In 2021, two plaintiffs filed separate class-action lawsuits against Coinbase, one of the largest cryptocurrency exchanges in the U.S. Coinbase moved to compel arbitration in each case because both plaintiffs signed Coinbase’s User Agreement directing any dispute to arbitration. The United States District Court for Northern California denied arbitration in both cases. Coinbase appealed the denial of arbitration and moved to stay the underlying class actions. The District Court again denied Coinbase’s motion and allowed both the arbitration appeal and the class action litigation to proceed concurrently.
The Ninth Circuit affirmed the District Court in both cases. Its ruling underscored a nine to three federal circuit split in which some jurisdictions automatically stay underlying litigation during arbitration appeals, while other jurisdictions, like the Ninth Circuit, do not. Coinbase petitioned the United States Supreme Court to resolve the circuit split and decide whether federal law requires an automatic stay of underlying litigation when a party appeals a denial of arbitration.
This Supreme Court agreed to hear the case, and its decision has significant financial implications for businesses attempting to use arbitration to avoid costly class action litigation. The rule is that, in general, there is a national policy favoring arbitration and the enforcement of arbitration agreements as they are written. Not only is there strong public policy favoring arbitration to keep disputes out of court, but arbitration agreements are traditionally enforced just like any other contract—meaning as they are written.
Without an automatic stay, businesses in many jurisdictions, including the Ninth Circuit, must incur the expense of appealing the denial of a motion to compel arbitration, while, at the same time, litigating the underlying class action. Arguably, this defeats the entire purpose of arbitration. This case could change that dichotomy. Not only is this a case that any employer or business owner should be watching but, depending on how the Court rules, this could be a seminal case that those seeking to enforce arbitration agreements, while avoiding the time and expense of litigation, cited for years to come.