On October 10, 2023, a new law was enacted in California that will curb automatic stays of trial court proceedings upon the appeal of a denial of a motion to compel arbitration. Senate Bill 365, which will take effect on January 1, 2024, amends the California Arbitration Act (“CAA”), which until now, has provided for automatic stays during the denial of such motions in California state court. Such stays have proved important for limiting the expense of trial-court litigation and discovery while the appeal is pending. Under SB 365, a stay may be granted at the discretion of the trial court.
SB 365 turns California law sharply away from the Federal Arbitration Act (“FAA”) and the US Supreme Court’s 2023 holding in Coinbase, Inc. v. Bielski, under which an appeal of denial of a motion to compel arbitration automatically stays proceedings in the district court. We expect that the conflict between SB 365 and the FAA will be hotly litigated in the new year—particularly where arbitration agreements do not clearly and unambiguously incorporate the FAA’s substantive and procedural provisions.
SB 365 amends California Code of Civil Procedure section 1294, a section of the CAA that governs the appealability of various orders related to arbitration. Under the amended provision, an appeal of a denial of a motion to compel arbitration “shall not automatically stay any proceedings in the trial court during the pendency of the appeal.” SB 365 directly abrogates the current law in...
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