In a recent ruling, the US Supreme Court has backed Coinbase Global Inc in a case that reinforces the ability of companies to direct customer and employee disputes into arbitration.
According to a Bloomberg report, the decision was made with a 5-4 vote, stating that lawsuits filed in federal court must be put on hold while a defendant appeals to send the case to arbitration.
The ruling is expected to significantly impact the cryptocurrency industry, as arbitration agreements are commonplace in the sector.
The decision will allow companies like Coinbase to enforce arbitration clauses with consumers and employees, which can be less expensive and give defendants key procedural advantages.
Arbitration is a dispute resolution process in which parties agree to submit their disputes to an impartial third party, called an arbitrator, instead of going to court.
Arbitration clauses are commonly included in contracts between companies and their customers or employees, and they require the parties to resolve any disputes through arbitration rather than in court.
Coinbase Prevails In Landmark Supreme Court Case
The Supreme Court’s decision favoring Coinbase means that companies with arbitration clauses in their contracts can enforce those clauses with consumers and employees.
This is significant because arbitration can be less expensive than going to court, giving defendants key procedural advantages, such as limiting discovery and reducing the scope of potential damages.
For companies, the ability to enforce arbitration clauses can provide a more efficient and cost-effective way to resolve disputes. It can also reduce the risk of costly litigation, as arbitration awards are typically final and not subject to appeal.
However, for consumers and employees, arbitration can be seen as disadvantageous because it may limit their ability to pursue their claims in court and result in less favorable outcomes than a trial by jury.
Additionally, arbitration proceedings are often confidential, which may limit public awareness of potential wrongdoing by companies.
The Supreme Court ruled that a district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing. The decision was made with Justice Brett Kavanaugh writing for the majority.
Kavanaugh stated allowing district courts to proceed with pre-trial and trial proceedings. At the same time, the ongoing appeal would reduce the benefits of arbitration, such as efficiency, less expense, and less intrusive discovery.
The Court’s decision reflects a clear background principle prescribed by its precedents, which states that an appeal, including an interlocutory appeal, “divests the district court of its control over those aspects of the case involved in the appeal.”
The ruling is expected to impact future disputes in the sector significantly, and many companies are likely to review their arbitration agreements in light of the decision.
Overall, the decision is a significant win for Coinbase and other companies that utilize arbitration agreements in their contracts.
While consumer advocates may argue that judges should have the discretion to decide which claims should proceed during the appeal, the Supreme Court’s ruling reinforces the power of companies like Coinbase to enforce arbitration clauses with consumers and employees.
Featured image from Unsplash, chart from TradingView.com