The Supreme Court Created A New Rule For Staying Cases Pending Interlocutory Appeal Of Order Denying Motion To Compel Arbitration.
Prof. Ronald Mann provides an excellent review in ScotusBlog of the Supreme Court's decision in Coinbase v. Bielski, No. 22-105 (S.Ct. 6/23/23). The majority opinion, authored by Justice Brett Kavanaugh, holds that a district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing.
In federal court, the general rule is that an interlocutory review of a trial court order leaves the rest of the case intact in the trial court. However, a party that wants to stay the case pending the review can seek a particularized determination from the trial court as to whether its proceedings should be stayed. As the dissent summarizes in Coinbase, the determination will hinge on consideration of "likelihood of success on the merits, irreparable harm, favorable balance of equities, and alignment with the public interest."
However, in Coinbase, the Supreme Court considered whether there should be a blanket stay rule, rather than a particularized determination, in the context of 9 USC § 16(a). This section of the Federal Arbitration Act allows a party to immediately appeal from an order denying a petition to order arbitration.
Justice Kavanaugh acknowledged that § 16 does not state whether proceedings should be stayed pending appeal. However, he believed a stay would prevent a detrimental result if the matter could be entirely litigated without a stay, only to find out that it should have been arbitrated.
COMMENTS. Justice Ketanji Brown Jackson dissented, joined by Justices Elena Kagan and Sonia Sotomayor and mostly by Justice Clarence Thomas. Aside from the legal arguments, it is pretty easy to understand why the liberal justices dissented. The majority created a bespoke rule for defendants who oppose arbitration -- in this case, for a cryptocurrency company seeking to avoid class action litigation. This ability to stay is not symmetrical, because under § 16(b), an interlocutory appeal may not be taken from an order requiring arbitration. Therefore, employees and consumers bringing class action litigation will not be able to appeal from orders requiring them to arbitrate, and thus will not be able to stay arbitration. Why Justice Thomas joined with his liberal brethren is less easy to explain. Perhaps he agreed with their reasoning?
Ronald Mann notes that this case concerning arbitration may have much broader impact, if its ruling is extended to other federal cases where interlocutory appeals are available. If there is an across-the-board rule that in such cases, there should be a stay to prevent further proceedings below, then the rule requiring particularized examination of the justification for a stay will no longer apply.
We note that the result in Coinbase v. Bielski is likely the same result that would have occurred if the case had been brought in California state court (we only say "likely", because California state courts are more likely to push back against mandatory arbitration). In California, an order denying a motion to compel arbitration is appealable, and the appeal will stay proceedings below. But an order granting a motion to compel arbitration is not appealable. In some circumstances, it may be challenged by writ. Zembesch v. Superior Court, 146 Cal.App.4th 153 (2006).
Comments