On May 23, 2024, the U.S. Supreme Court issued a unanimous decision in Coinbase, Inc. v. Suski, addressing the question of when two contracts conflict over whether a dispute should go to arbitration or court, who decides which agreement governs—an arbitrator or a judge? The answer: A judge must decide.
Coinbase, a cryptocurrency platform, had two contracts with its users:
- User Agreement – Required arbitration for all disputes and included a “delegation clause,” meaning an arbitrator would decide even threshold questions like whether a dispute was subject to arbitration.
- Sweepstakes Rules – Entered into later, this agreement governed a promotional Dogecoin sweepstakes and included a forum selection clause requiring all disputes to be resolved in California courts.
When users sued Coinbase over the sweepstakes, Coinbase tried to compel arbitration under the earlier User Agreement. The users pointed to the later sweepstakes rules, which clearly chose courts—not arbitrators—for resolving disputes.
Lower courts sided with the users, and the Supreme Court affirmed.
The Court held that when two contracts conflict over whether arbitration applies, the threshold question—which contract controls—must be decided by a court, not an arbitrator, even if one contract has a delegation clause. This is because arbitration is grounded in consent, and until a court determines which agreement governs, it cannot be assumed the parties agreed to arbitrate.
Why This Matters
1. Multiple Contracts, Multiple Problems
If a business uses layered agreements—terms of service, promotions, product-specific terms—it must ensure consistency across dispute resolution clauses. A later agreement can override earlier arbitration clauses, even inadvertently.
2. Delegation Clauses Aren’t Bulletproof
A delegation clause does not guarantee arbitration of all disputes. If a subsequent contract omits or contradicts it, courts get the final say on arbitrability.
3. Forum Selection Clauses Can Trump Arbitration
If you include a forum selection clause in a later agreement, it may override an earlier arbitration clause—even if that clause mandates that all disputes between the parties must be arbitrated.
Key Takeaways
- Businesses should review and harmonize their contracts.
- Businesses should be deliberate about dispute resolution language. They should decide if they want disputes to be resolved in arbitration or litigation, and their agreements should avoid conflicting language.
- Businesses should consult counsel before deploying new agreements, especially if those agreements interact with existing contracts.
