“The Ninth Circuit’s rule wreaks havoc on the FAA and deprives both the parties and the courts of the benefits of arbitration.”
—Cory Andrews, WLF General Counsel & Vice President of Litigation
Click here for WLF’s brief.
(Washington, DC)—Earlier today, Washington Legal Foundation (WLF) urged the U.S. Supreme Court to reverse a decision of the U.S. Court of Appeals for the Ninth Circuit that forces a company to proceed with costly and burdensome litigation while its arbitrability appeal is pending. As WLF explains in its amicus brief, the intolerable risk of bearing that burden upends the core policies animating the Federal Arbitration Act (FAA).
Under the FAA, an arbitration clause in a contract involving commerce is both valid and enforceable. When a district court refuses to compel arbitration as the parties agreed, Section 16 of the FAA allows an immediate appeal as of right from that decision. Most courts of appeals recognize that such an appeal automatically divests the district court of jurisdiction and stays the litigation. But the Ninth Circuit—joined by the Second and Fifth Circuits—holds otherwise. In their view, an appeal from the denial of a motion to compel arbitration does not divest the district court of jurisdiction, so the defendant must either obtain a stay pending appeal under the traditional discretionary test or bear the dual burdens of trial litigation and arbitrability appeals.
In its amicus brief urging reversal, WLF argues that Section 16 of the FAA makes sense only if an interlocutory appeal from the trial court’s refusal to compel arbitration automatically stays litigation in the district court. Congress never would have granted defendants the right to an immediate appeal if it had contemplated that litigation would continue apace while the appeal was pending. On the contrary, Congress crafted Section 16 against the background principle that an appeal divests a district court of jurisdiction over the case being appealed. And Congress recognized that the main virtues of arbitration—avoiding the cost and burden of litigation—would be lost if the case proceeds simultaneously in litigation and appeal only to be ultimately decided in arbitration.