by Andrew Flake

Summer is beach season, and when my family travels, we’ll usually bring a few decks of cards with us. When my children were younger, that meant we played a lot of “War.” You know the game — there’s not a lot to it, but it passes the time, and has the advantage of being very easy to set up and play.

What it’s missing is the complexity, and thus the interest, of some of our current favorites, like euchre or hearts. Games like those require setting strategy and play based on each new deal, adapting to the individual hand and the cards you have.

In the same way, when a trial court has judicial discretion to rule — on issues like case management and discovery — the court can adapt to the facts and issues at hand. Bright-line rules and statutory requirements, by contrast, generally do not allow for that discretion. They are algorithmic — if this happens, then that happens. Like setting up the card game “War,” they are predictable, and easy to administer.

Which puts me in mind of this week’s case, the Supreme Court’s Coinbase v. Bielski decision. It’s an important opinion in the arbitration-procedure realm that is also, in a fundamental way, about bright lines versus judicial discretion. The majority determined that when the parties in court disagree on where the case belongs, in court or in arbitration, and that issues is appealed, the court case is stayed.

The background is that, under the FAA, a party may not appeal an order compelling arbitration, that is, granting a motion to compel. But it does have the right to appeal an order denying such a motion. When that appeal happens, the FAA’s text does not directly speak to the whether the district court case can move forward.

With Judge Kavanaugh writing for the majority, a majority of the Supreme Court held that appeal of an order denying a motion to compel arbitration requires a stay during the appeal, in every case, of its proceedings.

In the Ninth Circuit, where the appeal arose, whether to issue a stay was discretionary. Other Circuits, like the Seventh, had already determined an appeal on a denied motion to compel will stay the case.

To decide the question, the Supreme Court relied on an earlier decision (Griggs v. Provident Consumer Discount) that a notice of appeal, once filed, divests the district court of control over the subject matter appealed.

Staying the case on appeal is already a common practice that the majority notes is also “common sense,” avoiding the potential for massive unnecessary expenditure, including a trial that could be a nullity. Fair point, and the discussion here very much focuses on the economics of litigation:

Absent an automatic stay of district court proceedings, Congress’s decision in § 16(a) to afford a right to an interlocutory appeal would be largely nullified. If the district court could move forward with pre-trial and trial proceedings while the appeal on arbitrability was ongoing, then many of the asserted benefits of arbitration (efficiency, less expense, less intrusive discovery, and the like) would be irretrievably lost—even if the court of appeals later concluded that the case actually had belonged in arbitration all along. Absent a stay, parties also could be forced to settle to avoid the district court proceedings (including discovery and trial) that they contracted to avoid through arbitration. That potential for coercion is especially pronounced in class actions, where the possibility of colossal liability can lead to what Judge Friendly called “blackmail settlements.” H. Friendly, Federal Jurisdiction: A General View 120 (1973).

Quoting the Seventh Circuit, the majority writes “Here, as elsewhere, it ‘makes no sense for trial to go forward while the court of appeals cogitates on whether there should be one.’ ‘”

Disagreeing with Bielski and Justice Jackson’s dissent, the majority does not believe that district courts’ have historically done enough to account for the concern of expense to the litigants: District courts and courts of appeals applying the usual four-factor standard…often do not consider litigation-related burdens (here, from the continued District Court proceedings) to constitute irreparable harm. By way of background, a stay requires showings of likelihood of success on the merits, irreparable harm, favorable balance of equities, and alignment with the public interest.

The dissent, written by Justice Jackson, deems the customer stay factors, along with existing trial court discretion, as more than sufficient to police these concerns. It sharply criticizes the majority for “invent[ing] a new stay rule perpetually favoring one class of litigants—defendants seeking arbitration.” Congress could have and did not permit a stay under Section 16, elsewhere in the FAA. And it views the principle of Griggs as simply preventing the district court from modifying an order or judgment while it is being appealed. Thus: “Griggs prevents the district judge from revisiting whether to compel arbitration while the appeal is pending. Griggs does not stop the district court from proceeding on matters other than arbitrability.”

To the efficiency concerns, the dissent would leave the district court, which has more knowledge of the case and more flexibility, to craft a solution. Justice Jackson sees similar policy arguments available to a plaintiff opposing arbitration and an appeal:

In addition, for each of the majority’s concerns favoring a mandatory stay, there are countervailing considerations. The majority professes interest in “efficiency.” Ibid. But forcing district court proceedings to a halt—for months or years while the appeal runs its course—is itself inefficient. The majority also fears losing other “asserted benefits of arbitration” without a stay. Ibid. But with a stay, the party opposing arbitration loses the benefits of immediate litigation. A plaintiff’s request for injunctive protection against imminent harm, for example, goes unanswered under the majority’s rule. Similarly, while the majority laments settlement pressure on parties seeking arbitration, ibid., the rule it announces imposes settlement pressure in the opposite direction. With justice delayed while the case is on hold, parties “could be forced to settle,” ibid., because they do not wish—or cannot afford—to leave their claims in limbo. Incongruously, the majority inflicts these burdens on the party that won the arbitrability issue before the district court (the party opposing arbitration).

She suggests Congress, not the Court, should resolve the competing policy concerns. Reasonable minds can differ here as to whether it is more or less helpful that all trial court proceedings be stayed on appeal. There’s certainly a case to be made for more discretion in certain cases. That’s particularly so where, as is often the case in complex litigation, a range of issues and claims are in dispute, not all of them necessarily arbitrable. For now, however, under its own view of the text of the FAA and the Griggs precedent, the Supreme Court has adopted what seems to be a fairly bright-line and a blanket stay approach.

Merits aside, my favorite part of the opinion, from a style perspective, is in the dissent. Justice Jackson writes that “the majority’s analysis comes down to this: Because the pro-arbitration party gets an interlocutory appeal, it should also get an automatic stay.” She then cites, not legal authority, but “If You Give a Mouse a Cookie“, the 1985 children’s book about a little mouse that, having received one tiny treat, keeps wanting more and more.

The case is Coinbase, Inc. v. Bielski, __ U.S.__, 2023 WL 4138983 (decided June 23, 2023).

Also cited was Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982) (per curiam).