U.S. Supreme Court Grants Coinbase’s Petition for Certiorari Regarding Stays of Litigation Pending Appeal on Motions to Compel Arbitration

U.S. Supreme Court Grants Coinbase’s Petition for Certiorari Regarding Stays of Litigation Pending Appeal on Motions to Compel Arbitration

On Friday, December 9, 2022, the United States Supreme Court granted certiorari to hear an appeal by the major cryptocurrency exchange Coinbase, Inc. (“Coinbase”) regarding whether a non-frivolous appeal of the denial of a motion to compel arbitration ousts a district court’s jurisdiction to proceed with litigation pending appeal, or whether a party must continue to defend the litigation, even as an appeal to send the case to arbitration proceeds.

The petition for certiorari arose out of the Ninth Circuit’s denial of Coinbase’s interlocutory appeal of the District Courts’ denials of motions to compel arbitration in two class actions, Abraham Bielski et al v. Coinbase, Inc., U.S. N.D. CA. Case Number 3:21-cv-07478-WHA, and David Suski et al. v. Coinbase, Inc., U.S. N.D. CA. Case Number 3:2021cv04539. Following those denials, Coinbase moved to stay the actions pending an interlocutory appeal of the decisions under the Federal Arbitration Act.

At issue before the Supreme Court, includes one lawsuit by Coinbase customer Abraham Bielski, who alleged he was tricked into giving access to his Coinbase account to a scammer, who in turn, stole more than $31,000 from him. Bielski sued Coinbase, arguing that the Electronic Funds Transfer Act requires the company to re-credit a customer’s stolen cryptocurrency.

The other suit at issue is a California class action brought by former Coinbase users who claim they were tricked by Coinbase into paying $100 or more to enter a sweepstakes that offered entrants the chance to win prizes of up to $1.2 million in the cryptocurrency Dogecoin.

In Coinbase’s Petition for certiorari, it explains, “the [Federal Arbitration Act] would not have granted parties the right to an immediate interlocutory appeal of refusals to compel arbitration if Congress had contemplated that litigation could proceed while the appeal was pending.”

There is a split of authority among jurisdictions, with the Third, Fourth, Seventh, Tenth, Eleventh, and D.C. Circuits holding such appeal ousts a district court’s ability to proceed with litigation pending the appeals, while the Second, Fifth, and Ninth Circuits hold a district court retains the discretion to proceed with litigation while the appeal is pending.

The result of this appeal has wider implications as the recent crypto exchange scandals reach mainstream media. Ultimately, it will impact class actions against cryptocurrency exchanges, many of which have arbitration agreements one must agree to prior to registering an account.  A decision that any litigation pending in District Court must halt, may translate to longer litigation times and plaintiffs’ decisions to settle as opposed to proceeding to trial. On the other hand, allowing the District Court litigation to move forward, may incentivize litigation on claims related to claims against cryptocurrency exchanges, and perhaps create much-needed case law and framework for evaluation of such claims.

If you would like more information about the underlying cases or this grant of certiorari, please let us know. We will be happy to discuss this important development further with you.

Christina A. Ho | Paul K. Schrieffer

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