Daniel Lund III | Phelps Dunbar
In a 5-4 decision, the United States Supreme Court settled a split among the federal appellate circuits on whether appeal of a district court refusal to compel arbitration stays the underlying litigation in the district court.
Having been denied relief by the district court on its motion to compel arbitration, plaintiff filed an interlocutory appeal to the Ninth Circuit under the Federal Arbitration Act, 9 U. S. C. §16(a), which authorizes an interlocutory appeal from the denial of a motion to compel arbitration. Plaintiff asked the district court to stay its proceedings pending resolution of the interlocutory appeal. The district court refused, and the Ninth Circuit also declined to stay the lower court proceedings pending appeal.
Characterizing its ruling is one employing “common sense,” the United States Supreme Court wrote:
“Section 16(a) does not say whether the district court proceedings must be stayed. But Congress enacted §16(a) against a clear background principle prescribed by this Court’s precedents: An appeal, including an interlocutory appeal, ‘divests the district court of its control over those aspects of the case involved in the appeal.’ Griggs v. Provident Consumer Discount Co., 459 U. S. 56, 58 (1982). That Griggs principle reflects a longstanding tenet of American procedure. … The Griggs principle resolves this case. 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.’ … In short, Griggs dictates that the district court must stay its proceedings while the interlocutory appeal on arbitrability is ongoing.
“Most courts of appeals to address the question in the §16(a) context have reached that same conclusion.”
The dissent noted that the “mandatory-general-stay rule for interlocutory arbitrability appeals comes out of nowhere,” and fails to allow for a district court to balance all relevant interests when deciding whether or not to stay a matter. The dissent further complained that a party will “now receive a stay even when, according to the usual equitable analysis, there is no good reason for one.”
Coinbase, Inc. v. Bielski (slip opinion June 23, 2023)
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