In a unanimous opinion, the U.S. Supreme Court has decided that a court, not an arbitrator, must decide whether a dispute is subject to arbitration when parties have agreed to two separate agreements that are in conflict as to whether a dispute between the parties is arbitrable.[1]
The case involved Coinbase, Inc., which operates a cryptocurrency exchange platform, and certain users of the Coinbase platform. The parties executed two contracts.
The first contract, the Coinbase User Agreement, contained an arbitration provision with what is known as a “delegation clause”; under that provision, an arbitrator must decide all disputes under the contract, including whether a given disagreement is arbitrable. In addition, the Coinbase users submitted entries to a sweepstakes that Coinbase offered. In so doing, they agreed to the Official Rules of the sweepstakes—the second contract. Unlike the User Agreement, the Official Rules contained a forum selection clause providing that all disputes regarding the sweepstakes must be decided in California courts, either state or federal.
After the sweepstakes concluded, the Coinbase users filed a class action lawsuit against Coinbase in federal district court in California, alleging that the sweepstakes violated certain California laws. Coinbase moved to compel arbitration, arguing that the User Agreement and its delegation clause controlled. The district court denied the motion, ruling that the Official Rules forum selection clause controlled, not the User Agreement. The United States Court of Appeals for the Ninth Circuit affirmed.[2] The Supreme Court granted certiorari to decide the following question: when two such contracts exist, who decides the arbitrability of a contract-related dispute between the parties—an arbitrator or the court?
The Supreme Court ruled that “basic legal principles” established the answer. It ruled that, because arbitration is a matter of contract and consent, a dispute is subject to arbitration only if the parties actually agreed to arbitrate the dispute. Before a delegation provision or a forum selection clause like the one at issue can be enforced, the Court ruled, a court needs to decide what the parties have agreed to—that is, which contract controls. Coinbase argued that this approach would “invite chaos” by facilitating challenges to delegation clauses. The Court disagreed. It said that, in cases where parties have agreed to only one contract, and the contract contains an arbitration clause with a delegation provision, courts must send all arbitrability disputes to arbitration. But where, as in this case, the parties have agreed to two contracts—one sending arbitrability disputes to arbitration, and the other either explicitly or implicitly sending arbitration disputes to the courts—a court must decide which contract governs.
[1] Coinbase, Inc. v. Suski, 2024 WL 233424 (U.S. May 23, 2024).
[2] Suski v. Coinbase, Inc., 5 F.4th 1227 (9th Cir. 2022).