Saturday, July 1, 2023

SCOTUS Stays Cases during Arb Appeals

The U.S. Supreme Court held last week that non-final appeals on arbitrability would stay litigation automatically while decided. This case arose from a class action between the cryptocurrency platform Coinbase and its users. The terms and conditions of the site required users to submit disputes to mandatory arbitration. The named plaintiff sued in federal court, arguing that the arbitration agreement was unenforceable. When the district court agreed, Coinbase appealed that decision to the Ninth Circuit seeking an interlocutory order that would stay the lawsuit until the appeal on arbitration could be heard. In conflict with decisions from other federal appellate courts, the Ninth Circuit rejected that position. In a 5-4 decision, the Supreme Court reversed the Ninth Circuit, finding a right to an interlocutory appeal of a decision not to enforce a mandatory arbitration agreement. The Court noted requiring cases to proceed to trial before hearing such appeals would defeat the purpose of using arbitration in the first place. As a result, an appeal of a district court’s decision to invalidate or enforce and arbitration agreement will be given an automatic stay of the matter pending the appeal. The Court opined it makes sense that absent an automatic stay of district court proceedings, Congress’s decision to afford a right to an interlocutory appeal in Section 16 of the Federal Arbitration Act (FAA) would be largely nullified. Beyond this reasoning, the majority also noted the purposes of arbitration and explained that automatic stays will preserve those objectives of efficiency, reduced litigation cost, and reduced discovery burdens on the parties. See more on Case No. 22-105 here-- and