The ruling stops district court proceedings in cases where an appeal seeking arbitration is also filed.
07/17/2023 9:50 A.M.
3 minute read
A U.S. Supreme Court ruling this summer found that litigation in district courts should be put on hold when a party appeals the case on the grounds it should first be reviewed in arbitration.
The decision in Coinbase, Inc. v. Bielski (PDF) favored the plaintiff, a cryptocurrency exchange, in that if an appeal is filed against a dispute in district courts with the goal to settle it in private arbitration, the case must be stayed until that is resolved, according to Reuters.
It reversed a ruling in the U.S. Court of Appeals for the 9th Circuit denying Coinbase’s attempt to have a putative class action settled through arbitration, not in court, according to a report on SCOTUSblog by Ronald Mann.
It also settled a circuit court split on the issue, leaving the decision to stay a case pending arbitration to trial judges.
According to a summary of the case from ACA International member company Barron & Newburger, the decision “represents a significant victory for businesses that seek to appeal denials of motions to compel arbitration.”
Of note, the decision by Justice Brett Kavanaugh, with Chief Justice Roberts and Justices Sam Alito, Neil Gorsuch and Amy Coney Barrett, states:
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.” 459 U. S., at 58. As Judge Easterbrook cogently explained, when a party appeals the denial of a motion to compel arbitration, whether “the litigation may go forward in the district court is precisely what the court of appeals must decide.” Bradford-Scott Data Corp. v. Physician Computer Network, Inc., 128 F. 3d 504, 506 (CA7 1997). Stated otherwise, the question of whether “the case should be litigated in the district court . . . is the mirror image of the question presented on appeal.” Id., at 505. Here, as elsewhere, it “makes no sense for trial to go forward while the court of appeals cogitates on whether there should be one.” Apostol v. Gallion, 870 F. 2d 1335, 1338 (CA7 1989). In short, Griggs dictates that the district court must stay its proceedings while the interlocutory appeal on arbitrability is ongoing.
Justice Kentanji Brown Jackson wrote a dissenting opinion with Justices Sonia Sotomayor and Elena Kagan and, in part, with Justice Clarence Thomas.
CFPB Rule on Nonbank Entities with Arbitration Agreements
As a refresher, the Consumer Financial Protection Bureau is in the final stages of a rulemaking that would create a registry of supervised nonbank entities with arbitration agreements in their contracts.
The bureau also has a rule in the final stages to require certain nonbank entities to register with the bureau when they are subject to local, state, or federal consumer protection agency or court orders, ACA previously reported.
Overall, ACA’s comments, led by lobbyist Leah Dempsey, shareholder at Brownstein Hyatt Farber Schreck, LLP, and using member feedback, say the CFPB’s actions in these proposed rules circumvent congressional intent of arbitration agreements, overextend the bureau’s authority and should not be completed until after the U.S. Supreme Court has issued its decision in a pending case on the constitutionality of the bureau’s structure, ACA previously reported.