By: Daniel S. Wolcott, Associate, Smith, Currie
September 8, 2023

On June 23, 2023, the Supreme Court of the United States in Coinbase, Inc. v. Bielski held that all federal courts must stay litigation proceedings while a motion to compel arbitration is appealed. This decision resolves a long-standing split between federal districts in favor of a uniform rule applicable to all federal courts. Prior to Bielski, some federal courts favored an automatic stay during the appeal of a denial of a motion to compel arbitration. Others allowed the litigation and appeal to proceed concurrently.

In the Bielski case, a proposed class of plaintiffs sued in federal court alleging that Coinbase, an online currency trading platform, failed to replace funds fraudulently taken from users’ accounts by criminal third parties. As is common in consumer contracts, Coinbase’s User Agreement provided for dispute resolution through binding arbitration.

Coinbase sought to enforce the arbitration provision of its User Agreement and moved to stay the pending litigation in federal court. The court denied Coinbase’s motion, and Coinbase appealed through the interlocutory appellate mechanism provided for under the Federal Arbitration Act.

The issue ended up before the Supreme Court on whether the federal court must stay the underlying litigation proceedings pending the outcome of the appeal. Ultimately, the Supreme Court created a new uniform rule holding “[a] district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing.” The Supreme Court added, “Here, as elsewhere, it makes no sense for trial to go forward while the court of appeals cogitates on whether there should be one.”

The Supreme Court reasoned:

  • “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.”
  • The automatic stay would allow parties and the courts to avoid “the worst possible outcome” of “litigating a dispute in the district court only for the court of appeals to “reverse and order the dispute arbitrated.”

In reaching its decision, the Supreme Court majority dismissed concerns from the plaintiff including arguments an automatic stay would result in widespread frivolous appeals of arbitrability issues or create a “a special, arbitration-preferring procedural rule.”

These concerns were echoed by the dissenting justices who stated, “today’s majority invents a new stay rule perpetually favoring one class of litigants—defendants seeking arbitration.” The dissent also noted, “Indeed, the majority mandates a stay even if none of the traditional stay prerequisites are present: likelihood of success on the merits, irreparable harm, favorable balance of equities, and alignment with the public interest.” The dissent went so far as to say that the decision “would upend federal litigation as we know it.”

Bielski is significant for the construction industry because construction disputes often have arbitrability of claims issues. Many arbitration agreements are broad in scope and clear, but some are not. For the latter variety, parties seeking to force arbitration now have, at least in federal court, a tactical stay option even in the face of a potentially shaky arbitration clause. This will delay litigation proceedings when cases are ultimately determined not to be arbitrable. This will add cost and risk to the party who has successfully opposed arbitration. Those costs and risks include:

  • Increased costs and damages. A stay of litigation can lead to increased costs and damages for a party, namely a claimant or plaintiff. This is because claimants may have to continue to pay their attorneys’ fees and other expenses during the stay, even though the case is not actively moving forward towards a recovery. Claimants’ damages could also increase as they accrue interest and fees on other downstream expenses for which they were seeking to recover in the proceedings.
  • Loss of evidence. If a stay of litigation is in place for a long period of time, evidence may be lost or destroyed. Witnesses’ recollections of key events could diminish. In construction cases specifically, witnesses could disappear altogether or end up outside the reach of the adjudicative court given the transient nature of the industry. This can make it more difficult for parties to prove their case at trial. Again, this would more likely impact a claimant who carries the burden of proof.
  • Impairment of rights. A stay of litigation can impair the rights of parties. For example, if a stay is in place for a long period of time, a party may be unable to obtain a temporary restraining order or preliminary injunction, which can be important remedies in some cases.

This decision also underscores the need for clarity in arbitration clauses. If a party wants to carve out certain varieties of disputes from the scope of an arbitration agreement, the time to do this is at the drafting/negotiation stage. With respect to drafting arbitration clauses, we have found that one helpful resource is the AAA’s arbitration free clause-builder platform. It can be found at

Construction industry players and their counsel should think through the dispute resolution procedures before the project begins. Arbitration is not a “one size fits all” process. If there are likely issues that would favor court involvement over the arbitrator, such as intellectual property, those areas need to be addressed plainly in the contract. The parties should also consider whether their arbitration provision incorporates state law that is not inconsistent with the FAA. This can in some cases aid in areas like subpoena power over non-parties. Care should always be given to the selection of any administrative rules as well. These factors should be on any pre-contract checklist.

The author acknowledges and appreciates the significant contributions of Smith, Currie legal intern Cortland Walton, in developing this article.

Smith Currie provides comprehensive legal services to all parts of the construction industry across the nation. Smith Currie lawyers have decades of demonstrated success representing construction and federal government contracting clients “From the Ground Up,” including procurement matters, contract formation and negotiation, project administration, claims prosecution and, when necessary, in litigation and other forms of dispute resolution.

The  views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.