Enforcing Arbitration: Lessons Learned from Recent Supreme Court Ruling

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The United States Supreme Court recently clarified an important issue concerning the enforceability of arbitration clauses. The ruling, from the case of Coinbase, Inc. v. Suski et al., addressed a critical question: when two contracts between the same parties contain conflicting arbitration and forum selection, or “choice-of-court,” clauses, who should resolve the issue of arbitrability? An arbitrator? Or the court?

The dispute involved cryptocurrency giant Coinbase and its users who participated in a promotional sweepstakes campaign. Users alleged that Coinbase had violated state laws, leading to a class-action lawsuit. Coinbase sought to compel arbitration based on its user agreement, which contained an arbitration provision with a delegation clause. However, the sweepstakes' official rules included a forum selection clause designating California courts as the exclusive jurisdiction for disputes.

The Supreme Court held that when parties have agreed to two potentially conflicting provisions—one directing arbitrability disputes to arbitration and another implicitly or explicitly assigning such disputes to the courts—a court must determine which provision governs. This ruling clarifies the hierarchy of contractual agreements in arbitration matters and reinforces the principle that arbitration is fundamentally a matter of contract.

The Court's decision underscores the importance of clarity and consistency in contracts, especially regarding dispute resolution clauses. When drafting contracts, parties should carefully consider the language used in arbitration provisions and ensure internal coherence and alignment across all relevant provisions and agreements. Inconsistencies can lead to ambiguity and undermine otherwise enforceable arbitration provisions.

If you have any questions regarding this decision or its impact on your organization, please contact Mark J. Kimzey at (312) 506-4461 or mkimzey@airdowerwas.com or Lauren McKenzie at (312) 506-4463 or lmckenzie@airdowerwas.com.

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