Defense Friends: Coinbase’s #SCOTUS Amicus On Why the Ninth Circuit Should Be Reversed

Posted By: Cenadra Gopala-Foster CPR Speaks,

By Cenadra Gopala-Foster

A batch of amicus filers have emerged on the defense side in the only Supreme Court arbitration case to be argued in the 2021-2022 term.

The U.S. Supreme Court will hear oral arguments for Coinbase Inc. v. Bielski, No. 22-105, on March 21. See CPR Speaks post here.

The main issue in the case is whether a non-frivolous appeal of the denial of a motion to compel arbitration ousts a district court’s jurisdiction to proceed with litigation pending appeal. 

There is a circuit split on the point. Currently, the Ninth U.S. Circuit Court of Appeals applies the minority rule—that there is not an automatic stay of the litigation proceedings pending an appeal of a denial motion to compel arbitration, and the appeal does not divest the district court of jurisdiction to proceed with the litigation pending appeal.

Coinbase notified the Supreme Court that the Ninth Circuit has deferred its appellate decision—not wanting to interfere with the Supreme Court’s decision but further underscoring the urgency of the Court’s review.

The issue has attracted numerous groups and their opinions on how the Supreme Court should rule. Seven amicus briefs were submitted to the Court on Jan. 27, all outlining why they believed the Court should rule in favor of the petitioner, Coinbase Inc., and stay the litigation while the arbitration denial was appealed.

Today, three amicus briefs were filed on behalf of the respondents, who were the original plaintiffs in the case seeking to avoid arbitration with Coinbase. CPR Speaks will examine the respondents' side--the original petitioners in the two consolidated cases--ahead of the March 21 arguments.

While all of the briefs filed before Feb. 28 agreed the minority rule should be overruled by the Court, they each have a unique perspective on the issue and their motivations for sharing their legal theories with the Court.

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The National Retail Federation, a 111-year old trade association in Washington, D.C., representing retailers of all sizes, formats, and channels of distribution, states that its interest is based on its membership routinely entering into arbitration agreements with employees and customers alike. It says that the minority rule would allow arbitration to be denied despite the Federal Arbitration Act’s protections.

The brief’s main point is that forcing parties to litigate during an appeal “deprives them of the substantive protections of the FAA, which entitles parties to resolve disputes under simplified and streamlined procedures rather than the complex rules governing litigation in court.” Available at page 5 of the brief, here.  

The Atlantic Legal Foundation, a Washington, D.C.-based national nonprofit public interest law firm that advocates for free enterprise and limited government, filed a brief centering on the foundation’s stance that arbitration is an efficient, speedier, less expensive alternative to litigation involving disputes between corporations, companies, individual consumers, and employees.

The foundation’s main motivation is to highlight the practical problems a defendant can suffer if forced to proceed in district court while an appeal is pending to compel arbitration. The brief emphasizes that the “burdens of discovery, and the risk of settlements aimed at avoiding those burdens, are particularly acute in class action litigation.” Available at page 7 of the brief, here. 

Courts and commentators, the brief states, have long “noted the risk of ‘in terrorem’ settlements that class actions entail.” (Citations omitted.) The brief continues, “The risk of devastating liability is not the only reason that class action defendants face intense pressures to settle. The cost of merely litigating such cases is so great that settlement is often the only economically sensible decision. This concern is real, not hypothetical.”

Overall, the foundation aims to underscore the importance of preserving the cost-saving benefits of arbitration that the parties bargained for by staying district court proceedings pending such an appeal.

The Retail Litigation Center Inc., based in Washington, provides courts with the retail industry’s perspective on a range of legal issues affecting its members. The RLC’s interest in submitting an amicus brief is to show its members’ support for the low costs and streamlined advantages of arbitration, rather clogging up the courts.              

The RLC brief focuses on the harmful effects of the minority rule that the filing of an appeal denying arbitration doesn’t stay the litigation toward not only defendants, but also injured consumers. Arbitration is the preferable method of dispute resolution to consumers with legitimate claims, the brief states, citing a study in the period from 2014 to 2021 when “consumers initiated and prevailed in 41.7% of arbitrations that terminated with an award, while they prevailed in only 29.3% of litigations during the same period.” Available at page 13 of the brief, here.

Furthermore, when these consumers prevailed, their average and median arbitration awards were significantly higher than in litigation, the RLC reports, with “an average of $79,945 ($20,356 median) in arbitration, compared with an average of $71,354 ($6,669 in median) in litigation.”

The Civil Justice Association of California, a nonprofit in Sacramento, Calif., representing businesses, professional associations, and financial institutions, says its mission is to educate the public about ways to make civil liability laws more fair, certain, economical and efficient. Its main interest in Coinbase is focused on California being part of the Ninth Circuit, the source of the underlying case the brief seeks to reverse.

By denying an automatic stay of proceedings pending the appeal of a denial of arbitration, the CJAC brief states, “the Ninth Circuit has effectively eviscerated the ‘two prudential concerns cited by [the majority of] courts requiring automatic stays of litigation pending a § 16(a) appeal: (1) the rights of parties to an arbitration agreement not to be subjected to litigation and (2) general principles of efficiency.’ Roger J. Perlstadt, 'Interlocutory Review of Litigation-avoidance Claims: Insights from Appeals under the Federal Arbitration Act,' 44 Akron L. Rev. 375, 382 (2011).”

The importance of these concerns is compounded by the locations of the circuit split, the brief notes. The Second, Fifth and Ninth Circuits include massive financial and commercial centers--New York, Texas and California. Therefore, “businesses in these important jurisdictions should not have to labor under the existing inefficient and unfair [minority] rule,” according to the brief. “This Court should impose a consistent nationwide rule in favor of an automatic stay of trial level litigation while an appeal is pending from the denial of arbitration.” Available at page 4 of the brief, here. 

The Washington Legal Foundation is a nonprofit, public-interest law firm and policy center with supporters nationwide, based in Washington, D.C. WLF promotes free enterprise, individual rights, limited government, and the rule of law. Its interest is preventing businesses proceeding with costly and burdensome litigation while an arbitrability appeal is pending. “[T]his minority rule wreaks havoc on the FAA and deprives both the parties and the courts of the benefits of arbitration,” the foundation’s brief notes, adding, “The Court should reject this self-defeating approach to the FAA.”

The WLF points directly to the FAA’s intent, which is to force courts to enforce arbitration agreements, chosen by parties because the alternative, litigation, is too expensive. The brief notes that by ensuring that “‘arbitration agreements are made valid and enforceable,’ Congress sought to eliminate ‘the costliness and delays of litigation.’ H.R. Rep. No. 68-96, at 2 (1924).” The Senate Report also “reveals that Congress intended for the FAA to help Americans ‘avoid the delay and expense of litigation.’ S. Rep. No. 68-536, at 3 (1924).” The WLF brief can be found here. 

The brief focuses on the practicable and financial implications of the varying circuit interpretations of the standard relating to commercial business appeals expressed in Griggs v. Provident Consumer Disc. Co., 459 U.S. 56 (1982).

The brief interprets four main points. First, Congress enacted the FAA to create streamlined procedures, and the Ninth Circuit minority rule frustrates this efficiency. Second, the monetary costs of forcing parties to bear both litigation and arbitration costs will be expensive and undercuts a fundamental benefit of arbitration. Third, allowing the district court to continue, potentially, to final judgment, just to be vacated later wastes judicial resources. Fourth, forcing contracting commercial parties to litigate their dispute, rather than arbitrate them, undermines harmonious business relations.

The U.S. Chamber of Commerce and the National Federation of Independent Business Small Business Legal Center (NFIB Legal Center), are ubiquitous presences in arbitration cases before the nation’s highest Court, and have combined on an amicus brief in support of Coinbase. Both are based in Washington and have state affiliates nationwide. Their main interest is their concern over what they state in their brief are the millions of contractual relationships their members have structured around arbitration agreements.

These arbitration agreements allow their members to resolve disputes promptly and efficiently, the brief states, while avoiding the costs associated with traditional litigation based on a reliance on policy reflected in the FAA. Thus, the minority rule “invites precisely ‘the kind of ‘hostility to arbitration'' that the FAA is designed to combat and that [the Supreme] Court has repeatedly warned against. See, e.g., Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 581 U.S. 246, 254 (2017) (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)).” See the parties’ brief here.

The DRI Center for Law and Public Policy is a public policy think tank and advocacy unit of Chicago-based DRI—an international organization of about 14,000 attorneys who represent businesses in civil litigation, formerly known as the Defense Research Institute. Its main interest is that the FAA should receive uniform application across federal circuits in order to ensure that arbitration achieves its basic purpose of resolving disputes efficiently, predictably, and at minimal cost.

DRI stresses that the majority rule serves both the interests of the consumer and businesses. Furthermore, “a clear, bright-line rule better serves the liberal federal public policy favoring arbitration and federal court judicial economy.” The rule does this by freeing up district court resources while a case is on appeal, and preventing unnecessary costs. The amicus brief is available here.

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The author is the 2022-2023 CPR Intern under CPR’s consortium agreement with Washington, D.C.’s Howard University School of Law, where she is a second-year student.