An initial contract — the Coinbase User Agreement that respondents agreed to when they created their accounts — contains an arbitration provision with a delegation clause. Per this provision, an arbitrator must decide all disputes under the contract, including whether a given disagreement is arbitrable. A second contract — the Official Rules for a promotional sweepstakes respondents entered — contains a forum selection clause providing that California courts shall have sole jurisdiction of any controversies regarding the sweepstakes promotion. Respondents ultimately filed a class action in the U.S. District Court for the Northern District of California alleging that the sweepstakes violated various California laws. Coinbase moved to compel arbitration based on the User Agreement’s delegation clause. The District Court, however, determined that the Official Rules’ forum selection clause controlled the parties’ dispute, and accordingly denied the motion. The Ninth Circuit affirmed.  Further affirming, the U.S. Supreme Court, in a unanimous decision, reasoned as follows:

“Given that arbitration agreements are simply contracts, the first principle that underscores all of our arbitration decisions is that arbitration is strictly a matter of consent. Arbitration is a way to resolve those disputes — but only those disputes — that the parties have agreed to submit to arbitration. Consequently, the first question in any arbitration dispute must be: What have these parties agreed to?

“When we home in on the conflict between the delegation clause in the first contract and forum selection clause in the second, the question is whether the parties agreed to send the given dispute to arbitration—and, per usual, that question must be answered by a court….

“Assuming without deciding that the severability principle is implicated here, it is nonetheless satisfied. The severability principle establishes that a party seeking to avoid arbitration must directly challenge the arbitration or delegation clause, not just the contract as a whole. But this rule does not require that a party challenge only the arbitration or delegation provision. Rather, where a challenge applies ‘equally’ to the whole contract and to an arbitration or delegation provision, a court must address that challenge. Again, basic principles of contract and consent require that result. Arbitration and delegation agreements are simply contracts, and, normally, if a party says that a contract is invalid, the court must address that argument before deciding the merits of the contract dispute. So too here. If a party challenges the validity of the precise agreement to arbitrate at issue, the federal court must consider the challenge before ordering compliance with that arbitration agreement.

“Next, Coinbase contends that, as a matter of California law, the Ninth Circuit was wrong to hold that the Official Rules’ forum selection clause superseded the User Agreement’s delegation provision. That issue is outside the scope of the question presented, and we do not address it. We took this case to decide whether, under the FAA, a court or an arbitrator decides which of the two contractual provisions controls. We decline to consider auxiliary questions about whether the Ninth Circuit properly applied state law.

“Finally, Coinbase contends that our approach will invite chaos by facilitating challenges to delegation clauses. We do not believe that such chaos will follow. In cases where parties have agreed to only one contract, and that contract contains an arbitration clause with a delegation provision, then, absent a successful challenge to the delegation provision, courts must send all arbitrability disputes to arbitration. But, where, as here, 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. To hold otherwise would be to impermissibly elevate a delegation provision over other forms of contract.”  Accordingly,

“We conclude that a court, not an arbitrator, must decide whether the parties’ first agreement was superseded by their second. The Ninth Circuit’s judgment is affirmed.”

 

Coinbase v. Suski, 144 S.Ct. 1186 (2024).