Yasmine Lahlou and Andrew Poplinger | Chaffetz Lindsey
Supreme Court holds that court decides whether subsequent forum selection clause supersedes an arbitration agreement, even if the arbitration agreement delegates arbitrability questions to the arbitrators.
Coinbase, Inc. v. Suski, 144 S.Ct. 1186 (2024).
The Supreme Court has long held that whether a dispute falls within the scope of the parties’ arbitration agreement, an issue often termed “arbitrability,” is a gateway question that is presumptively for the court, rather than the arbitrators, to decide. However, it is equally well-established that courts will enforce “delegation clauses” reflecting the parties’ “clear and unmistakable” intention to arbitrate the arbitrability question itself.
In Coinbase v. Suski, the Supreme Court was faced with an unusual dilemma: the parties entered two agreements concerning the same transaction with conflicting dispute resolution clauses. One contract contained an arbitration clause delegating arbitrability disputes to arbitration, but a later agreement contained a forum-selection clause providing that all disputes would be submitted to California courts. In this situation, the Supreme Court ruled that a court in the first instance must determine which contract controls, including whether the delegation clause in the earlier arbitration agreement applied.
The underlying dispute in Coinbase concerned Coinbase’s operation of a sweepstakes program to promote its cryptocurrency exchange platform in which customers could win a cryptocurrency called Dogecoin. Participants entered two agreements: (1) the Coinbase User Agreement, which contained a broad agreement to arbitrate disputes arising out of use of the cite; and (2) Coinbase’s subsequent Official Rules of the sweepstakes, which contained a broadly worded forum selection clause providing that California courts would have “sole jurisdiction over any controversies” regarding the sweepstakes.
Following conclusion of the sweepstakes, certain participants filed a class action in the United States District Court for the Northern District of California alleging that Coinbase had violated various California laws.
Coinbase moved to compel arbitration, invoking the arbitration clause in the User Agreement. The participants opposed arbitration, arguing that the forum selection clause in the Official Rules superseded the prior agreement to arbitrate. Coinbase argued that the delegation clause in the User Agreement’s arbitration provision required the parties to arbitrate whether the User Agreement’s arbitration provision controlled over the Official Rules’ forum selection clause. The district court and the Ninth Circuit both ruled that the courts, rather than the arbitrators, must decide whether the Official Rules superseded the User Agreement.
The Supreme Court unanimously affirmed. The Court held that whether the parties agreed to arbitrate arbitrability could only be answered by first “determining which contract applie[d].” In other words, a threshold determination was needed to determine whether the arbitration provision delegating arbitrability applied to begin with. The court described this as a “higher-order” determination, which, like other questions regarding whether the parties agreed to arbitrate in the first instance, could only be made by courts.
In so holding, the Court rejected Coinbase’s argument that the arbitration clause was separable from the contract and the delegation clause separable from the arbitration agreement, and thus only a direct challenge to the delegation clause itself was for the courts in the first instance. The Court held the separability principle inapposite here, because the participants’ challenge applied “equally” to the whole User Agreement and its delegation provision. Here, the issue was whether the subsequent Official Rules, including the forum selection clause, superseded the entirety of the User Agreement, including the arbitration clause. In these circumstances, the challenge need not go “only” to an arbitration or delegation provision to require judicial resolution.
The Court also rejected Coinbase’s concern that the approach adopted would “invite chaos by facilitating challenges to delegation clauses,” pointing out the approach adopted applies only where the court is called upon to determine which agreement among multiple conflicting contracts governs. Where there is one contract containing a delegation provision, arbitrability disputes remain arbitrable absent a successful challenge to the delegation provision itself.
In a brief concurrence, Justice Gorsuch observed that, even in the case of multiple agreements, the parties could themselves resolve any conflict by, for example, agreeing to a “master contract” providing that “all disputes arising out of or related to this or future agreements between the parties, including questions concerning whether a dispute should be routed to arbitration, shall be decided by an arbitrator.” Such a provision, he suggested, “would seem to require a court to step aside.”
Read the court’s full decision here.
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