July 03, 2023

Should I Stay or Should I Go? Supreme Court Gives Arbitrability Appeal Automatic Stay

3 min

Every day, untold thousands get online to buy goods, book services, or sell something. And almost without fail, they are greeted with a Terms and Conditions pop-up. Then, perhaps the most common human experience of the digital age takes place: The customer scrolls past the terms, clicks “I have read and agree to these terms,” and never thinks about them again.

When they click “Agree,” however, virtually every customer agrees to a mandatory arbitration provision that waives their right to sue in court. But what happens if a customer sues anyway and the business’s motion to compel arbitration is denied? The Supreme Court’s opinion in Coinbase, Inc., v. Bielski has the answer.

In Coinbase, after the district court denied the business’s motion to compel arbitration, the company filed an immediate interlocutory appeal to the Ninth Circuit, asking that court to send the whole matter to arbitration under the Terms and Conditions that the customer had agreed to. Yet the district court continued to proceed to trial and the Ninth Circuit declined to stop it—even though it would take a year or more to resolve the business’s appeal. Faced with the costs of a trial and an appeal that could be decided too late to avoid them, Coinbase raised a red flag that caught the Supreme Court’s eye.

After granting review, the Court held that, when a party who loses a motion to compel arbitration takes their statutory right of immediate appeal under 9 U.S.C. § 16(a), that appeal divests the district court of jurisdiction to hear the case, automatically staying the merits proceedings until the appellate courts weigh in. This is a win for businesses that contract for arbitration to avoid costly, lengthy, and potentially embarrassing litigation to vindicate their right to arbitrate—even when that contract is created by a customer clicking “I agree” to a website’s terms and conditions.

Justice Kavanaugh, writing for the majority, described the common sense of this approach: If the Court of Appeals reverses the district court on arbitrability and sends the case to the arbitrator, any time, energy, and money invested in litigation would be wasted, and the very reason businesses contract for mandatory arbitration provisions would be lost. In short, “[a] right to an interlocutory appeal of the arbitrability issue without an automatic stay” is “like a lock without a key, a bat without a ball, a computer without a keyboard—in other words, not especially sensible.”

After Coinbase, businesses facing class action litigation in spite of their mandatory arbitration provisions can breathe a sigh of relief. But that doesn’t mean the end of efforts to circumvent arbitration provisions. If you’re faced with such a maneuver, Venable’s experienced litigators and appellate attorneys can help with both motions and appeals under the Federal Arbitration Act.