Coinbase, Inc. operates a cryptocurrency exchange platform that requires users to agree to a user agreement, which includes an arbitration provision. Coinbase offered a sweepstakes in which users could enter for a chance to win a cryptocurrency called Dogecoin. In entering into this sweepstakes, users agreed to the official rules, which offered a forum selection clause that gave the California courts sole jurisdiction over any sweepstake related controversies. Coinbase customers who entered the sweepstakes, therefore, had entered two contracts: the user agreement, which sent disputes about arbitrability to arbitration, and the officialrRules, which sent disputes to California courts. The court has previously addressed “three layers of arbitration disputes: (1) merits, (2) arbitrability, and (3) who decides arbitrability,” but this case involves a fourth: What happens if parties have multiple agreements that conflict as to who decides arbitrability?
A unanimous Supreme Court held that this is a question to be decided by the courts. In cases where parties have agreed to only one contract, and that contract has an arbitration clause with a delegation provision, then absent a successful challenge to that provision, courts must send all arbitrability disputes to arbitration. However, as here, where parties have agreed to two contracts, one sending arbitrability disputes to arbitration, and the other sending arbitrability disputes to the courts, a court must decide which contract governs.
The Indian Gaming Regulatory Act (IGRA) provides a statutory basis for the operation and regulation of gaming by Indian tribes while allowing the state to play a role in regulating gaming through the negotiation of tribal-state compacts. In such negotiations, the state is required to negotiate “in good faith.” This case arises from a negotiation of a new Tribal-State gaming compact in May of 2020 between California and Alturas Indian Rancheria.
During the negotiations, California introduced a draft compact that contained environmental and tort law matters. The Ninth Circuit had previously held that because such matters are “off-list topics,” it is unlawful for the state to introduce them in the context of these negotiations. Alturas argued, therefore, that California did not negotiate in good faith. On summary judgment, the District Court agreed and directed the negotiations to continue under the court’s continued supervision.
The United States Supreme Court determined that courts do not have discretion to dismiss a case instead of issuing a stay, once they have determined that the dispute is subject to arbitration and a party has requested a stay under § 3 of the Federal Arbitration Act (FAA). The petitioners, delivery drivers employed by respondents, sued the respondents in Arizona. Petitioners alleged that the respondents misclassified them as independent contractors, failed to pay required minimum and overtime wages, and failed to provide paid sick leave. The respondents removed the case to federal court and moved to compel arbitration and dismiss the case. Although the plaintiffs agreed to arbitration, they argued that FAA § 3 requires courts to stay cases pending arbitration, not dismiss them. The district court compelled arbitration and dismissed the case without prejudice, and the Ninth Circuit affirmed. The Supreme Court granted certiorari to resolve a split among the circuits on this issue.
The Supreme Court unanimously agreed with the petitioners and held that under the FAA, when a party requests a stay pending arbitration, the district court must stay the case and does not have the discretion to dismiss it. The opinion by Justice Sotomayor emphasized the plain language of FAA § 3, concluding that “shall” imposes a mandatory obligation, and “stay” means to suspend legal proceedings, not end them. The Court further reasoned that this interpretation aligns with the FAA's structure and purpose, which aims to facilitate quick arbitration without allowing immediate appeals from orders compelling arbitration. The Court stated that dismissing a case would subvert this purpose by triggering the right to an immediate appeal, contrary to congress's intent.
Two manufacturers of lighting products (“Current” and “Signify”) were engaged in a dispute over alleged patent infringements and associated cross-licenses. In 2018, Signify accused Current of infringing upon its LED lighting patents which led to five years of negotiations between the companies. Less than thirty minutes before a scheduled negotiation meeting with Signify, during which Current was supposed to present a counteroffer, Current canceled the meeting and informed Signify that it had filed a declaratory judgment action. Specifically, Current sought declaratory judgments of non-infringement as to eighteen Signify patents. Current told Signify at the same time that it would “hold off on formally serving the Complaint in order to leave open a transition period, should [Signify] wish to present a more realistic licensing offer."
Signify filed a motion to dismiss Current’s declaratory judgment action, arguing that the action brought by Current was aimed at interfering with ongoing, good-faith negotiations between the parties regarding patent licensing. The trial court agreed, noting that under the Declaratory Judgment Act, a court may use its discretion to decline jurisdiction when the action is brought to disrupt ongoing negotiations or enhance a party’s bargaining position. In this case, the court found that Current timed the filing of its action to leverage its bargaining power in future negotiations. Because the suit was brought by Current to obtain a tactical advantage in negotiations, the court dismissed Current’s declaratory judgment action.
In Caremark, LLC v. Choctaw Nation, 104 F.4th 81 (9th Cir. 2024), the Ninth Circuit Court of Appeals held that the Choctaw Nation had waived any sovereign immunity defense against a motion to compel arbitration stemming from a contractual dispute. The Choctaw Nation had entered into a contract with Caremark to manage certain aspects of insurance reimbursements for tribally owned pharmacies. A dispute arose, and the Choctaw Nation sued in the Eastern District of Oklahoma. That case was stayed, and Caremark then sought to compel arbitration in the District of Arizona.
The Choctaw Nation argued that it did not “clearly and unequivocally” waive its tribal sovereign immunity, and thus that the District of Arizona would have no jurisdiction to compel arbitration. The Nation’s main support for its argument was that it did not directly sign the provider manuals that contained the arbitration provisions, that the tribal representatives that contracted with Caremark did not have the authority to waive the Nation’s sovereign immunity, and that the language in the arbitration provisions should be interpreted in favor of the Choctaw Nation because it did not draft the provisions. The court dismissed each of these arguments in turn. The court held that the provider agreements that the Nation signed incorporated the provider panuals that contained the arbitration provisions. The court also held that since there was no Choctaw Nation law on point that said the representatives could not waive the Nation’s sovereign immunity, it found no legal support for the claim that the representatives could not waive the Nation’s sovereign immunity. Finally, the court held that since there was no ambiguity in the arbitration provisions, which party drafted the provisions was irrelevant. For those reasons, the court of appeals affirmed the district court’s order to compel arbitration.
