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Coinbase, Inc. v. Suski (US 23–3 5/23/24) Arbitrability Disputes in Multiple Contracts (impacts employment arbitration)

By May 23, 2024June 24th, 2024Uncategorized

The dispute here involves a conflict between two contracts executed by petitioner Coinbase, Inc., operator of a cryptocurrency exchange platform, and respondents, who use Coinbase. The first contract—the Coinbase User Agreement that respondents agreed to when they created their accounts—contains an arbitration provision with a delegation clause. Per this provision, an arbitrator must decide all disputes under the contract, including whether a given disagreement is arbitrable. The second contract—the Official Rules for a promotional sweepstakes respondents entered—contains a forum selection clause providing that California courts “shall have sole jurisdiction of any controversies regarding the [sweepstakes] promotion.” Respondents ultimately filed a class action in the U. S. District Court for the Northern District of California, alleging that the sweepstakes violated various California laws. Coinbase moved to compel arbitration based on the User Agreement’s delegation clause. The District Court determined that the Official Rules’ forum selection clause controlled the parties’ dispute and accordingly denied the motion. The Ninth Circuit affirmed.

Held: Where parties have agreed to two contracts—one sending arbitrability disputes to arbitration, and the other either explicitly or implicitly sending arbitrability disputes to the courts—a court must decide which contract governs. Pp. 4–9.

(a) The Federal Arbitration Act “reflects the fundamental principle that arbitration is a matter of contract.” Rent-A-Center, West, Inc. v. Jackson, 561 U. S. 63, 67. Given that arbitration agreements are simply contracts, the first question in any arbitration dispute must be: What have these parties agreed to? Parties can form multiple levels of agreements concerning arbitration, and thus can have different kinds of disputes. At a basic level, parties can agree to send the merits of a dispute to an arbitrator. The merits of a dispute is a first-order disagreement. The parties may also have a second-order dispute— “whether they agreed to arbitrate the merits”—as well as a third-order dispute—“who should have the primary power to decide the second matter.” First Options of Chicago, Inc. v. Kaplan, 514 U. S. 938, 942. Pp. 4–5.

(b) This case involves a fourth kind of dispute: What happens if parties have multiple agreements that evidence a conflict over the answer to the third-order question of who decides arbitrability? That question can be answered as to these parties only by determining which contract applies. Homing in on the conflict between the delegation clause in the first contract and the forum selection clause in the second, the question becomes whether the parties agreed to send the given dispute to arbitration. And that question must be answered by a court.

Coinbase asks the Court to revisit the Ninth Circuit’s bottom-line conclusion below, but its arguments are unpersuasive. First, Coinbase argues that the Ninth Circuit should have applied the so-called severability principle—under which “an arbitration [or delegation] provision is severable from the remainder of the contract,” Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 445–446—and considered only arguments specific to the User Agreement’s delegation provision. But the severability rule does not require that a party challenge only the arbitration or delegation provision. Rather, where a challenge applies “equally” to the whole contract and to an arbitration or delegation provision, a court must address that challenge. Rent-A-Center, 561 U. S., at 71.

Coinbase next contends that, as a matter of California state law, the Ninth Circuit erroneously held that the Official Rules’ forum selection clause superseded the User Agreement’s delegation provision. That issue is outside the scope of the question presented, and the Court does not address it.

Finally, the Court does not believe its ruling here will invite chaos by facilitating challenges to delegation clauses. Regardless, where the parties have agreed to two contracts, a court must decide which contract governs. To hold otherwise would be to impermissibly elevate a delegation provision over other forms of contract. See ibid. Pp. 5–8.

55 F. 4th 1227, affirmed.

JACKSON, J., delivered the opinion for a unanimous Court. GORSUCH, J., filed a concurring opinion.