth Circuit—in a split from several other Circuits—declined to stay the district court proceedings while the appeal was pending.  The Supreme Court now has ruled that a district court must stay proceedings while an interlocutory appeal on the question of arbitrability is ongoing.  The decision means that defendants should be able to minimize ongoing litigation costs while an appeal of an adverse arbitration decision is pending.

In resolving the split in Coinbase’s favor, the Supreme Court held that “after Coinbase appealed from the denial of its motion to compel arbitration, the District Court was required to stay its proceedings.”  Coinbase, Inc. v. Bielski, No. 22–105, Slip Op. at 10 (U.S. 2023).  The Court observed that its holding followed that of most other Circuits that had faced this question, as well as treatises such as Moore’s and Wright & Miller.  Applying the Griggs principle, the Court explained “[a]n appeal, including an interlocutory appeal, ‘divests the district court of its control over those aspects of the case involved in the appeal.’”  Coinbase at 3 (citing Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982)).  “Because the question on appeal is whether the case belongs in arbitration or instead in the district court, the entire case is essentially ‘involved in the appeal.’”  Id.  Since discovery was part of the district court proceedings that were divested, it would also necessarily be stayed by the appeal.  The majority held that the need for a stay is “common sense,” as absent the stay, the benefits of arbitration, such as efficiency and lessened cost, would be “irretrievably lost.”  Id. at 5-6. 

The Court rejected Bielski’s arguments against application of the Griggs rule.  Among other things, the Court saw no evidence that Circuits applying Griggs were subject to frequent frivolous appeals, and it pointed out that courts have other tools for dealing with that problem if it arises.  The Court also found that ordinary discretionary stay factors are insufficient to protect parties’ rights in this context, “because courts applying that test often do not consider litigation-related burdens . . . to constitute irreparable harm,” whereas that harm is specifically at issue in the context of arbitration rights.  Id. at 9-10.  Finally, the Court rejected Bielski’s reliance on precedent holding that “questions of arbitrability are severable from the merits of the underlying disputes,” as “the sole issue here is whether the district court’s authority to consider a case is involved in the appeal when an appellate court considers the threshold question of arbitrability.”  Id. at 10 (citations omitted).

The dissenting opinion, written by Justice Jackson and joined by Justices Sotomayor and Kagan, and Thomas in part, disagreed that the stay should be mandatory.  The dissent argued that for most interlocutory appeals, the district court retains the remainder of the case, and has the discretion to stay those parts, and that the “discretionary decisionmaking promotes procedural fairness because it allows for a balancing of all relevant interests.”  Dissent at 1.  Justice Jackson wrote that the “mandatory-general-stay rule for interlocutory arbitrability appeals comes out of nowhere,” and will “perpetually favor[] one class of litigants—defendants seeking arbitration.”  The dissent also argued that the original federal interlocutory-appeal statute “cemented a background discretionary-stay rule that governed even where Congress was silent,” id. at 6, and that the policy considerations underlying Griggs don’t support a mandatory stay rule in this context.  Finally, the dissent warned that the majority’s logic could potentially apply to a “wide array of appeals,” and that “[t]aken that broadly, the mandatory-general-stay rule the Court adopts today would upend federal litigation as we know it” because “defendants would presumably pursue [this] tactic at every opportunity” to stop a plaintiff’s case.  Id. at 14.