Kamath v. Coinbase, Inc.

Background

Reshma Kamath sued Coinbase, Inc. and Wells Fargo Bank, N.A. for damages arising from an allegedly fraudulent transaction. According to the opinion, a client gave Kamath a fraudulent check, Kamath deposited it into her Wells Fargo account, and she then transferred cryptocurrency through Coinbase to an unknown third party at the client’s request. The opinion states that Kamath told Coinbase she made three Bitcoin transactions totaling $35,000, although her claimed damages elsewhere in the case appeared to vary.

Coinbase moved to compel arbitration and to dismiss the case for lack of subject-matter jurisdiction under Rule 12(b)(1), or alternatively to stay the case. Coinbase relied on a 2022 Coinbase User Agreement containing an arbitration provision, a jury-trial waiver, and a delegation provision. The delegation provision gave the arbitrator exclusive authority to decide disputes about the arbitration agreement’s enforceability, scope, validity, and related issues.

Contract Formation

Coinbase’s records showed that Kamath created a Coinbase account and accepted a 2017 user agreement. That agreement stated that Coinbase could amend the agreement by posting or emailing revised terms. Coinbase emailed Kamath on January 25, 2022, about the upcoming updated agreement. The email linked to the full terms and specifically identified changes to the arbitration provisions.

When Kamath later accessed her account, Coinbase displayed a landing page with the updated agreement in a scroll box. The page told users to review and accept the updated terms to continue using their accounts. Kamath clicked a blue “Accept terms” button on February 28, 2022, and continued accessing her account.

The court held that Coinbase provided reasonably conspicuous notice of the updated terms and that Kamath’s click on the clearly labeled button unambiguously showed assent. The court also held that clicking the button could serve as an electronic signature under federal and California law. It therefore concluded that Kamath agreed to the 2022 User Agreement.

Delegation of Arbitrability

“Arbitrability” means whether a particular dispute must be decided in arbitration. The court held that the 2022 User Agreement clearly and unmistakably delegated arbitrability questions to the arbitrator. The court relied on the agreement’s delegation language and decisions involving similar Coinbase provisions.

The court separately decided contract formation because it found that the question whether a contract existed was for the court, rather than the arbitrator, to decide. After finding that Kamath had agreed to the 2022 User Agreement, the court held that the arbitrator would decide the remaining arbitrability questions.

Unconscionability

Kamath argued that the delegation provision was unconscionable, meaning unfairly oppressive or one-sided. The court found that her procedural-unconscionability showing was, at most, minimal. It also found that she had not shown substantive unconscionability because her argument focused on the lack of informed written consent and did not establish that written consent was required.

The court therefore held that the delegation provision was valid and enforceable. It granted Coinbase’s motion to compel arbitration.

Stay and Disposition

The Federal Arbitration Act generally requires a court to stay a lawsuit involving issues subject to arbitration. Although the court noted that Ninth Circuit precedent allows dismissal instead of a stay when all claims are arbitrable, Coinbase did not show why the court should depart from the statute’s plain language.

The court stayed the suit pending arbitration and vacated the previously scheduled hearing. The order did not decide the merits of Kamath’s claims concerning the allegedly fraudulent transaction. It also did not separately state a disposition on Coinbase’s alternative request for dismissal.

Result

The court granted Coinbase’s motion to compel arbitration and stayed the suit pending arbitration.