#SCOTUS’s Arbitration Appeals: Why the Case Should Continue When a District Court Denies ADR

Posted By: Cenadra Gopala-Foster CPR Speaks,

By Cenadra Gopala-Foster

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

The main issue 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. 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.

As the oral arguments approach next week, more support has flowed in—this time, amicus briefs backing the respondents Abraham Bielski and David Suski, who represent two class actions by Coinbase customers.  Their cases have been consolidated at the Court.

Amicus briefs from the business community in support of Coinbase, a company based on the web which provides a platform for buying and selling digital currency, were filed and then posted by the Court in January.  See Cenadra Gopala-Foster, “Defense Friends: Coinbase’s #SCOTUS Amicus On Why the Ninth Circuit Should Be Reversed,” CPR Speaks (Feb. 28) (available at bit.ly/3TieFHf). For more background on the case, see Cenadra Gopala-Foster, “Arbitration’s SCOTUS Return: Bitcoin Firm Seeks to Halt Litigation While ADR Is on Appeal,” CPR Speaks (Feb. 21) (available at bit.ly/3Jo7JUh).

The respondents are Coinbase accountholders who seek to hold the company accountable for alleged false advertising, unfair competition, and failing to investigate electronic fraud under the Electronic Funds Transfer Act, 15 U.S.C. §§ 1693 et seq., and therefore brought suit against Coinbase.

Here are summaries of the amicus parties supporting the respondents:

The Constitutional Accountability Center, is a Washington, D.C., think tank and public interest law firm “dedicated to fulfilling the progressive promise of the Constitution’s text and history.” The  CAC says that it has “a strong interest in ensuring meaningful access to the courts and thus has an interest in ensuring that statutory provisions are treated as jurisdictional only when Congress clearly requires that result.”

Addressing whether the district court loses its jurisdiction with litigation pending appeal of a denial of arbitration, the CAC reasons that a district court retains jurisdiction, finding no Federal Arbitration Act support that strips a district court of authority.

CAC argues that FAA Section 16(a) provides that “an appeal may be taken from . . . an interlocutory order granting ... an injunction against an arbitration.” The amicus brief says that the law is a statutory provision, not a jurisdictional rule, so it does not have the weight to strip the district court of its innate subject matter jurisdiction. Emphasizing the Supreme Court requires “a clear statement before it regards a statutory provision as jurisdictional,” the brief states, “there is no such clear statement here.”

Furthermore, the key case on divesting the district court of jurisdiction in Coinbase’s argument, Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982) (per curiam) (see Feb. 21 CPR Speaks post), does not support the argument because the judge-made rule was articulated “to promote judicial economy and avoid the confusion and inefficiency that might flow from putting the same issue before two courts at the same time.” Therefore, the brief argues, Coinbase has misread Griggs, which prohibits the district court from addressing aspects of the case involved in the appeal but allows it to move forward with other components.

Rather, the CAC contends, Coinbase is advocating that the district court under no circumstances can continue to address any aspect of the case, once an appeal of a motion to compel arbitration has been made.

Finally, the CAC undermines Coinbase’s argument that the FAA’s purpose supports an automatic stay of litigation pending an appeal with a textual argument. The brief says that the law clearly states Congress intent, rather needing to use legislative history. The FAA text “require[s] courts to enforce private arbitration agreements,” but does not require parties to arbitrate if they have not agreed to do so.

Here, this is especially probative because one of the issues involved in the Coinbase appeal is debating the existence of an arbitration agreement. “There is no indication,” the brief notes, “that Congress intended to provide parties [the ability to invoke] the FAA with a stay of proceedings while appellate courts review decisions concerning the existence of an agreement to arbitrate.”

The CAC brief is available on the U.S. Supreme Court website here.

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Public Justice is a 41-year-old national law firm based in Washington that focuses on fighting corporate and governmental misconduct from the consumer side.

In its amicus filing, Public Justice focuses on the ability to determine if an issue is arbitrable or non-arbitrable, making it the key to determine a mandatory stay under the FAA. By looking at the complaint and the contract, it allows the court to accurately determine the scope of the arbitration agreement. Coinbase’s inflexible approach would mean that if any issue is part of the merits of the case on appeal, then there must be automatic stay, according to Public Justice's amicus.

Citing Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906, 1919 (2022) (holding that the FAA does not require enforcement of other contractual terms that would affect rights besides the right to arbitrate), the brief warns, a statute whose “mandate is to enforce ‘arbitration agreements’ may not be hijacked to delay the adjudication in court of disputes no one ever agreed to arbitrate.”

In addition, it focuses on the unfairness and prejudicial effect of Coinbase’s approach for an automatic stay where there are multiple contracts in dispute--like here with respondent Suski. In those situations, some contracts may not have arbitration agreements. An appeal to compel arbitration could lump in their issues, even if they are non-arbitrable, warns Public Justice.  

The Public Justice brief is available here.

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Washington-based trial lawyers group the American Association for Justice  “is a national, voluntary bar association established in 1946 to strengthen the civil justice system, preserve the right to trial by jury, and protect access to the courts for those who have been wrongfully injured.”

AAJ filed its amicus brief because it is concerned that “Coinbase’s theory effectively ‘invent[s],’ without any textual basis, a ‘special, arbitration-preferring’ rule that does not apply to other kinds of forum-selection clauses.”

AAJ uses a historical analysis of the FAA and its 1988 amendment adding Sec. 16 to allow immediate appeals of orders denying arbitration to argue that the appeals under the FAA aren’t stayed in all district-court proceedings in all cases, because it would strip federal courts of their traditional, case-specific discretion.

Looking at the pre-1988 judicial landscape, the AAJ argues that litigants were able to routinely seek and obtain interlocutory appeals, and in doing so federal courts did not automatically stay the matter, but relied on equitable discretion to be used on a case-by-case basis.

It counters that Coinbase’s argument that the 1988 amendment was created to completely eradicate the court’s traditional practice falls short, otherwise Congress would have explicitly stated so.

The Supreme Court has ruled it does not “construe a statute to displace courts' traditional equitable authority absent the ‘clearest command’ or an ‘inescapable inference to the contrary,’” neither has been done here. (Citing Miller v. French, 530 U.S. 327, 340–41 (2000).)

The AAJ's 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.