In Coinbase v. Bielski the U.S. Supreme Court reversed a ruling of the U.S. Court of Appeals for the 9th Circuit in California that had rejected a party’s efforts to force a putative class action out of court and into arbitration. The result of the Supreme Court’s decision requires federal district court proceedings to be stayed until the appellate court decides if arbitration is required.

In this matter, Coinbase (a cryptocurrency platform) in a dispute with a group of its customers, contends its user agreement requires the customers to arbitrate their disputes with Coinbase. However, the district court disagreed, denied arbitration, and Coinbase appealed. Pending the decision on appeal, the District Court continued litigation proceedings to bring the matter to trial. The question Coinbase appealed all the way to the Supreme Court was whether the district court had to halt – or “stay” — the pre-trial proceedings while the appellate court considered the ruling denying arbitration. The court of appeals allowed the district court to move forward. A narrow majority of five Supreme Court justices reversed that ruling.

The case turns on a 1988 amendment to the Federal Arbitration Act, which added the current Section 16(a) to that statute. Contrary to the general rule in federal courts that parties cannot appeal from adverse trial-court decisions until the end
of the case, a 1988 amendment to the Federal Arbitration Act, Section 16(a), sets up a “one-way” right to an immediate (“interlocutory”) appeal: The party seeking arbitration can appeal immediately if the trial court refuses to order arbitration, but the party opposing arbitration has no similar right if the trial court does order arbitration.

Although Section 16(a) does not say whether the district court proceedings must be stayed; the majority found the entire case is essentially “involved in the appeal” and, therefore, must be stayed pending the results on appeal.

This Supreme Court decision provides an avenue of attack for those cases where a court denies a petition for arbitration, and a delaying tactic to continue the matter indefinitely by virtue of an appeal.

Should you or your company be subject to a claim where the party making the claim refuses to go to arbitration, despite the existence of an arbitration agreement, you should immediately contact litigation counsel to help assure the matter is litigated and tried in the proper forum.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

California Code of Civil Procedure sections 1281.97, 1281.98 and 1281.99 obligate a company or business that drafts an arbitration agreement to pay its share of arbitration fees no later than 30 days after the date they are due, and specify that the failure to do so constitutes a “material breach of the arbitration agreement” that gives the employee or consumer, in addition to a mandatory award of attorney fees and costs related to the breach as well as other discretionary sanctions, the options of either (1) continuing in arbitration with the company or business paying attorney fees and costs related to the arbitration as a whole or (2) withdrawing from arbitration and resuming the litigation in a judicial forum.

On July 25, 2022, the California Court of Appeals for the Second Appellate District in Gallo v. Wood Ranch USA, Inc. issued its opinion as to whether these California Code of Civil Procedure provisions are preempted by the Federal Arbitration Act
(“FAA”). The Court of Appeals held they are not preempted because the procedures they prescribe further — rather than frustrate — the objectives of the FAA to honor the parties’ intent to arbitrate and to preserve arbitration as a speedy and effective alternative forum for resolving disputes.

It is imperative that employers strictly follow the statutory deadlines for employment-related arbitration, or they may lose their right to mandatory arbitration. Be sure to have your business or employment attorney review your arbitration agreements to assure compliance and potentially ameliorate the bar to arbitration

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.