The appeals courts for the 3rd, 4th, 7th, 10th, 11th, and D.C. Circuits have ruled that a non-frivolous appeal of a district’s court’s denial of a motion to compel arbitration divests a district court of jurisdiction over the case while the appeal is pending, meaning the case is stayed. The 2nd, 5th, and 9th Circuits, however, have ruled that district courts retain discretion to proceed with the litigation while such an appeal is pending.
The issue has been raised in a pair of cases involving the cryptocurrency company Coinbase, Inc. on appeal from decisions in the 9th Circuit. Both cases arise from consumer suits against Coinbase filed in federal court in which Coinbase moved to compel arbitration of the dispute based on the arbitration provision in Coinbase’s user agreement. In Coinbase, Inc. v. Bielski, the district court denied Coinbase’s motion to compel arbitration, ruling that, in the circumstances of the case, the arbitration provision was unconscionable. In Coinbase, Inc. v. Suski, the district court denied Coinbase’s motion to compel arbitration on the ground that another agreement purportedly superseded the user agreement.
Under § 16(a) of the Federal Arbitration Act (FAA), when a district court denies a motion to compel arbitration, the party seeking arbitration may file an immediate interlocutory appeal, which Coinbase did in the Bielski and Suski cases. It also sought to stay the cases pending appeal. In both cases, the district court declined to issue a stay pending appeal. Coinbase then moved for a stay in the 9th Circuit, which also declined to stay the litigations based on an earlier 9th Circuit decision—Britton v. Co-op Banking Grp., 916 F.2d 1405 (9th Cir. 1990)—which held that an appeal of the denial of a motion to compel arbitration does not automatically divest the district court of jurisdiction to continue the litigation. The 9th Circuit adopted this rule in part based on the belief that automatic jurisdictional ouster would allow a defendant to stall a trial simply by bringing a frivolous motion to compel arbitration.
Subsequent to Britton, the 2th and 5th Circuits have similarly ruled that a district court has discretion to deny a stay pending appeal of a decision denying a motion to compel arbitration. The 3rd, 4th, 7th, 10th, 11th, and D.C. Circuits, however, have disagreed, ruling that such an appeal automatically divests the district court of jurisdiction to proceed with the case pending the appeal. In Bradford-Scott Data Corp. v. Physician Comput. Network, Inc., 128 F.3d 504 (7th Cir. 1997), for example, the court ruled that, when a party appeals arbitrability, the court of appeals must decide whether the litigation may go forward in the district court, and continuation of the litigation pending appeal would largely defeat the point of the appeal. Coinbase filed a petition for certiorari in the Bielski and Suski cases, asking the Supreme Court to resolve the circuit split in favor of the majority rule adopted by the 3rd , 4th, 7th, 10th, 11th, and D.C. Circuits. The Supreme Court granted certiorari on December 9, 2022, case number 22-105.