Facts of the Case
In June 2021, Coinbase, an online cryptocurrency exchange, launched a Dogecoin Sweepstakes that required participants to opt into "Official Rules" with a forum selection clause stipulating exclusive jurisdiction of California courts for related disputes. Respondent David Suski and three other users, who had agreed to the “Coinbase User Agreement” containing an arbitration provision when they created their accounts, entered the sweepstakes. Subsequently, they filed a lawsuit against Coinbase and Marden-Kane, Inc., the company engaged by Coinbase for the sweepstakes management, alleging violations of California’s False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act. Coinbase sought to compel arbitration based on the User Agreement, but the district court denied Coinbase’s motion, interpreting the contractual documents to conclude that the Sweepstakes’ Official Rules, with their forum selection clause, took precedence over the User Agreement’s arbitration clause.
On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed, concluding that the dispute should be resolved within the California court system as per the Official Rules of the Sweepstakes, not through arbitration as Coinbase had sought.
Questions
When parties enter into an arbitration agreement with a delegation clause, does an arbitrator or a court decide whether that arbitration agreement is narrowed by a later contract that is silent as to arbitration and delegation?
Conclusions
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Where parties have agreed to two contracts—one sending arbitrability disputes to arbitration, and the other either explicitly or implicitly sending arbitrability disputes to the courts—a court must decide which contract governs. Justice Ketanji Brown Jackson authored the unanimous opinion of the Court.
When a court faces a situation where parties have agreed to two contracts that conflict on the question of who decides the arbitrability of disputes—the courts or an arbitrator—a court must determine which contract governs. Parties can form multiple levels of agreements concerning arbitration, leading to different kinds of disputes: first-order (merits of the dispute), second-order (whether they agreed to arbitrate the merits), and third-order (who decides the second-order question). This case involves a fourth-order dispute: which contract applies when there are conflicting agreements on who decides arbitrability. This question must be answered by a court, not an arbitrator. The severability principle does not require parties to challenge only the arbitration or delegation provision, and the issue of California state law is outside the scope of the question presented.
