On June 23, 2023 the Supreme Court held that when a federal district court’s denial of a motion to compel arbitration is appealed in accordance with the Federal Arbitration Act, all trial court proceedings, including discovery, must be placed on hold. The Court’s 5 to 4 opinion in Coinbase v. Bielski was authored by Justice Kavanaugh. The dissenting opinion was written by Justice Jackson.
The majority opinion explains that the Federal Arbitration Act “provide[s] for immediate interlocutory appeals of orders denying—but not of orders granting—motions to compel arbitration.” Without an “automatic stay of district court proceedings, Congress’s decision . . . to afford a right to an interlocutory appeal would be largely nullified.”
More specifically, “[i]f 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—even if the court of appeals later concluded that the case actually had belonged in arbitration all along.”
The Court’s holding closely aligns with the arguments that ALF presented in an amicus brief supporting an automatic stay of trial court proceedings while denial of a motion to compel arbitration is being appealed.
ALF’s brief observed, for example, that without a stay, the pressure to settle expensive-to-litigate class actions, even before a class is certified, is intense. Along the same lines, the majority opinion explains as follows:
“Absent a stay, parties also could be forced to settle to avoid the district court proceedings (including discovery and trial) that they contracted to avoid through arbitration. That potential for coercion is especially pronounced in class actions, where the possibility of colossal liability can lead to what [has been] called ‘blackmail settlements.'”
ALF long has been a strong advocate for enforcing the provisions, and fulfilling the objectives, of the Federal Arbitration Act. Its successful amicus brief in Coinbase was authored by Felix Shafir, John Querio, and Scott Dixler of Horvitz & Levy LLP and ALF Executive Vice President & General Counsel Larry Ebner.