SCOTUS Hears Oral Argument in Coinbase

This article was first published on the Securities Arbitration Alert blog, here.

The Supreme Court heard oral argument this week in Coinbase, Inc. v. Bielski, No. 22-105.

As reported in SAAs 2023-11 (Mar. 16) and -07 (Feb. 16) the Supreme Court on March 21 heard the oral argument in Coinbase. It was the second case heard that morning. The audio is here and the transcript can be found here.

Certiorari Petition

As reported in SAA 2023-47 (Dec. 15), the Court’s December 9, 2022 Order List granted Certiorari in the case. The issue in this matter is a technical one, as described in the July 2022 Petition:

“Under § 16(a) of the Federal Arbitration Act, when a district court denies a motion to compel arbitration, the party seeking arbitration may file an immediate interlocutory appeal. This Court has held that an appeal ‘divests the district court of its control over those aspects of the case involved in the appeal.’ Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58 (1982) (per curiam).[] The question presented is: “Does a non-frivolous appeal of the denial of a motion to compel arbitration oust a district court’s jurisdiction to proceed with litigation pending appeal, as the Third, Fourth, Seventh, Tenth, Eleventh and D.C. Circuits have held, or does the district court retain discretion to proceed with litigation while the appeal is pending, as the Second, Fifth, and Ninth Circuits have held?” (links added by the Alert).

Case Below

We covered in SAA 2022-17 (May 5) the trial court decision below, Bielski v. Coinbase, Inc., No. C21-07478, 2022 WL 1062049 (N.D. Cal. Apr. 8, 2022). There, the District Court, applying California contract law, held that the predispute arbitration agreement covering the case before it was both substantively and procedurally unconscionable. The subsequent District Court and Ninth Circuit decisions declining to stay the case pending the appeal are unreported. We covered the case in detail in SAA 2023-11 (Mar. 16), and in a March 14 blog post, Reminder: Oral Argument in Coinbase is March 21. What You Need to Know.

The Oral Argument

With a full complement of Justices, the oral argument in this consolidated case was audio livestreamed via the SCOTUS Website. The Court’s March 6 Order List on page 2 denied Respondents’ unopposed motion for divided argument. The discussion focused squarely on the intent of FAA section 16, with several references to Griggs and occasional references to “Timbuktu.” Coinbase’s counsel Neal Kumar Katyal asserted that the statute assumes a stay of the underlying District Court cases. He argued that allowing the District Court to proceed would result in the “toothpaste being out of the tube” with respect to aspects such as discovery and undue settlement pressure. The Court’s pro-arbitration wing was relatively quiet, with the bulk of the questions coming from Justices Kagan and Sotomayor (although Justice Thomas was atypically active). A key theme of these Justices was that, if Congress intended FAA section 16(a) to provide an automatic stay, it would have said so directly. Hassan Ali Zavareei, Counsel for the Suski Respondents, led with: “Congress means what it says and says what it means,” echoing the sentiments of the liberal wing Justices.

For a comprehensive “chapter-and-verse” analysis, we recommend that readers peruse these March 21 posts: Coinbase Argues an Arbitration Case in U.S. Supreme Court as Crypto Makes Its Debut (CoinDesk); U.S. Supreme Court Divided Over Coinbase Arbitration Dispute (Reuters); Supreme Court Hears Arguments in Coinbase Arbitration Case (Axios); and Today’s #SCOTUS Arguments: When Is an Arbitration Appeal Stay Really a Stay? (CPR Speaks).

(ed: *Amicus Briefs aplenty were filed in this case and may be found here. **The Court’s Website posts audio recordings and transcripts the same day as arguments. ***There was a puzzling exchange (transcript page 78) where it was asserted that AAA and JAMS arbitrations were open to the public and there was no presumption of confidentiality. We point out that the AAA Commercial Arbitration Rules state in Rule R-45(a): “Unless otherwise required by applicable law, court order, or the parties’ agreement, the AAA and the arbitrator shall keep confidential all matters relating to the arbitration or the award.” Likewise, Rule R-26 provides: “The arbitrator and the AAA shall maintain the privacy of the hearings unless the law provides to the contrary.” ****We’re not willing to hazard a prediction as to where the Court will land, although to us the pro-arbitration wing seemed sympathetic to Coinbase’s arguments.)

George Friedman

George H. Friedman is the publisher and Editor-in-Chief of the Securities Arbitration Alert, a weekly online publication covering the latest developments in financial services arbitration and mediation. He is also the principal of George H. Friedman Consulting, LLC, providing expert advice on arbitration and mediation in general and the FINRA…