SCOTUS Decides Suski. Dueling Delegation and Forum Selection Clause Disputes Are Decided by Courts
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By George H. Friedman, SAA Publisher & Editor-in-Chief

In the third unanimous decision of the term SCOTUS holds in Coinbase v. Suski, No. 23-3, that under the Federal Arbitration Act (“FAA”), courts, not arbitrators, decide whether a delegation agreement or conflicting forum selection clause applies. As previously reported the Court heard oral argument February 20. The audio is here and the transcript can be found here.

Certiorari Petition

Recall that we reported in SAA 2023-25 (Jun. 29) and blogged in June 2023 that the Supreme Court had decided Coinbase, Inc. v. Bielski, No. 22-105, ruling mostly along ideological lines that courts must stay underlying litigation while an appeal of a denial of a motion to compel arbitration is pending. The 5-4 decision, which was released on June 23, was authored by Justice Kavanaugh. He was joined outright by Chief Justice Roberts, and Justices Alito, Barrett, and Gorsuch. Justice Jackson wrote a dissenting opinion, in which Justices Kagan and Sotomayor joined in full, and in which Justice Thomas joined for the most part. Buried in a footnote was this landmine: “The Court’s judgment today pertains to respondent Abraham Bielski. The writ of certiorari as to respondents David Suski et al. is dismissed as improvidently granted.”

We further reported that back with a June 2023 Certiorari Petition was Coinbase, which raised this issue: “Whether, where parties enter into an arbitration agreement with a delegation clause, an arbitrator or a court should decide whether that arbitration agreement is narrowed by a later contract that is silent as to arbitration and delegation.” In a three-item Miscellaneous Order released November 3, 2023, SCOTUS granted Certiorari. As usual, there was no explanation. Several amicus briefs were filed. Noteworthy briefs in Suski were filed by the American Bankers Association, the American Tort Reform Association, the Atlantic Legal Foundation, the Cato Institute, and the Chamber of Commerce of the United States.

The Oral Argument

With a full complement of Justices, the oral argument in this case was audio livestreamed February 20 via the SCOTUS Website. The discussion focused squarely on the limits of delegation under the Federal Arbitration Act. Petitioner Coinbase’s counsel Jessica Lynn Ellsworth stated:

“The Federal Arbitration Act requires courts to enforce arbitration agreements according to their terms. Respondents and Coinbase agreed to arbitrate any disputes about Coinbase services and to delegate to an arbitrator any threshold disputes about whether specific claims were subject to arbitration. Despite this delegation clause, the parties have spent nearly three years disputing this threshold issue. That's because, instead of enforcing the delegation clause, the courts below came up with rationales to evade it and to instead answer the question of arbitrability for themselves.”

Respondents’ counsel David John Harris Jr. led with:

“I'm going to abandon what I planned to talk about and try to answer Justice Gorsuch's question. Why are they fighting this so hard? And that only occurred to me within the last week or so. And the answer is there's a strategic reason. They want the Court -- they don't care who decides arbitrability. All they care about is how arbitrability gets decided because that's what goes to liability at the end of the day. And so the plan is we need the Supreme Court to overrule.”

Questions were posed by all of the Justices, with the bulk of the questions coming from Justices Jackson, Sotomayor, and Thomas. Several Justices on both sides struggled with what instructions should be given to the Ninth Circuit in the event of a remand from SCOTUS.

Unanimous Court: Unique Facts here Call for a Court to Decide

Justice Jackson’s unanimous opinion holds that, under the somewhat unique facts of this case, courts and not arbitrators decide which clause applies. She first lays out the facts:

“The parties in this case executed two contracts. The first contained an arbitration provision with a delegation clause; per that provision, an arbitrator must decide all disputes under the contract, including whether a given disagreement is arbitrable. The second contract contained a forum selection clause, providing that all disputes related to that contract must be decided in California courts. Coinbase insists that the first contract’s delegation clause established the terms by which all subsequent disputes were to be resolved, so the arbitrability of a contract-related dispute between these parties is a matter for the arbitrator to decide. But respondents maintain—and the Ninth Circuit held— that the second contract’s forum selection clause superseded that prior agreement.”

She then articulates the issues and holding:

“This case thus presents the following question: When two such contracts exist, who decides the arbitrability of a contract-related dispute between the parties—an arbitrator or the court? Basic legal principles establish the answer. Arbitration is a matter of contract and consent, and we have long held that disputes are subject to arbitration if, and only if, the parties actually agreed to arbitrate those disputes. Here, before either the delegation provision or the forum selection clause can be enforced, a court needs to decide what the parties have agreed to—i.e., which contract controls.”

Gorsuch Concurring Opinion

Justice Gorsuch concurs, writing:

“Our decision today recognizes—and stresses—that ‘[a]rbitration is a matter of contract,’ and parties can ‘agree by contract that an arbitrator, rather than a court, will resolve threshold arbitrability questions as well as underlying merits disputes,’ quoting Henry Schein, 586 U. S., at 65). Notably, too, the Court does not endorse the reasoning in the Ninth Circuit’s opinion, let alone its state contract law analysis of the parties’ agreements. Instead, the Court simply reaffirms well-established principles about the primacy of the parties’ agreements when it comes to arbitration, and the Ninth Circuit’s ‘bottom-line conclusion’ that a court had to decide whether and to what extent the parties here reached ‘an agreement’ to have an arbitrator resolve the question of arbitrability …. With that understanding, I am pleased to concur” (internal citations omitted).

Recap for the Term

Here’s where the Court landed on the three arbitration-centric cases decided this term. All were unanimous:

  • A unanimous Court holds in Bissonnette v. LePage Bakeries Park St. LLC, No. 23-51 (Apr. 12, 2024), that the FAA section one exemption does not require that the worker be engaged in the transportation industry. See our blog post.
  • A unanimous Court holds in Smith v. Spizzirri, No. 22-1218 (May 16, 2024), that under FAA section three, courts compelling arbitration must stay but cannot dismiss the underlying litigation. See our blog post.
  • A unanimous Court holds in Coinbase v. Suski, 23-3 (May 23, 2024), that under the FAA courts, not arbitrators, decide whether a delegation agreement or conflicting forum selection clause applies.

 

(ed: *For an excellent analysis, see this May 23 CPR blog post, This Time, the Court Decides: SCOTUS, Clarifying Delegation, Rejects Coinbase Mandatory Arbitration.)