Supreme Court hears oral argument in cases involving stays pending appeals of orders denying motions to compel arbitration

This morning we attended the Supreme Court’s oral arguments in Coinbase, Inc. v. Bielski. The issue presented in Coinbase is a procedural one, but of tremendous practical importance to defendants that seek to enforce arbitration agreements: does an appeal from an order denying a motion to compel arbitration automatically stay further proceedings in the district court during the appeal? 

As background, in 1988, Congress authorized immediate appeals of orders denying arbitration when it enacted Section 16 of the Federal Arbitration Act. Over the past quarter-century, the courts of appeals have divided over whether stays pending appeal are automatic.

The majority of circuits have answered that question yes, because further litigation on the merits in the district court eliminates the benefits of the claimed right to arbitrate that is the subject of the appeal. But Coinbase arises out of the Ninth Circuit, which, along with the Second and Fifth Circuits, takes the minority view that stays are discretionary. The Supreme Court granted review to resolve this long-standing split. (We filed an amicus brief on behalf of the National Retail Federation in support of Coinbase at the merits stage.)

Based on today’s argument, it’s too early to tell how the Court will rule; the Justices had tough questions for both sides. (The transcript is available here.)

Justices Sotomayor, Kagan, and Jackson were the most critical of Coinbase’s position. Each asked Coinbase’s counsel why Section 16 should be read to authorize an automatic stay—pointing out that Section 16 does not expressly authorize one. As Coinbase’s counsel noted, it does not address the topic of a stay at all. Instead, Coinbase argued, the default rule is that when there is an interlocutory appeal, the district court loses jurisdiction to conduct proceedings that intrude on the issues before the appellate court unless Congress expressly provides otherwise—and Congress did not expressly provide otherwise here. The leading case for that “divestiture” principle is Griggs v. Provident Consumer Discount Co. (1982), in which the Court had held that a notice of appeal “divests the district court of its control over those aspects of the case involved in the appeal.” Coinbase’s counsel argued that in the context of appeals from orders denying arbitration, the principle in Griggs means that a district court may not conduct further proceedings on the merits, as the whole point of the appeal is to decide whether an arbitrator rather than the court should decide the merits.

Justices Sotomayor and Jackson also argued that because Section 3 of the FAA provides for a “stay” of trial court proceedings while an arbitration takes place while Section 16 does not mention a “stay,” that suggests (to them) that Congress did not intend to require a stay pending appeals under Section 16. But that mixes apples and oranges, in our view: Section 3 is about stays pending arbitration; it says nothing about appeals or stays pending appeal. It’s hard to say for sure, but the point didn’t appear to gain traction with other members of the Court.

Other Justices appeared to be more supportive of Coinbase’s position. Coinbase’s counsel argued that when Congress does not want an automatic stay to take place during an interlocutory appeal, it has said so expressly—in 11 different statutes. Justice Kavanaugh remarked that the point was a “strong” one, seemingly agreeing with Coinbase that the pattern of these other statutes (combined with the background rule) favored an automatic stay. Justice Kavanaugh further observed that the coercive settlement pressure imposed on defendants in the absence of an automatic stay is a “realistic concern.” Justice Gorsuch remarked on the long-standing pedigree of the common law rule that “one court at a time” should decide issues, seeming to suggest that an automatic stay is consistent with that principle. And both Justices Gorsuch and Alito asked questions reflecting concern about whether the ordinary four-factor test governing discretionary stays pending appeal is adequate to protect the rights of defendants appealing the denial of arbitration. For our part, our amicus brief agrees that the best reading of the statutory text and context is that stays pending appeal should be automatic, although we have explained in the alternative why even under the four-factor test, stays pending appeal should be nearly automatic in cases involving the denials of motions to compel arbitration.

A number of Justices also appeared persuaded by Coinbase’s analogy to interlocutory appeals involving qualified immunity, state sovereign immunity, or double jeopardy—all settings in which the appellant receives an automatic stay pending appeal without Congress expressly providing for one. For example, Justice Alito noted that interlocutory appeals under the criminal interlocutory appeal statute are widely understood to result in an automatic stay of proceedings that intrude on the issues before the appellate court. Justice Gorsuch noted the parallels between interlocutory appeals involving state sovereign immunity and those involving arbitration.

Relatedly, respondents’ counsel had difficulty coming up with a workable distinction between arbitration appeals and these other contexts in which appellants receive automatic stays. In one colloquy, respondents’ counsel seemingly went so far as to concede in response to a question by Justice Gorsuch that, to rule in respondents’ favor, the Court would be required to implicitly overrule lower court decisions authorizing automatic stays in the qualified immunity and state sovereign immunity contexts. Justice Kagan quickly jumped in and urged respondents’ counsel to walk back what she clearly recognized to be an unwise concession.

Finally, Chief Justice Roberts and Justices Thomas and Barrett asked relatively few questions, making their positions harder to predict. While Chief Justice Roberts did ask Coinbase’s counsel why the immediate appeal authorized by Section 16 isn’t enough of a benefit to defendants seeking to compel arbitration, the question may well have been to afford Coinbase’s counsel the opportunity to explain why a stay is necessary to preserve a meaningful appellate right.

In short, today’s oral argument shows that the Court is divided on the issue, but it’s too soon to say how the case will turn out. We expect a decision by June, and we will keep you posted on the outcome.

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