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-- https://tinyurl.com/546zn456 and https://tinyurl.com/2r5snu79

More Arbitration Argument Before SCOTUS

Today, the U.S. Supreme Court (SCOTUS) has oral arguments in two arbitration cases. In the first matter, Henry Schein, Inc. v. Archer & White Sales, Inc., the justices consider if a judge or an arbitrator should decide if a particular dispute should be resolved in arbitration rather than in court. In the second case, Lamps Plus Inc. v. Varela, the issue is whether the Federal Arbitration Act (FAA) precludes state law interpretation of arbitration contracts allowing for class arbitration and who decides whether a particular dispute should be decided in arbitration rather than a court. SCOTUS has already recognized that arbitrators decide issues of arbitrability if the parties clearly and unmistakably agree the arbitrator can assess whether any particular dispute is sufficiently related to the contract to warrant arbitration. Apparently, the U.S. Court of Appeals for the 5th Circuit will not send a case to the arbitrator decide the question of arbitrability, even if the parties have agreed that the arbitrator should decide such questions, if the court finds the claim of arbitrability wholly groundless. The contract in the first case mentioned above provided for arbitration of any dispute arising under or related to the contract, except for actions seeking injunctive relief. The complaint sought damages for Sherman Act violations, as well as injunctive relief. The defendants sought arbitration, arguing the thrust of the complaint was to seek damages, and that injunctive relief could issue after the arbitrator ruled on the merits. Lower courts refused to send the matter to arbitration, finding the request for arbitration groundless because of the inclusion in the complaint of a count for injunctive relief. Because SCOTUS already decided parties can delegate issues of arbitrability to an arbitrator in precedents that do not include exceptions for cases in which courts regard the request for arbitration as groundless, a reversal is likely given recent trends in favor of arbitration. The second case hinges on whether the U.S. Court of Appeals for the 9th Circuit correctly held that an employer did consent to class arbitration when it included language in the arbitration contract that committed the parties to use arbitration in lieu of any and all lawsuits or other civil legal proceedings. This case too may find itself going back, but on procedural grounds as the FAA dictates that an appeal may not be taken from an interlocutory order directing arbitration to proceed. See more here-- https://bit.ly/2AzcN6e and https://bit.ly/2JodgdX and https://bit.ly/2w5K2O8