The Atlantic Legal Foundation (ALF) long has supported a contracting party’s right, as protected by the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2, to enter into a binding, judicially enforceable arbitration agreement. Arbitration is an efficient, speedier, less expensive, and often confidential alternative to litigating disputes between corporations, between companies and individual consumers, and between employers and individual employees.
When a federal district court denies a defendant’s motion to compel arbitration, the FAA authorizes an interlocutory (i.e., immediate) appeal on the question of whether the parties’ dispute is subject to a valid and binding arbitration agreement. See 9 U.S.C. § 16(a). Federal courts of appeals have been divided, however, as to whether district court proceedings must be stayed while such an “arbitrability” appeal is being pursued. Some circuits have held that discovery, class certification, and other trial-court proceedings must be stayed because a district court loses jurisdiction over the case while an appeal is pending. Other circuits have held that a stay is discretionary, but not mandatory.
The Supreme Court has granted certiorari in Coinbase, Inc. v. Bielski, No. 22-105, to address the issue of whether district court proceedings must be stayed while an interlocutory appeal of a denial of a motion to compel arbitration is being pursued.
ALF has submitted an amicus brief urging the Court to hold that a stay pending appeal is mandatory. The brief was authored by Felix Shafir, John Querio, and Scott Dixler of Horvitz & Levy LLP and ALF Executive Vice President & General Counsel Larry Ebner.
ALF’s amicus brief describes arbitration’s many benefits over traditional litigation. In addition to greater speed and lower costs, these benefits include, for example, the parties’ ability to choose expert adjudicators to resolve specialized disputes; to streamline discovery and other procedures; to maintain confidentiality, particularly regarding the arbitration award; and to avoid appeals except in rare cases of party or arbitrator misconduct. Avoiding excessively burdensome discovery and other litigation costs is particularly important in putative class actions, where they may compel a defendant to settle even frivolous claims.
As a result, ALF's brief argues that “[o]nly a rule mandating that district court litigation is stayed pending a party’s appeal from an order denying a motion to compel arbitration honors the parties’ contractual bargain by preserving the benefits of arbitration.”
