Today’s “Highlights” is unusual in that it focuses on two aspects of a single case.  In one decision in the Coinbase class action, the Supreme Court has granted cert. on the question of whether litigation should be stayed pending the appeal of the denial of an application to compel arbitration.  Meanwhile, the Ninth Circuit has proceeded with the case and affirmed the District Court’s ruling.  

Stays pending appeal of the denial of a motion to compel; Cert. to SCOTUS

SCOTUS is “arbitration hot.”  Last Term, it decided four cases involving various procedural aspects of the process.  On December 9^th, the Court reiterated its interest in the effects of the Federal Arbitration Act by granting cert. in Coinbase, Inc. v. Bielski, Dkt. No. 22-105.

The issue raised is whether litigation may proceed during a “non-frivolous appeal” of the denial of a motion to compel arbitration of the claims in the case.  According to Coinbase,  there is a Circuit split, as the Third, Fourth, Seventh, Tenth, Eleventh, and D.C. Circuits have held that such an appeal ousts the District Court of all jurisdiction while the Second, Fifth, and Ninth Circuits have held that the litigation may proceed on issues unrelated to the appeal.  Coinbase argues that the Ninth Circuit view, which it characterizes as the minority view, flies in the face of the Federal Arbitration Act’s policy allowing interlocutory appeals of the denial of applications to compel arbitration. “Congress would not have granted parties the right to an immediate interlocutory appeal of refusals to compel arbitration if Congress had contemplated that litigation could proceed while the appeal was pending.”  Coinbase argues such appeals resemble those arising from the denial of sovereign or other immunity, which it claims “ousts the district court of jurisdiction to proceed while the appeal is pending.”  In those cases, as in arbitration, it contends, the granting of the motion “vindicate[s] appellant’s right to avoid litigation entirely.” Pet. for Certiorari, p. 19 (Emphasis added).

In opposition, in addition to arguing that the issue was not important enough for the Court to consider under its discretionary cert. powers, Respondent Bielski defends the Ninth Circuit on the merits.[1] Citing last Term’s decision in Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022), he argues that removing the District Court’s discretion to move forward with litigation when the issue on appeal involves arbitration, while allowing it to do so during the interlocutory appeal of other matters, violates the principle that “courts enforce arbitration agreements in the same manner as other contracts.”  He further argues that, like appeals of the denial of a motion to compel arbitration, injunctions are immediately appealable as of right, but the underlying litigation continues while the appeal of injunctive relief is pending.

The issue is an important one, as it balances the rights of a plaintiff to avoid delay in reaching the merits of its claim against the costs and judicial resources consumed during motion practice and discovery that are potentially wasted if the case ultimately is arbitrated. Also, while the issue is not before SCOTUS in Coinbase, it will be interesting to see if the language of the ultimate opinion sheds any light on the other “hot” FAA stay issue splitting the Circuits.  In the face of Section 3 of the FAA, which provides that the court, upon granting an application to compel arbitration, “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement,” may a court dismiss, rather than stay, the case?  (Emphasis added).

As always, you can get the petition, response, and all filings going forward on the ever-useful Scotus Blog, Scotusblog.com.

Delegation of Arbitrability; Multiple Documents

Coincidentally, the Ninth Circuit issued a decision last week in the underlying matter as to which SCOTUS granted cert., Suski v. Coinbase, Inc., 2022 U.S. App. LEXIS 34806 (9^th Cir. December 16, 2022) – and, as Coinbase feared, the litigation continues while SCOTUS considers the stay issue. [2]

Black letter arbitration law holds that courts resolve the threshold issue of arbitrability, unless the parties “clearly and unmistakably provide otherwise.” Plaintiffs entered into two agreements with Coinbase, a cryptocurrency exchange.   At the time they created their accounts, they agreed to a “Coinbase User Agreement” (“the Agreement”).  Thereafter they entered a Dogecoin Sweepstakes through Coinbase and accepted the contest’s “Official Rules” (“the Rules”).  The Agreement contained an arbitration clause; the Rules provided that California courts would have jurisdiction over any dispute related to the sweepstakes.  Plaintiffs brought claims under various state consumer protection laws related to the sweepstakes.  Coinbase moved to compel arbitration under the Agreement.  The District Court denied the motion; the Court of Appeals affirms.

The decision centers on the priority of the two agreements.  The Agreement delegated disputes “including the enforceability, revocability, scope or validity of the Arbitration Agreement” to the arbitrator.  Coinbase argued that, under this provision, the arbitrator should resolve the question of whether contest claims were subject to arbitration, despite the absence of arbitration language in the Rules themselves. Judge Tashima,  writing for himself; Judge Paez; and District Judge Sessions, sitting by designation, holds that the provision in the Rules for a judicial forum undercuts any “clear and unmistakable evidence of the parties’ intent to delegate questions of arbitrability” that may be contained in the Agreement.  Further, the question of whether Sweepstakes issues must be arbitrated centers on whether the parties ever agreed to that form of resolution, i.e., it involves the “existence rather than the scope of an arbitration agreement.” (Emphasis added).  “The ‘scope’ of an arbitration clause concerns how widely it applies, not whether it has been superseded by a subsequent agreement.”  The panel distinguishes Mohamed v. Uber Techs., Inc., 848 F.3d 1201 (9th Cir. 2016), in which another panel held that the issue of arbitrability was delegated even though the parties’ contract provided that state and federal courts in San Francisco would have “exclusive jurisdiction” over “any disputes, actions, claims or causes of action arising out of or in connection with this Agreement. . . . “  The difference, the panel holds, is that the conflicting provisions in Mohamed were contained in a single agreement, not, as here, in two separate documents. Therefore, the court opines, in Mohamed  “there was no question about a later, potentially superseding agreement.”

The court, then, affirms the District Court’s finding on the issue of whether the Rules’ forum selection clause trumps the arbitration clause in the Agreement, despite the presence of an integration clause in the Agreement.  That provision, the court opines, “only covers antecedent and contemporaneous agreements; it does not foreclose the possibility of future agreements.” (Quoted citation omitted).  The panel declines to harmonize the two agreements by limiting the forum selection clause to non-arbitrable issues. Rather, applying California law, it holds that, when two contracts cover the same subject matter, the second contract prevails to the extent that they are inconsistent, as the court here finds.  Again, it distinguishes Mohamed on the basis that the precedent only involved one agreement.

The recent granting of cert. discussed above may well result in another motion from Coinbase in the District Court to stay the litigation, this time pending SCOTUS’s decision on the underlying arbitration issue.  If so, I’ll try to track where that goes.

Literature: the Singapore Convention

The United Nations Convention on International Settlement Agreements Resulting from Mediation, commonly known by the far shorter name of the “Singapore Convention,” is an attempt to provide international enforceability of agreements reached through ADR.   Leslie Berkoff discusses some of the challenges to effective use of the Convention in the current issue of the American Bankruptcy Institute’s Journal, Berkoff, Mediation Matters, Mediation in International Cases to Advance Cross-Border Disputes; The Singapore Convention and Its Impact on the Process, 41-12 ABIJ 22 (2022).  The article is available on Lexis, In This Issue:, Mediation Matters, Mediation in International Cases to Advance Cross-Border Disputes: The Singapore Convention and Its Impact on the Process, 41-12 ABIJ 22 (lexis.com). The United States has signed, but not ratified, the Convention.

Have a good week.  For those celebrating Christmas, you are down to the last few days of shopping; get out there.  

David A. Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com

[1] The other respondents waived the right to file an opposition to the Petition.
[2] Coinbase has asked that SCOTUS expedite the appeal.  The order granting certiorari does not order any acceleration of the review process.