On May 23, the United States Supreme Court issued its decision in Coinbase, Inc. v. Suski et al., unanimously affirming the Ninth Circuit's decision holding that when parties have agreed to two contracts (one sending arbitrability disputes to arbitration and the other sending arbitrability disputes to court), a court must decide which contract governs. The decision teaches a cautionary lesson: Parties with multiple contracts with each other should keep arbitrability issues consistent across contracts.
Coinbase, a cryptocurrency exchange platform, was involved in a dispute with its users who participated in a promotional giveaway. The dispute arose from two separate contracts:
- The Coinbase User Agreement that users agreed to when they created their accounts. The User Agreement contained an arbitration provision that stated that an arbitrator must decide all disputes, including whether a disagreement is arbitrable.
- The official giveaway rules for a chance to win the Dogecoin cryptocurrency. The Official Rules contained a forum selection clause that provided that the California courts will have exclusive jurisdiction over any dispute related to the promotion.
Sweepstakes participants therefore had two contracts with Coinbase: the User Agreement that referred disputes over arbitrability to arbitration, and the Official Rules that delegated disputes to California courts. When Coinbase users filed a class-action lawsuit in the U.S. District Court for the Northern District of California alleging that the giveaway violated several California laws, Coinbase took steps to compel arbitration based on the arbitration provision of the User Agreement. The district court held, and the Ninth Circuit subsequently affirmed, that the forum selection clause of the Official Rules controlled the dispute and that the case was not subject to arbitration.
Justice Jackson, issuing the Court's unanimous opinion, reasoned that arbitration is a matter of contract and consent, and disputes are subject to arbitration if, and only if, the parties actually agreed to arbitrate those disputes. โHere, then, before the delegation provision or forum selection clause can be enforced, a court needs to decide what the parties have agreed to, that is, which contract it controls.โ Judge Jackson rejected Coinbase's argument that the Court's approach "will invite chaos by facilitating challenges to the delegation clauses." He noted that in cases where the parties agree to a single contract, and that contract contains an arbitration clause with delegation provisions, courts are required to refer issues relating to arbitrability to arbitration. โBut when, as here, the parties have agreed two contracts (one sends arbitrability disputes to arbitration and the other explicitly or implicitly sends arbitrability disputes to court), a court must decide which contract governs.โ
Judge Gorsuch filed a concurring opinion emphasizing that neither the Ninth Circuit's reasoning nor the state contract law analysis was upheld by the Supreme Court, but rather the Court reaffirmed the primacy of parties' agreements in arbitration matters.
Our opinion
This decision underlines the importance of clear and consistent contract wording, especially in relation to dispute resolution mechanisms. Companies should be aware that when multiple agreements govern the relationship between the parties and contain conflicting provisions related to arbitrability, courts will need to determine which contract governs the dispute.
