The United States Supreme Court decided a case in favor of arbitration agreements, which is a win for employers. The Court specifically determined that a lower court must stay a case while it was determining whether or not the arbitration agreement was enforceable. This will prevent companies from spending money litigating a case in court that may eventually be moved into arbitration.
Coinbase Inc. v. Bielski combines two class-action lawsuits filed in federal district court in California against Coinbase, a San Francisco-based currency exchange and transaction platform. Coinbase’s users agreed to arbitrate disputes with the company on an individual basis.
Coinbase, Inc. was sued in two different cases and Coinbase filed to move the two cases to arbitration based on the user agreement’s arbitration clause. The federal district court ruled that the arbitration agreement was too one-sided in favor of Coinbase and therefore unenforceable.
Coinbase requested an interlocutory appeal, to the Ninth Circuirt Court of Appeals. Congress amended the Federal Arbitration Act in 1988 to allow an interlocutory appeal of decisions denying a motion to compel arbitration and refusing to stay proceedings pending arbitration.
Coinbase appealed to the 9th U.S. Circuit Court of Appeals, which denied its request to pause the litigation pending the appeal. However, the Supreme Court reversed the circuit court’s decision and remanded the case to the lower courts. Coinbase can continue its efforts to compel arbitration without spending time and money litigating the case.
Employers should consider the use of arbitration agreements for several reasons. An arbitration agreement requires the parties to submit cases to arbitration rather than filing suit in court. Arbitration allows the parties to mutually chose arbitrators vs. being assigned a judge randomly. Arbitration, in most cases, is quicker and less expensive and is confidential. Agreements can also be used to avoid class action litigation and can shorten a statute of limitations. Lastly, they generally avoid large verdicts due to runaway juries.
The downside is that arbitration is final with no ability to appeal the decision, and the entire cost usually rests with the employer.
Arbitration is generally thought to be more employer friendly than a traditional courtroom setting for employment matters.
