June 29, 2023

U.S Supreme Court Settles Arbitrability Automatic Stay Issue

The right to file an interlocutory appeal[i] on the issue of arbitrability is provided for under the Federal Arbitration Act (FAA). However, the FAA is not clear on whether District Court proceedings are to be stayed pending resolution of the appeal. With decisions split among the District Courts, the U.S. Supreme Court has resolved the issue in favor of an automatic stay.

A 5–4 decision in Coinbase v. Bielski, determined that a district court “must stay its proceedings while [an] interlocutory appeal on arbitrability is ongoing.” The Court found this to be a “common sense” approach upholding both the letter and spirit of the FAA. As determined by Court, one of the major benefits of an automatic stay is that it prevents FAA interlocutory appeal protections from being undermined and virtually nullified as parties will no longer find themselves forced into early settlement just to avoid the costly burdens of litigation.

Noted by the dissent as a new rule favoring one class of litigants—defendants seeking arbitration – over another, employers will want to take note of this important decision when considering the pros and cons of entering into, and enforcing, arbitration agreements with their employees.

[i] An appeal of a non-final order issued during the course of litigation.