U.S. Supreme Court Mandates that Federal District Courts Must Stay All Proceedings While an Interlocutory Appeal on Arbitrability is Pending

Coinbase, Inc. operates an online cryptocurrency exchange platform. To gain access to Coinbase’s platform, individuals must create a Coinbase account, which requires them to sign Coinbase’s user agreement. This agreement contains an arbitration clause that requires the parties to resolve all disputes through arbitration.

Bielski, a Coinbase user, brought an action against Coinbase in the U.S. District Court for the Northern District of California, on behalf of Coinbase users, alleging the company failed to replace funds that were fraudulently taken from the users’ accounts. Coinbase filed a motion to compel arbitration, which the Court denied. Coinbase filed an interlocutory appeal of the denial of its motion in the Ninth Circuit Court of Appeals, while simultaneously filing a motion to stay all proceedings in the District Court until after the Ninth Circuit ruled on the arbitrability issue. The District Court declined to stay the proceedings, and Coinbase also appealed that denial to the Ninth Circuit. Following its precedent, the Ninth Circuit declined to stay the proceedings. Noting that most other Courts of Appeal who have considered the issue have held that all proceedings in a district court must be stayed while the interlocutory appeal was being decided, the Supreme Court granted certiorari to resolve that disagreement among the Courts of Appeal.

In a 5-4 decision, the Court reversed the Ninth Circuit and held that a district court must stay all pretrial and trial proceedings until the court of appeals decides the issue of arbitrability. Writing for the Court, Justice Kavanagh stated that staying all proceedings on the trial level is consistent with the principle that a district court should not exercise jurisdiction over those aspects of the case involved in a pending appeal. The Court reasoned that, since the central question in Coinbase’s motion to compel is whether the parties must arbitrate the dispute, the entire action is “involved in the appeal”—thus requiring a mandatory stay of the trial court proceedings. Further, the Court stated a stay pending the interlocutory appeal of a motion to compel arbitration was “common sense,” because allowing proceedings to move forward during such an appeal would essentially nullify the right to an interlocutory appeal. It also pointed out that the benefits of arbitration would be “irretrievably lost” if the District Court moved forward with the trial of the matter while the appeal on arbitrability was pending.

In writing for the Dissent, Justice Jackson stated that the Court’s decision was not derived from a federal statute or the Court’s precedent, and “comes out of nowhere.” She wrote that the mandatory-general-stay rule “manufactured” by the majority decision represented a significant departure from the traditional approach of deferring to the trial judge’s determinations. Her dissent stated this decision created a windfall for one class of litigants, defendants seeking arbitration, and prevents courts from “crafting case-specific solutions to balance all the interests at stake.” Justice Jackson warned that a broader application of this rule could significantly alter the face of federal litigation as we know it, enabling litigants to trigger a mandatory stay by tactically filing an interlocutory appeal.


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