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U.S. Supreme Court Puts Lawsuits on Hold Pending Appeal of Arbitration Agreements

    Client Alerts
  • June 29, 2023

For many employers, mandatory arbitration agreements have become a popular alternative to judges and juries hearing employment disputes. These employers view arbitration as a more predictable alternative than jury pools found in many parts of the U.S. Last week the U.S. Supreme Court gave employers another reason to consider use of arbitration agreements. It upheld a company’s right to stop a case from proceeding to trial while it appeals the denial of an arbitration agreement’s enforcement.

Coinbase Inc. v. Bielski was not an employment case but rather a class action dispute between the cryptocurrency platform Coinbase and its users. The service’s terms and conditions required users to submit disputes to mandatory arbitration. The named plaintiff sued in federal court, arguing that the arbitration agreement was unenforceable. The district court agreed, and Coinbase appealed this decision to the Ninth Circuit Court of Appeals, seeking an interlocutory order that would stay the lawsuit until the appeal on arbitration could be heard. Contrary to decisions from other federal appellate courts, the Ninth Circuit rejected this motion, setting in place the appeal to the Supreme Court.

In a 5-4 decision, the Supreme Court reversed the Ninth Circuit, finding a right to an interlocutory appeal of a decision not to enforce a mandatory arbitration agreement. The court noted that requiring the case to proceed to trial before hearing the appeal would defeat the purpose of using arbitration in the first place. As a result, an appeal of a district court’s decision to invalidate an arbitration agreement results in an automatic stay of the matter pending the appeal.

Why does this decision matter for employers? Given that some appellate cases can take a year or more to be heard, the imposition of a mandatory stay pending appeal will significantly delay the resolution of litigation with employees. Employees with mandatory arbitration agreements in place may be less willing to challenge their validity knowing that even a favorable initial ruling could result in a long delay in the adjudication of the merits of their claims. While arbitration agreements are not a good fit for all employers, companies concerned about unreliable juries may consider using them in the future.

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