Picha v. Gemini Trust Company, LLC

Background

The plaintiffs—Brendan Picha, Max J. Hastings, Kyle McKuhen, James Derek Taylor, and Christine Calderwood—were Gemini account holders who participated in the Gemini Earn Program. The program allowed participants to lend digital assets through Gemini’s platform to Genesis Global Capital in exchange for interest. After Genesis suspended redemptions and new loans on November 16, 2022, Gemini suspended customer withdrawals from the Earn platform and later terminated the program.

The amended complaint asserted eleven causes of action, including securities claims against Gemini, control-person claims against Tyler and Cameron Winklevoss, common-law fraud, aiding and abetting fraud, negligent misrepresentation, unjust enrichment, and a request for a declaration that no controlling arbitration agreement existed. The defendants moved under the Federal Arbitration Act to compel arbitration under Gemini’s User Agreement and to stay the court case.

The Agreements and the Parties’ Arguments

The court described three agreements governing the relationship between each plaintiff and Gemini: the User Agreement, the Master Loan Agreement, and the Authorization Agreement. Each agreement contained an arbitration provision, although the provisions identified different arbitration administrators or procedures. The User Agreement also contained a class-action waiver and stated that its arbitration provision covered disputes with Gemini and any other party named or added as a co-defendant.

The September 2022 User Agreement allowed Gemini to change its terms and provided that a user’s later login would constitute agreement to the amended terms. Gemini notified users by email on December 15, 2022, that the User Agreement had changed, including its dispute-resolution provision. The updated login page also notified users of the change and stated that clicking “Sign In” constituted agreement to the User Agreement. The plaintiffs logged into their accounts between December 16 and December 25, 2022. The plaintiffs had opted out of modifications to the Master Loan Agreement, but the defendants sought arbitration under the modified User Agreement.

The plaintiffs argued that they had not agreed to the modified User Agreement, that the different arbitration procedures showed there was no mutual agreement to arbitrate, and that the class-action waiver was invalid. They also argued that Tyler and Cameron Winklevoss could not compel arbitration because they were not parties to the agreements.

Modification and Formation of the Arbitration Agreement

Applying New York contract law, the court held that Gemini properly modified the User Agreement under the modification procedure contained in the earlier version. The court concluded that the updated login page gave a reasonably prudent user notice that the dispute-resolution provision had changed and that signing in would constitute acceptance. The defendants’ account records showed that each named plaintiff logged into a Gemini account after the modification. The court found that the plaintiffs had not provided evidence creating a genuine dispute about whether they had logged in or accepted the modified User Agreement.

The court rejected the argument that differences among the arbitration provisions prevented contract formation. It held that the arbitral forum and procedural rules were not essential terms requiring a finding that there was no meeting of the minds. Because all the agreements required arbitration and the modified User Agreement stated that its dispute-resolution terms governed despite other agreements, the plaintiffs had not shown that the arbitration agreement was invalid or inapplicable.

Individual Defendants

Although Tyler and Cameron Winklevoss were not parties to the agreements, the court held that they could compel arbitration. The User Agreement expressly extended arbitration to disputes involving Gemini and any other party named or added as a co-defendant. It also expressly identified such co-defendants as third-party beneficiaries entitled to enforce the arbitration provision. The court therefore did not need to decide the defendants’ alternative argument based on equitable estoppel.

Arbitrability

The modified User Agreement delegated questions about the scope of the arbitration agreement and whether a particular dispute was subject to arbitration to the arbitrator. The court found this language to be clear and unmistakable evidence that the parties intended the arbitrator—not the court—to decide arbitrability issues.

Class-Action Waiver

The court rejected the plaintiffs’ challenges to the class-action waiver. It found the waiver was not ambiguous, and it concluded that the modified User Agreement’s merger clause superseded the earlier Master Loan Agreement for purposes of the plaintiffs’ arguments. The court also found no basis to void the waiver as improper interference with class rights because the User Agreement already contained a class-action waiver before the December 2022 modification and the lawsuit was filed thirteen days after that modification. The court concluded that the User Agreement had been modified according to its terms.

Disposition

The court held that the defendants established an agreement to arbitrate the dispute and that the agreement extended to the individual defendants. It granted the defendants’ motion to compel arbitration, referred the entire case to arbitration, and stayed the case pending the outcome of the arbitration. The Clerk of Court was instructed to terminate the motion at ECF No. 51 and stay the case. The court also granted Christine Calderwood’s request to withdraw as a class representative.