Alfia v. Coinbase Global, Inc.

Background

Adam Alfia filed a proposed class action against Coinbase Global, Inc. He alleged that Coinbase failed to properly secure his account, allowing an unauthorized purchase of $50,000 in cryptocurrency. He also alleged that an equivalent amount was deducted from his personal bank account without his knowledge or approval, causing economic loss, worry, and stress. His claims included breach of contract based on Coinbase’s Privacy Policy, negligent security of his information and accounts, and misrepresentations about the security and confidentiality of that information.

Coinbase moved to compel arbitration under the Federal Arbitration Act. Coinbase asserted that, when Alfia created his account on December 18, 2017, he clicked a checkbox stating that he agreed to the User Agreement and Privacy Policy. The 2017 User Agreement contained an arbitration provision requiring disputes arising under the agreement to be resolved through binding arbitration on an individual basis and waiving a jury trial and participation in a class action or class-wide arbitration.

Court’s analysis

The court found that the parties formed a valid arbitration agreement. It treated the online agreement as similar to a “clickwrap” agreement because Alfia had to click a checkbox to agree to hyperlinked terms. The court found that Alfia had clear notice of the User Agreement and had taken physical action showing his assent. Alfia did not contest that he agreed to the 2017 User Agreement when he created his Coinbase account.

The court also found that the arbitration provision covered the dispute. The provision broadly covered disputes arising under the User Agreement, which governed Coinbase’s services through a Coinbase account. The court concluded that Alfia’s claims related to Coinbase’s provision of those services.

Alfia argued that his privacy-related claims were not subject to arbitration because the Privacy Policy was a separate document without its own arbitration provision. The court rejected that argument because the User Agreement incorporated the Privacy Policy by reference, and the Privacy Policy was readily accessible through a hyperlink during account creation. The court also stated that the Privacy Policy did not have to incorporate the User Agreement in return.

The court further rejected Alfia’s challenge that the arbitration provision was unconscionable, meaning unfairly one-sided or imposed without meaningful choice. The court found a minimal degree of procedural unconscionability because the User Agreement was presented on a take-it-or-leave-it basis and Coinbase had greater bargaining power. But the arbitration provision was clearly labeled in bold, and the record did not show that Coinbase was Alfia’s only option for cryptocurrency services. The court also found no substantive unconscionability, concluding that the class-action waiver and the provision’s benefits to Coinbase did not make the agreement so one-sided as to be unenforceable.

Ruling and effect

Judge Haywood S. Gilliam, Jr. granted Coinbase’s motion to compel arbitration. The court stayed the action pending resolution of the arbitration. The parties were ordered to file a joint status report about the arbitration 120 days after the order and every 120 days afterward unless the court ordered otherwise. They were also ordered to notify the court jointly within 48 hours after the arbitration concluded.