Reed Smith Client Alerts

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.

Authors: Ed Mullins Zachary J. Kosnitzky

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 to control the case completely. According to the majority, Congress drafted section 16 in light of this idea.

This approach, wrote Justice Kavanaugh, “reflects common sense,” as proceeding with an entire trial would negate the benefits that parties seek to gain by agreeing to arbitration in the first place. The majority continued that “[a] right to interlocutory appeal of the arbitrability issue without an automatic stay of the district court proceedings is therefore like a lock without a key, a bat without a ball, a computer without a keyboard – in other words, not especially sensible.”