Conflicting Terms of Service Provisions Undermine Arbitration Clause–Suski v. Coinbase

Coinbase launched “Dogecoin promotion” sweepstakes in 2021. Users sued Coinbase and its marketing agency, asserting claims under state law.

Coinbase sought to send the case to arbitration, but there was a possible conflict in the governing TOSes. Coinbase’s standard terms required consumers to arbitrate their disputes with Coinbase. However, the terms accompanying the Dogecoin sweepstakes offer contained an exclusive forum selection clause, requiring resolution of disputes in California courts. The legal question is how these two documents interact with each other. Does the original TOS (and its arbitration provision) control, or do the Dogecoin promotion terms?

The district court denied Coinbase’s request to compel arbitration. The Ninth Circuit affirms.

Coinbase argued that the delegation clause in its standard Coinbase terms granted authority to the arbitrator in the first instance to decide whether the dispute was covered by the arbitration clause. The Ninth Circuit disagreed, finding that while this may be the case where a conflicting venue provision and an arbitration clause are contained in the same agreement, this is not the case where the venue clause is contained in a later agreement. In the court’s view, the question presented is the validity of the arbitration agreement, which is a matter of “the existence rather than the scope” of the arbitration agreement:

The “scope” of an arbitration clause concerns how widely it applies, not whether it has been superseded by a subsequent agreement.

While an arbitrator may decide the scope of the agreement, they may not decide the existence of an agreement to arbitrate.

Coinbase relied on an integration clause in the original Coinbase terms and argued that this reflected the parties’ intent to have all disputes governed by arbitration. The court says that an integration clause does not mean that future agreements can’t supersede earlier ones, and the later agreement need not specifically call out an intent to revoke the prior agreement.

Coinbase also argued that the two agreements should be “harmonized,” but the court agrees with plaintiffs that there is a clear conflict between the two agreements. While language in the agreements themselves render them difficult to reconcile with each other, there was another aspect to the two agreements that made them difficult to reconcile:

The Official Rules apply to all Sweepstakes entrants, including entrants who are not subject to the User Agreement because they used an alternative mail-in procedure. Despite Coinbase’s arguments, the Official Rules make no distinction between entrants who are Coinbase users subject to the User Agreement’s arbitration clause and those who are not because they used an alternative mail-in entry procedure.

The court affirms the district court’s refusal to send the dispute to arbitration. That seemingly leaves the Dogecoin promotion terms as the controlling document, at least as to dispute resolution.

What could Coinbase have done to avoid this? The easy answer is that it should ensure that any later agreements expressly incorporate the default terms and its dispute resolution provisions. It’s always easier said than done to ensure consistency among various sets of terms of service, but this is one of those things where it’s worth having on a checklist.

[Eric’s comment: another option would be to use the identical arbitration provisions in every TOS. It’s easy enough to cut-and-paste from one document to the next, but usually this is a left-hand/right-hand problem where two internal teams are working independently and don’t cross-check each others’ efforts.]

Starting with Douglas v. Talk America (and later Blockbuster), the blog has covered numerous cases where companies rely on ToS provisions that say they can be unilaterally amended. Courts have grown increasingly skeptical of this practice. Most recently Kieran covered International Markets v. Thayer and offered this comment:

RIP, “The Company may update these terms of use at any time by posting updates to this site.” Born, circa 1997. Always sick and infirm. Officially declared dead, 2022.

Did the rising judicial skepticism towards TOS amendments influence this decision?

Interestingly, the plaintiffs also named the marketing agency involved in the sweepstakes. One wonders how the dispute between it and Coinbase (if any) played out.

Case citation: Suski v. Coinbase, No. 22-15209 (9th Cir. Dec. 16, 2022). (Note: Coinbase obtained an extension of the deadline to seek rehearing.)

Related posts:

Court Says “You May NOT Amend Your TOS by Posting New Terms to Your Site”–International Markets v. Thayer

Ninth Circuit Strikes Down Contract Amendment Without Notice–Douglas v. Talk America

Stop Saying “We Can Amend This Agreement Whenever We Want”!–Harris v. Blockbuster