A US Supreme Court case on whether trial court proceedings should automatically be paused while defendants fight to send disputes to arbitration promises to reshape litigation strategies in employment fights.
The justices last week agreed to weigh the question of whether trials should be halted during an appeal of a trial court decision denying a defendant’s motion to compel arbitration.
Employers and worker advocates alike are closely watching the case, which could resolve a federal appeals court divide. The decision promises to impact both sides’ litigation strategies.
The issue is before the court in a combined pair of cases involving Coinbase Global Inc. brought by users who defeated the cryptocurrency exchange’s bids to send disputes with the platform to arbitration. The US Court of Appeals for the Ninth Circuit refused to stay district court proceedings while considering Coinbase’s appeal.
A uniform precedent requiring a suit to move forward while the defendant presses an appeal to compel arbitration could force employers into expensive and time-consuming dual-front fights, and give workers significant leverage in pushing for settlements, attorneys who represent employers said.
“If, as in this case, employees can initiate litigation in a circuit that gives the court discretion to stay pending appeal, the employer would lose significant protections,” said Richard M. Volin, principal at Volin Employment Law.
Duplicative Proceedings
Absent an automatic stay, an employer denied arbitration at the district court could be burdened by briefing, expert work, and class discovery. If their appeal is successful, the parties would have to start anew, Volin added.
“That potential burden with duplicative proceedings is especially critical in employment litigation that typically involves fee-shifting provisions,” which require the prevailing party to be paid legal fees and related costs, Volin said. It adds “pressure on an employer to settle because of the prospect of paying attorney’s fees,” he said.
David J. Harris Jr. of Finkelstein & Krinsk LLP, who represents some of the Coinbase users, lauded the justices for taking up the case.
“On its face, this may look like only a technical procedural issue that the Supreme Court is about to resolve. In practice, however, the current law of the six circuits wrongly hinders access to justice for many people, in many types of civil cases across the country,” Harris said in a statement.
Counsel for other parties didn’t immediately respond to requests for comment.
The Third, Fourth, Seventh, Tenth, Eleventh, and District of Columbia circuits have precedents guaranteeing a stay of the underlying litigation pending appeal of the denial of a motion to compel arbitration, Coinbase told the Supreme Court in its petition for review.
The Second, Fifth, and Ninth Circuits leave it up to district courts to decide whether to pause or continue cases while an appeal on arbitrability is pending. That stance warrants high court action because those appeals courts handle a considerable number of arbitration-related appeals, the filing added.
Stretching Cases
Attorneys who represent workers contend that allowing employers to pause cases while they litigate the arbitration question would put employee plaintiffs at a considerable disadvantage by prolonging their cases for years.
“It forces the employee to make a decision to sit and wait for an appeal or to agree to go to arbitration. This is intended to make it harder for employees to get to court,” said Brian Heller, a partner at Schwartz Perry & Heller LLP.
The Federal Arbitration Act, which generally favors arbitration, is silent on whether an automatic stay should be granted pending an appeal of a denied motion to compel.
A ruling for Coinbase would extend the statute’s reach and allow it “to become a weapon for employers to shield themselves from worker lawsuits seeking to hold them accountable for basic violations of our employment laws,” said Hugh Baran of Kakalec Law PLLC.
While appeals courts are divided on the issue, it’s quite rare for a court to deny a motion like the one at issue in the Coinbase case if the motion to compel arbitration had a chance of success on appeal, Heller said. “This is a very obscure issue,” he added.
If cases are delayed, witnesses’ memory would fade or evidence for discovery would go stale, Baran said.
“It’s a common tactic,” by the defense bar, “which is being extended here,” he said.
Baran pointed to the Supreme Court’s decision last May in Morgan v. Sundance Inc., which said that while the Federal Arbitration Act generally favors arbitration, “a court may not devise novel rules to favor arbitration over litigation.”
Coinbase is essentially asking the justices to do that, Baran said.
