On June 23, 2023, the U.S. Supreme Court decided Coinbase, Inc. v. Bielski, holding that litigation in district court is automatically stayed when a party appeals the denial of a motion to compel arbitration, reversing the Ninth Circuit Court of Appeals and settling a circuit split.

When a federal district court denies a motion to compel arbitration, the losing party has a statutory right to an interlocutory appeal under the Federal Arbitration Act. The question in this case was whether the district court must stay its pre-trial and trial proceedings while the interlocutory appeal is ongoing.

Abraham Bielski filed a putative class action against Coinbase, an online platform on which users can buy and sell cryptocurrencies, alleging that Coinbase failed to replace funds fraudulently taken from the users’ accounts. Coinbase moved to compel arbitration, and the Northern District of California denied the motion. Coinbase then filed an interlocutory appeal to the Ninth Circuit and moved to stay district court proceedings pending resolution of the arbitrability issue on appeal. The district court declined to stay the proceedings. The Ninth Circuit likewise refused to stay, following its precedent that an appeal from the denial of a motion to compel arbitration does not automatically stay district court proceedings.

The Supreme Court reversed in a 5-4 decision. Writing for the Court, Justice Kavanaugh explained that a stay in these circumstances is consistent with the general principle that a district court should not exercise jurisdiction over those aspects of the case that are involved in an appeal. “Because the question on appeal is whether the case belongs in arbitration or instead in the district court, the entire case is essentially ‘involved in the appeal.’” Thus, a district court must stay its proceedings while the interlocutory appeal on arbitrability is ongoing.

Justice Kavanaugh also observed that allowing district courts to move forward during the interlocutory appeal would reduce the benefits of arbitration. “If the district court could move forward with pre-trial and trial proceedings while the appeal on arbitrability was ongoing, then many of the asserted benefits of arbitration (efficiency, less expense, less intrusive discovery, and the like) would be irretrievably lost.”

Justice Kavanaugh delivered the Opinion of the Court. Justice Jackson filed a dissenting opinion.

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