The Supreme Court on Friday agreed to hear an appeal from the major crypto exchange coin basewhich is attempting to resolve two customer lawsuits against the company through private arbitration rather than federal court.
“We are pleased that the Supreme Court has granted our appeal and we look forward to its resolution of this matter,” a Coinbase spokesman said.
The issue the High Court will take up in Coinbase’s case relates to the highly technical issue of whether a party in a lawsuit can be compelled to continue defending the case in a federal district court hearing, even if they have an appeals court order of dispatch asks the dispute to an arbitrator.
But the case could be the first the Supreme Court is hearing involving a cryptocurrency company.
“It’s definitely the first one I know of,” said Glenn Chappell, an attorney for Abraham Bielski, one of the Coinbase clients suing the company.
“It could very well be the first,” he said.
People watch as the logo of Coinbase Global Inc, the largest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite’s jumbotron in Times Square in New York, April 14, 2021.
Shannon Stapleton | Reuters
He and Bielski’s other attorneys had opposed Coinbase’s motion to take the case to the Supreme Court.
“We do not believe companies like Coinbase should be entitled to an automatic stay of litigation after a district court has already found their arbitration unlawful,” Chappell said.
But he added, “We definitely still welcome the opportunity to advocate for consumers on this matter.”
Bielski sued Coinbase after being defrauded of more than $31,000 from his account with the company by someone unrelated to Coinbase. His potential class action lawsuit alleges that the Electronic Funds Transfer Act requires Coinbase to credit customer accounts with stolen cryptocurrency.
Coinbase attempted to force arbitration. However, a California federal district court judge ruled that the arbitration agreement Bielski had with the company was not valid under that state’s laws, allowing him to try his case in a district court.
In the other lawsuit, picked up by the Supreme Court on Friday, Coinbase customers sued the company in California District Court, alleging that Coinbase’s sponsorship of a Dogecoin sweepstakes in June 2021 violated state law.
As in the Bielski case, a district judge denied Coinbase’s request to arbitrate the sweepstakes-related case.
The U.S. Court of Appeals for the Ninth Circuit denied Coinbase’s motion to stay the district court-level claims in both cases, as the company appealed to overturn the verdicts denying it arbitration.
Neal Katyal, an attorney representing Coinbase on the Supreme Court, said in his petition asking judges to hear the company’s appeal that there is a deep division among the lower federal circuit courts over the issue the court will decide .
Six state appellate courts have ruled that an appeal against the denial of a motion to enforce arbitration will be “automatically” heard in a district court, Katyal wrote.
But: “Three circuits … have claimed otherwise,” he added. “The circles will remain separate unless this court intervenes.”
“Coinbase is now having to devote significant time, energy and resources to onerous putative class action lawsuits in two district courts, although the Ninth Circuit is likely to conclude that none of the cases belong in federal court first,” Katyal wrote.