On Might 23, the U.S. Supreme Court docket issued its determination in Coinbase, Inc. v. Suski et al., unanimously affirming the Ninth Circuit’s determination holding that when events have agreed to 2 contracts — one sending arbitrability disputes to arbitration, and the different sending arbitrability disputes to the courts — a court docket should resolve which contract governs. The choice teaches a cautionary lesson that events with a number of contracts between them should preserve points of arbitrability constant between the contracts.
Coinbase, a cryptocurrency change platform, was concerned in a dispute with its customers who participated in a promotional sweepstakes. The battle arose from two separate contracts:
- The Coinbase Consumer Settlement that customers agreed to after they created their accounts. The Consumer Settlement contained an arbitration provision stating that an arbitrator should resolve all disputes, together with whether or not a disagreement is arbitrable.
- The Official Guidelines for the sweepstakes for an opportunity to win the cryptocurrency Dogecoin. The Official Guidelines contained a discussion board choice clause offering that California courts shall have sole jurisdiction over any controversies concerning the promotion.
Thus, the sweepstakes entrants had two contracts with Coinbase — the Consumer Settlement which despatched disputes about arbitrability to arbitration, and the Official Guidelines which delegated disputes to the California courts. When Coinbase’s customers filed a category motion in the U.S. District Court docket for the Northern District of California alleging that the sweepstakes violated numerous California legal guidelines, Coinbase moved to compel arbitration primarily based on the Consumer Settlement’s arbitration provision. The district court docket held, and subsequently the Ninth Circuit affirmed, that the Official Guidelines’ discussion board choice clause managed the dispute and the case was not topic to arbitration.
Justice Jackson, delivering the opinion for the unanimous Court docket, reasoned that arbitration is a matter of contract and consent, and disputes are topic to arbitration if, and provided that, the events really agreed to arbitrate these disputes. “Right here, then, earlier than both the delegation provision or the discussion board choice clause might be enforced, a court docket must resolve what the events have agreed to — i.e., which contract controls.” Justice Jackson rejected Coinbase’s argument that the Court docket’s strategy “will invite chaos by facilitating challenges to delegation clauses.” She famous that in instances the place events conform to just one contract, and that contract accommodates an arbitration clause with a delegation provisions, the courts are certain to ship points concerning arbitrability to arbitration. “However, the place, as right here, events have agreed to two contracts — one sending arbitrability disputes to arbitration, and the different both explicitly or implicitly sending arbitrability disputes to the courts — a court docket should resolve which contract governs.”
Justice Gorsuch submitted a concurring opinion emphasizing that neither the Ninth Circuit’s reasoning nor state contract regulation evaluation was endorsed by the Supreme Court docket, however somewhat the Court docket reaffirmed the primacy of the events’ agreements in arbitration issues.
Our Take
This determination underscores the significance of clear and constant contract drafting, significantly in relation to dispute decision mechanisms. Companies needs to be conscious that when a number of agreements govern the relationship between the events and include conflicting provisions regarding arbitrability, courts might want to decide which contract governs the dispute.