Home » Cases to Watch: Suski v. Coinbase Presents Important Questions of Arbitration and Crypto Law | Stroock & Stroock & Lavan LLP

Cases to Watch: Suski v. Coinbase Presents Important Questions of Arbitration and Crypto Law | Stroock & Stroock & Lavan LLP

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Plaintiff David Suski has filed a proposed class action lawsuit against Coinbase and the marketing firm it hired, Marden-Kane, based on allegations that marketing for crypto exchange sweepstakes deceived customers. The lawsuit, pending in the U.S. District Court for the Northern District of California, concerns “Dogecoin Sweepstakes” Coinbase, which began last summer and is the largest transaction in Dogecoin or DOGE (a popular cryptocurrency named after the Internet). It offered a prize worth $1.2 million. meme). The class-action complaint alleges that Coinbase and Marden-Kane can participate in the Dogecoin sweepstakes for free. claims to have led them to believe that You can also enter by mailing in an index card with your name, contact information and date of birth, but you will need Dogecoins to enter. His Coinbase user of the proposed class files a complaint against Coinbase and its marketing company for violating California’s False Advertising Act. bus. & Professor Code § 17500, Less than. (“FAL”), California Unfair Competition Act, Cal. Bus. & Professor Code § 17200, Less than. (“UCL”) and the California Consumer Legal Remedies Act, Cal. Citizens. Code § 1750, Less than. (“CLRA”).

By directing the district court to (i) compel individual arbitration pursuant to the arbitration clause of the Coinbase User Agreement or (2) dismiss the complaint for failure to state its allegations, Coinbase and Marden-Kane: I contested the class action lawsuit. The District Court found that the Dogecoin Sweepstakes Terms of Service, which users agreed to after opening their Coinbase accounts, contained a choice-forum clause designating California courts as the exclusive forum for all sweepstakes-related disputes. has dismissed Coinbase’s claim to compel arbitration under the User Agreement. Therefore, it is inconsistent with the arbitration clause of the User Agreement. The Court determined that the terms of the Sweepstakes Agreement thereafter prevailed, such that the Forum Choice Clause superseded the Arbitration Clause of the User Agreement. The district court also dismissed Marden Cain’s motion for arbitration, ruling that Marden Cain was not a party to the Coinbase User Agreement and therefore could not enforce the arbitration provisions.

Although the case was allowed to remain in court, the district court partially granted the motion to dismiss and discarded the viable claim. Notably, the district court dismissed plaintiffs’ claims under the CLRA. The CLRA prohibits certain “unfair methods of competition and unfair or deceptive conduct or practices” in transactions intended to result in or resulting in the sale or lease of goods or services. for every consumer. ” Given the CLRA definition of a commodity,tangible Personal property purchased or leased primarily for personal, family, or domestic use”- and services-“other than for commercial or business use, including services provided in connection with the sale or repair of goods work, labor, and services”—the District Court ruled that DOGE is an “intangible good” outside the scope of the CLRA (similar to life insurance policies and mortgages), and that Coinbase’s facilitation of cryptocurrency transactions would be a violation of the cryptocurrency itself. (Ancillary services related to mortgage servicing).

Coinbase subsequently appealed the order dismissing the request for arbitration, requesting a stay of the district court proceedings pending the appeal. The district court denied Coinbase’s request to stay on the grounds that it was unlikely Coinbase would win an appeal. Coinbase subsequently reconsidered its request to the Ninth Circuit Court of Appeals to stay the district court proceedings, and issued an automatic order following the 3rd, 4th, 7th, 10th, 11th, and DC circuits. Asked to adopt suspension. In the Ninth, Second and Fifth Circuits, a district court action is not automatically stayed until a frivolous appeal of arbitrability is filed (although the district court will still any stop can be ordered). The Ninth Circuit dismissed Coinbase’s request, ruling Coinbase’s U.S. Supreme Court to resolve a 6-to-3 circuit split over whether an appeal against an order denying arbitration would strip a district court of jurisdiction. prompted a petition to

The question of whether litigation should be automatically stayed pending appeal of a denial of arbitration is of particular interest to class action parties. For defendants, without stay, companies denied arbitration in a putative class action could incur significant costs for class discovery, class certification briefings, and experts when appealing the denial of arbitration. be forced. Cases will be referred to individual arbitration. Coinbase believes that the approach taken by a handful of circuit courts (including the 2nd and 9th Circuits, which have relatively active class action records) effectively voids the arbitration agreement during the appeal period, leaving companies claims to deprive the Means of resolving individual disputes. Plaintiffs, on the other hand, may be prejudiced by automatic suspension because they are forced to postpone the pursuit of their claims while they await a decision on their appeal from arbitration, which can sometimes take a year or more. Plaintiffs objecting to the court allege that delay risks losing witnesses and concrete evidence.

Plaintiff Suski has an October 31, 2022 deadline to respond to Coinbase’s petition. The issues raised in this lawsuit are important to businesses and consumers in general, not just those engaged in cryptocurrency trading, and we will continue to monitor new developments.

the case is Suski et al. v. Coinbase Inc., etc.Case No. 3:21-cv-04539, United States District Court for the Northern District of California.

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