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December 13, 2022

Stroock Client Alert

By: Stephen J. Newman, Allen H. Denson, Ali Fesharaki

On December 9, 2022, the U.S. Supreme Court agreed to hear a petition brought by cryptocurrency exchange Coinbase that could resolve a 6-3 circuit split on whether litigation should automatically be stayed pending a party’s appeal of an order denying a motion to compel arbitration. 

The United States Supreme Court is set to review decisions by the Ninth Circuit Court of Appeals in two different consumer class actions brought against Coinbase—Suski v. Coinbase Global, Inc. et al., Case No. 3:21-cv-04539 (N.D. Cal.) (alleging Coinbase violated California consumer laws in its marketing of $1.2 million Dogecoin sweepstakes) and Bielski v. Coinbase Global, Inc. et al., Case No. 3:31-cv-07478 (N.D. Cal.) (alleging Coinbase failed to investigate or remediate plaintiff after unauthorized account transfer)—upholding the district court’s refusal to grant a stay pending appeal of the district court’s order denying Coinbase’s motion to compel arbitration.  The question presented in Coinbase’s petition is whether a non-frivolous appeal of an order denying a motion to compel arbitration ousts a district court’s jurisdiction to proceed with litigation pending appeal.  There is a split amongst the nine circuits that have addressed the question.  Six circuits—the Third, Fourth, Seventh, Tenth, Eleventh, and D.C. Circuits—have held that a non-frivolous appeal of the denial of a motion to compel arbitration divests the district court of jurisdiction, thereby automatically staying proceedings in the district court. Three circuits—the Second, Fifth, and Ninth Circuits—have held that an appeal of the denial of a motion to compel arbitration does not divest the district court of jurisdiction over the underlying litigation, such that the appealing party must obtain a stay pending appeal pursuant to the traditional discretionary test.

A decision by the Supreme Court on Coinbase’s petition will be of particular importance for consumers and businesses involved in class actions.  For defendants, absent a stay, businesses denied arbitration in putative class actions must incur significant expense on class discovery, class certification briefing and experts as they appeal the arbitration denial, only to have this time and money wasted if the appeal is successful and the case is ordered to individual arbitration.  Defendants argue that the minority approach followed by the Ninth Circuit effectively nullifies arbitration agreements during the duration of the appeal and deprives businesses of the benefits thereof (namely, an inexpensive and expeditious means of resolving individual disputes).  Plaintiffs however argue that they may be disadvantaged by the automatic stay as they would be forced to delay pursuing their claims as they wait for a decision on the arbitration appeal, and that such delay risks subjecting them to loss of witnesses and tangible evidence.  

The case is docketed in the U.S. Supreme Court as Coinbase, Inc. v. Bielski, case number 22-105. 

December 13, 2022

Stroock Client Alert

By: Stephen J. Newman, Allen H. Denson, Ali Fesharaki

On December 9, 2022, the U.S. Supreme Court agreed to hear a petition brought by cryptocurrency exchange Coinbase that could resolve a 6-3 circuit split on whether litigation should automatically be stayed pending a party’s appeal of an order denying a motion to compel arbitration. 

The United States Supreme Court is set to review decisions by the Ninth Circuit Court of Appeals in two different consumer class actions brought against Coinbase—Suski v. Coinbase Global, Inc. et al., Case No. 3:21-cv-04539 (N.D. Cal.) (alleging Coinbase violated California consumer laws in its marketing of $1.2 million Dogecoin sweepstakes) and Bielski v. Coinbase Global, Inc. et al., Case No. 3:31-cv-07478 (N.D. Cal.) (alleging Coinbase failed to investigate or remediate plaintiff after unauthorized account transfer)—upholding the district court’s refusal to grant a stay pending appeal of the district court’s order denying Coinbase’s motion to compel arbitration.  The question presented in Coinbase’s petition is whether a non-frivolous appeal of an order denying a motion to compel arbitration ousts a district court’s jurisdiction to proceed with litigation pending appeal.  There is a split amongst the nine circuits that have addressed the question.  Six circuits—the Third, Fourth, Seventh, Tenth, Eleventh, and D.C. Circuits—have held that a non-frivolous appeal of the denial of a motion to compel arbitration divests the district court of jurisdiction, thereby automatically staying proceedings in the district court. Three circuits—the Second, Fifth, and Ninth Circuits—have held that an appeal of the denial of a motion to compel arbitration does not divest the district court of jurisdiction over the underlying litigation, such that the appealing party must obtain a stay pending appeal pursuant to the traditional discretionary test.

A decision by the Supreme Court on Coinbase’s petition will be of particular importance for consumers and businesses involved in class actions.  For defendants, absent a stay, businesses denied arbitration in putative class actions must incur significant expense on class discovery, class certification briefing and experts as they appeal the arbitration denial, only to have this time and money wasted if the appeal is successful and the case is ordered to individual arbitration.  Defendants argue that the minority approach followed by the Ninth Circuit effectively nullifies arbitration agreements during the duration of the appeal and deprives businesses of the benefits thereof (namely, an inexpensive and expeditious means of resolving individual disputes).  Plaintiffs however argue that they may be disadvantaged by the automatic stay as they would be forced to delay pursuing their claims as they wait for a decision on the arbitration appeal, and that such delay risks subjecting them to loss of witnesses and tangible evidence.  

The case is docketed in the U.S. Supreme Court as Coinbase, Inc. v. Bielski, case number 22-105.