Ninth Circuit Affirms District Court’s Order Denying Online Cryptocurrency Exchange’s Motion to Compel Arbitration of Users’ Claims

In David Suski v. Coinbase, Inc., et al., the Ninth Circuit affirmed a district court order denying defendant Coinbase, Inc.’s motion to compel arbitration, concluding that issues surrounding a forum selection clause were not delegated to the arbitrator and were for the court to decide. The court further found that the forum selection clause in Coinbase’s official rules superseded the user agreement’s arbitration clause.

The case involved claims brought by the plaintiff and other users of Coinbase’s online cryptocurrency exchange who opted into Coinbase’s “Dogecoin Sweepstakes” in June 2021. When opening their accounts, the plaintiffs agreed to a Coinbase user agreement which included an arbitration provision. The plaintiffs later opted into the sweepstakes’ official rules, which included a forum selection clause providing that “California courts have exclusive jurisdiction over any controversies regarding the sweepstakes.” The plaintiffs later brought claims under California’s False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act against Coinbase and another defendant hired by Coinbase to market and run the sweepstakes. Coinbase filed a motion to compel arbitration of the plaintiffs’ claims. The district court denied the motion, concluding that the “delegation clause” in the user agreement “did not delegate to the arbitrator the issue of which contract [the User Agreement or Official Rules] governed the dispute.” Applying state law principles of contract interpretation, the district court then ruled that the official rules superseded the user agreement, and that the arbitration clause contained in the user agreement did not apply to the plaintiffs’ claims.

The Ninth Circuit affirmed the district court’s order and addressed Coinbase’s argument that the district court erred when it concluded that the user agreement did not delegate to the arbitrator the issue of whether the forum selection clause in the official rules superseded the arbitration clause in the user agreement. The court noted its decision in Oracle Am. Inc. v. Myriad Grp. A.G., (9th Cir. 2013) that “[w]hether the court or the arbitrator decides arbitrability is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.” The court then found that the district court correctly ruled that in this case, the issue of whether the forum selection clause in the official rules superseded the arbitration clause in the user agreement “was not delegated to the arbitrator, but rather was for the court to decide.”

The court then addressed Coinbase’s argument that the district court erred when it concluded that the forum selection clause in the official rules superseded the arbitration clause contained in the user agreement. The court noted that state law principles of contract formation and interpretation apply “when determining whether parties have agreed to submit to arbitration” and when there are two contracts dealing with the same subject matter without addressing whether the second contract is a substitute for the first, “the two contracts must be interpreted together and the latter contract prevails to the extent they are inconsistent.” The court agreed with the district court that given the conflict between the official rules and the user agreement, “the Official Rules’ forum selection clause supersedes the User Agreement’s arbitration clause” since the official rules came after the user agreement.

David Suski, et al. v. Coinbase, Inc., et al., No. 22-15209 (9th Cir. Dec. 16, 2022)