This Report summarizes cases granted review on November 21 and December 1 and 9, 2022 (Part I).
Case Granted Review: Coinbase, Inc. v. Bielski, 22-105
Coinbase, Inc. v. Bielski, 22-105. At issue is: “Does a non-frivolous appeal of the denial of a motion to compel arbitration oust a district court’s jurisdiction to proceed with litigation pending appeal, as the Third, Fourth, Seventh, Tenth, Eleventh and D.C. Circuits have held, or does the district court retain discretion to proceed with litigation while the appeal is pending, as the Second, Fifth, and Ninth Circuits have held?” Petitioner Coinbase operates one of the largest cryptocurrency exchange platforms in the United States. Coinbase’s User Agreement states that the parties agree that “any dispute” between them will be resolved through arbitration, and contains a delegation clause under which the parties agree to arbitrate threshold issues such as whether the parties have agreed to arbitrate. Respondent Abraham Bielski filed a putative class action against Coinbase in federal district court alleging that federal law requires Coinbase to recredit cryptocurrency that had been stolen from him and others. The district court denied Coinbase’s motion to compel arbitration, ruling that the arbitration clause was unconscionable under California law and that the delegation clause was therefore unenforceable. Coinbase filed an interlocutory appeal of the denial of the motion to compel pursuant to §16(a) of the Federal Arbitration Act and asked the district court to stay further proceedings pending the resolution of that appeal. The district court recognized “that reasonable minds may differ over” its refusal to compel arbitration, but it decided that a stay was unwarranted because “Coinbase is a large company,” while “Bielski is a single individual,” and he “would suffer if forced to wait for a remedy.” Coinbase asked the Ninth Circuit to stay district court proceedings pending the appeal, but the Ninth Circuit applied controlling circuit precedent holding that no automatic stay attaches in these circumstances. See Britton v. Co-op Banking Grp., 916 F.2d 1405 (9th Cir. 1990). Accordingly, the case is proceeding in the district court even as the Ninth Circuit addresses the appeal on an interlocutory basis. [Ed.: This petition also involves another case, arising from a suit brought against Coinbase by David Suski et al. But there is no relevant difference between the two cases and so we won’t summarize the facts of, and proceedings in, the Suski case.]
Coinbase argues in its petition that the circuits are divided 6-3 on the issue, with a majority holding that a non-frivolous arbitrability appeal ousts the district court of jurisdiction. On the merits, the company points to the “foundational principle of appellate procedure that an appeal ‘divests the district court of its control over those aspects of the case involved in the appeal.’ Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58 (1982) (per curiam).” And “[w]hen a party appeals arbitrability, ‘[w]hether the litigation may go forward in the district court is precisely what the court of appeals must decide.’” Coinbase adds that “Congress in the FAA would not have granted parties the right to an immediate interlocutory appeal of refusals to compel arbitration if Congress had contemplated that litigation could proceed while the appeal was pending.” Coinbase further asserts that, “[b]ecause interlocutory arbitrability appeals seek to vindicate the appellant’s right to avoid litigation entirely, they resemble interlocutory appeals involving immunity from suit, which similarly seek to vindicate a party’s right to avoid litigation. It is uncontroversial that interlocutory appeals of the denial of immunity—including qualified immunity, sovereign immunity, and double-jeopardy immunity—oust the district court of jurisdiction to proceed while the appeal is pending, because forcing a party to litigate pending appeal of the immunity question ‘destroys rights created by’ immunity.”
Bielski relies on the principle, stated in Griggs, that an interlocutory appeal divests the district court of jurisdiction only “over those aspects of the case involved in the appeal.” Applied here, he says, “determining arbitrability requires ruling on the enforceability of the underlying arbitration provisions, while evaluating the merits requires only a consideration of Coinbase’s duties under the [federal law] and its implementing regulations.” Thus, “[t]here is no risk that the simultaneous exercise of jurisdiction by the district court and the Ninth Circuit would lead to concurrent analysis of ‘the same legal question’ or inconsistent judgments. If the Ninth Circuit reverses the district court’s decision on arbitrability, the case would simply move to a different forum and any of the individual discovery completed while the Ninth Circuit considers Coinbase’s interlocutory appeal is equally relevant to the arbitration.” (Citation omitted.) Bielski adds that “nothing in the text of the FAA or its legislative history suggests that Congress intended” Coinbase’s proposed rule.