Coinbase Holds that § 16 Appeals Require a Stay

In Coinbase, Inc., v. Bielski, the Supreme Court held that district courts must stay proceedings on the merits once a party appeals from the denial of arbitration. The Court determined that 9 U.S.C. § 16—which authorizes these appeals—was enacted against Griggs v. Provident Consumer Discount Co.’s background principal that a district court loses control over all aspects of a case that are on appeal. And because the issue in an arbitration appeal is whether the case should proceed at all, the entirety of the case is effectively “on appeal.” So district courts must stay proceedings on the merits pending the appeal. The implication (though not expressly stayed by the Court) is that district courts lose jurisdiction over the merits and have no choice but to stay proceedings once an appeal is taken.

Justice Jackson dissented. She contended that the background principal against which Congress added § 16 was the opposite: no automatic stays due to interlocutory appeals. And Griggs means that the district court loses control over only the issue on appeal: arbitrability. She would have left the stay decision to the discretion of the district court.

I think I side with the dissent on this one. The majority gives several good reasons for why district courts might stay proceedings in many cases. But I’m not convinced that courts must grant a stay in all cases.

One other note: Coinbase did not touch on whether district courts may dismiss a case, rather than stay it, after ordering arbitration. That’s an issue that the Court has yet to resolve.

The Split in Coinbase

9 U.S.C. § 16 provides that litigants can appeal from (among other things) interlocutory orders refusing to order arbitration under the Federal Arbitration Act. That’s what happened in Coinbase: the district court refused to order arbitration on the plaintiff’s claims, and the defendant appealed.

The question then arose of what to do with district court proceedings once the defendant appealed. The statute does not say anything about staying proceedings pending an appeal. But some courts of appeals have held that district courts must stay all further litigation on the merits. Other courts have held that stays are not mandatory but instead governed by the usual standards for staying proceedings.

The Supreme Court granted cert in Coinbase to resolve this split.

The Majority: Must Stay

A majority of the Supreme Court held that district courts must stay proceedings on the merits pending the arbitration appeal.

The reason for doing so was the Griggs rule. In Griggs v. Provident Consumer Discount Co., the Court that the filing of a notice of appeal deprives a district court of jurisdiction over matters involved in the appeal. The rationale is that two courts should not exercise control over the same matters simultaneously. So once a notice of appeal is filed, the district court loses jurisdiction over the matters on appeal.

The Coinbase majority derived a background principal from Griggs about automatic stays due and interlocutory appeals:

When Congress wants to authorize an interlocutory appeal and to automatically stay the district court proceedings during that appeal, Congress need not say anything about a stay. At least absent contrary indications, the background Griggs principle already requires an automatic stay of district court proceedings that relate to any aspect of the case involved in the appeal. By contrast, when Congress wants to authorize an interlocutory appeal, but not to automatically stay district court proceedings pending that appeal, Congress typically says so.

The majority interpreted § 16 against this background principal. The statute was silent on stays. So the statute did not upset this background principal.

An arbitration appeal thus deprives the district court of control over—and requires staying further proceedings on—matters involved in the appeal. The only question, then, was what was involved in the appeal.

The majority’s answer: all litigation on the merits. “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.’” So “Griggs dictates that the district court must stay its proceedings while the interlocutory appeal on arbitrability is ongoing.”

The Court added several practical concerns. For example, allowing district courts to proceed on a case’s merits would be inefficient if the court of appeals reverses the denial of arbitration. And absent an automatic stay, the benefits of arbitration could be irreparably lost.

Justice Jackson’s Dissent

Justice Jackson dissented. She gave several reasons for disagreeing with the majority. I’ll highlight a few.

First, she saw a different background principal against which Congress added § 16: “there is no background mandatory-general-stay rule,” and “courts have case-by-case discretion regarding whether or not to issue a stay.” Indeed, this discretionary-stay default dated back to the 1891 creation of the modern courts of appeals. Section 16’s silence thus retained this other, no-stay background principal.

Second, Justice Jackson thought Griggs was “far narrower” than the majority said. Griggs held only that one court should address an order or judgment at a time. So under Griggs, arbitration appeals means that district courts lose control over the issue of arbitrability. They do not, however, lose control over every other aspect of the case, including the merits.

Third, Justice Jackson pointed out that the concerns favoring a stay (e.g., efficiency, preserving the benefits of arbitration) all have countervailing interests. The majority was looking at only one side of the balance:

[F]or each of the majority’s concerns favoring a mandatory stay, there are countervailing considerations. The majority professes interest in “efficiency.” But forcing district court proceedings to a halt—for months or years while the appeal runs its course—is itself inefficient. The majority also fears losing other “asserted benefits of arbitration” without a stay. But with a stay, the party opposing arbitration loses the benefits of immediate litigation. A plaintiff’s request for injunctive protection against imminent harm, for example, goes unanswered under the majority’s rule. Similarly, while the majority laments settlement pressure on parties seeking arbitration, the rule it announces imposes settlement pressure in the opposite direction. With justice delayed while the case is on hold, parties “could be forced to settle,” because they do not wish—or cannot afford—to leave their claims in limbo. Incongruously, the majority inflicts these burdens on the party that won the arbitrability issue before the district court (the party opposing arbitration).

(Citations omitted.)

Justice Jackson would instead have relied on the standard rules for staying district court proceedings, leaving that issue to the discretion of the district courts and courts of appeals.

An Unfortunate Decision

I’m with the dissent on this one.

Section 16 doesn’t tell us what to do. And I don’t think Griggs does, either. There’s a big jump from “the district court loses control over arbitrability” to “the district court loses control over the entire case.”

What’s left are the reasons for and against granting a stay. The reasons the majority gave might be good reasons for why a district court should stay proceedings in a particular case. But that doesn’t mean all cases require a stay.

Coinbase, Inc., v. Bielski, 2023 WL 4138983 (June 23, 2023), available at the Supreme Court of the United States and Westlaw