Hogan Lovells secures far reaching Supreme Court win for Coinbase in widely watched arbitration dispute

The issue before the Court was whether a case is automatically stayed when there is a motion to compel arbitration. The decision in favor of Coinbase reversed the Ninth Circuit and settles a circuit split. 

Appellate practice group Co-Head Neal Katyal, who argued the case before the Court, said: “Today’s decision has broad applicability to businesses that routinely use arbitration clauses in their contracts. It was also the first dispute to be heard by the Court involving a cryptocurrency company. It was an honor to have represented Coinbase in this case, and we are very pleased that the Supreme Court has provided clarity on an issue that is so important to litigants.”

In a majority opinion written by Associate Justice Brett Kavanaugh, the Court held that an appeal of a denial to compel arbitration automatically stays district court proceedings. Justice Kavanaugh noted that if the Court were to decide in favor of the plaintiffs, the cost savings of arbitration would be "irretrievably lost - even if the court of appeals later concluded that the case actually had belonged in arbitration all along."

Joining the majority opinion were Chief Justice John Roberts, and Associate Justices Samuel Alito, Neil Gorsuch, and Amy Coney Barrett.

The ruling is a major victory for defendants seeking to compel arbitration. Such defendants, depending on the jurisdiction, previously may have been compelled to move forward with litigation in the trial court, including costly discovery, while also appealing the right to arbitrate. Six circuit courts granted automatic stays in this instance, while three circuit courts, including the Ninth Circuit, left the decision to the discretion of trial judges.

The Coinbase case involved a putative class action in which the District Court denied a motion by Coinbase to compel arbitration. Both the District Court and the Ninth Circuit denied a request by Coinbase’s to stay the case while it appealed to the Ninth Circuit. This effectively required Coinbase to continue to litigate in the District Court—the very thing arbitration was designed to prevent. 

Katherine Minarik, Vice President - Litigation, of Coinbase said in a statement: “Coinbase appreciates today’s Supreme Court decision which recognizes that companies like Coinbase, as well as our customers, bear significant burdens when cases that belong in an arbitration process instead proceed in lengthy and expensive court proceedings. It makes sense that lower court litigation should be paused while an appellate court decides whether a case belongs in court at all.”

Following the Supreme Court’s opinion, Courts of Appeal must first decide whether a matter belongs in arbitration—and only if the court agrees the matter is not arbitrable can the case proceed in federal court.

The Hogan Lovells team was led by Katyal and included partner Jessica Ellsworth, counsel Jo-Ann Sagar, senior associates Will Havemann and Nathaniel Zelinsky, and associate Ezra Louvis (all Washington, D.C.). Ellsworth also argued a related appeal before the Ninth Circuit. The decision in that case is pending. 

A team from Cooley LLP led by partner Kathleen Hartnett acted as co-counsel.