Acknowledging that litigation expenses resulting from the denial of a motion to compel arbitration can constitute "irreparable harm" to the moving party, a California federal district court has granted a motion to stay an I-Phone class action lawsuit pending appeal of an order denying arbitration.

In Steiner v. Apple Computer, Inc., No. C 07-04486 SBA, 2008 WL 1925197 (N.D. Cal. Apr. 29, 2008), Steiner filed a class action lawsuit against Apple and AT&T for breach of contract and other claims stemming from the purchase of an Apple I-Phone. AT&T moved to compel individual arbitration of Steiner's claims in accordance with their agreement.

The Court denied the motion to compel, holding that the class action waiver in the agreement was unconscionable. Steiner v. Apple Computer, Inc., 556 F.Supp.2d 1016, 1022 (N.D. Cal. 2008). AT&T appealed the denial and sought a stay of proceedings pending its appeal.

The Court found that a stay pending appeal was warranted. In considering the motion to stay, the Court examined the likelihood of AT&T's success on the merits, the irreparable injury to AT&T should a stay not be granted, any substantial injury to Steiner from granting the stay, and the interest of the public in granting or denying the stay. See Hilton v. Braunskill, 481 U.S. 770, 776 (1987) (enumerating the four "stay" factors).

While the Court agreed with Steiner that AT&T would not likely succeed on the issues it sought to present on appeal, the Court found that AT&T's latest arbitration agreement had not yet been examined by the appellate court, and its consideration presented a "substantial question." Therefore, the Court determined a stay would be justified if the three other Hilton factors weighed strongly in AT&T's favor.

AT&T next argued that it would suffer irreparable harm if its motion to stay were denied. The Court agreed, finding that "litigation costs would constitute irreparable harm" under the circumstances. It also noted that "almost every California district court to recently consider whether to stay a matter, pending appeal of an order denying a motion to compel arbitration, has issued a stay." See, e.g., Pokorny v. Quixtar, Inc., No. 07-00201 SC, 2008 WL 1787111, at *1 (N.D. Cal. Apr. 17, 2008); Jones v. Deutsche Bank AG, No. C 04-05357 JW, 2007 WL 1456041, at *1 (N.D. Cal. May 17, 2007); Winig v. Cingular Wireless LLC, No. C-06-4297 MMC, 2006 WL 3201047, at *3 (N.D. Cal. Nov. 6, 2006).

In so finding, the Court declined to place the burden of showing substantial irreparable harm on AT&T, reminding Steiner that Hilton only required a strong showing of any irreparable harm. Hilton, supra, at 776. To the Court, AT&T "met this burden, as it will suffer lost time and money" – some of the very harms arbitration is designed to avoid – if the Ninth Circuit reversed the order.

The Court also decided that a stay would not substantially injure class members seeking minimal individual damages and would not be contrary to the public interest. Accordingly, the Court held that the second, third, and fourth Hilton factors strongly favored AT&T, and granted the motion to stay proceedings pending AT&T's appeal.