ALEX VIOLA—In 2010, the Supreme Court upheld the use of delegation clauses in arbitration agreements. These clauses delegate to an arbitrator—rather than a court—the power to decide threshold issues about arbitrability, such as whether a valid agreement to arbitrate exists or whether a dispute falls under the scope of an arbitration agreement. Fourteen years later, courts are grappling with the limits of delegation clauses. One example is Coinbase, Inc. v. Suski, a class action now before the Supreme Court that was initially filed by users of Coinbase, a cryptocurrency exchange, against the exchange and others.
Even though this dispute, which relates to Coinbase’s 2021 Dogecoin Sweepstakes, already came to the Supreme Court on an arbitration issue during the October 2022 term, the Court decided to grant certiorari on another arbitration question. The issue this time is whether a court or an arbitrator should decide if an arbitration agreement with a delegation clause is narrowed by a later agreement with a forum selection clause that gives a state’s courts exclusive jurisdiction over certain disputes. Typically, when parties enter into successive agreements over the same subject matter but with differing terms, the later agreement supersedes the earlier one—the presumption being that the parties made the later agreement with knowledge of the first. But how should the presence of a delegation clause and the Court’s arbitration precedents affect this principle?
The plaintiffs in Coinbase, Inc. v. Suski first agreed to Coinbase’s “User Agreement” when creating their Coinbase accounts. The User Agreement provided that the parties must arbitrate disputes, and an arbitrator shall decide disputes about the interpretation of the arbitration agreement, like enforceability, revocability, scope, or validity. The plaintiffs later entered into the Dogecoin Sweepstakes’ “Official Rules,” which contradicted the User Agreement by providing California courts exclusive jurisdiction over sweepstakes disputes.
When the plaintiffs believed state law violations occurred, they sued in court. Coinbase responded by trying to compel arbitration, citing the User Agreement’s arbitration provision. The district court denied Coinbase’s motion, holding that the Official Rules superseded the User Agreement. On appeal, the Ninth Circuit affirmed. The Ninth Circuit saw the issue as one of existence versus scope. Therefore, because “[t]he ‘scope’ of an arbitration clause concerns how widely it applies, not whether it has been superseded by a subsequent agreement[,]” the Ninth Circuit concluded that the question of existence was for the court to decide. Coinbase appealed to the Supreme Court.
At the oral argument on February 28, 2024, both parties agreed that the Ninth Circuit’s analysis missed the mark. At one point, Justice Kavanaugh asked, “[I]f you both agree that the Ninth Circuit’s analysis is wrong, . . . are we done?” When Coinbase’s attorney, Jessica Ellsworth, conceded a remand possibility but tried to explain why the Court should do more, Kavanaugh interjected, “But we could. I just want to get the ‘could’. . . .” Justice Sotomayor then characterized the “more” that Coinbase wanted as “huge changes” and said that Coinbase was creating a whole set of federal rules.
By contrast, the plaintiffs’ attorney, David Harris, still wanted the Court to affirm the Ninth Circuit’s general holding but clarify that “[the] ‘existence’ language isn’t the way to go about it.” However, as Harris tried to present his alternative analysis, Justice Gorsuch said, “I think you’ve just conceded over and over again that the first agreement says those questions go to the arbitrator, and it’s broad in scope, and it covers everything . . . .” The “existence” language also did not appear to be a massive problem for Harris below. The Ninth Circuit’s opinion stated, “We find well-taken plaintiffs’ argument that . . . the existence rather than the scope of an arbitration agreement is at issue here.” Harris had submitted the answering brief to the Ninth Circuit. It asserted, “Where, as here, the interpretive question does not concern a standalone arbitration agreement, but rather, concerns whether a subsequent, forum-selection agreement ‘superseded’ or modified an earlier arbitration agreement, the dispute becomes one ‘over the existence, rather than the scope, of the agreement to arbitrate.’” Similarly, at the oral argument in the Ninth Circuit, Harris did not seem to suggest that the “existence” framing was wrong. Harris’s argument may be more consistent than it initially appears, but his presentation on February 28 obfuscated his point.
The question presented by Coinbase, Inc. v. Suski matters because, as Coinbase’s counsel explained, parties often enter into successive agreements. Answering this question, however, would require the Court to get into the weeds on its arbitration precedents. Though based on the oral argument, the Justices will not have to; instead, they will likely remand the case to the Ninth Circuit. Less clear is what the Court will tell the Ninth Circuit to do.
