Aggarwal v. Coinbase, Inc.
| Docket Number | 22-cv-04829-JSW |
| Decision Date | 02 August 2023 |
| Parties | MANISH AGGARWAL and MOSTAFA EL BERMAWY, on behalf of themselves and all others similarly situated, Plaintiffs, v. COINBASE, INC. and COINBASE GLOBAL INC., Defendants. |
| Court | U.S. District Court — Northern District of California |
ORDER GRANTING MOTION TO COMPEL ARBITRATION AND STAYING CASE RE: DKT. NOS. 21, 35
Now before the Court for consideration is the motion to compel arbitration filed by Coinbase Global, Inc. and Coinbase, Inc. (together “Coinbase”). Having reviewed the parties' papers, relevant legal authority, and record in this case, the Court hereby GRANTS the motion to compel arbitration and STAYS all further litigation pending the completion of arbitration.[1]
Defendant Coinbase operates an online platform for buying, selling transferring, and storing cryptocurrencies. (Dkt. No. 21-1 Declaration of Suellen Black (“Black Decl”) ¶ 2.) To access Coinbase's services, a user is required to create a Coinbase account and agree to Coinbase's User Agreement. (Id. ¶ 7.) Plaintiffs Manish Aggarwal (“Mr. Aggarwal”) and Mostafa El Bermawy (“Mr. El Bermawy”) (together “Plaintiffs”) were previously both Coinbase users. (Id. ¶ 8.) On December 18, 2017, Mr. El Bermawy created a Coinbase account and accepted the Coinbase User Agreement that was in effect. (Id., Ex. 1.) On February 8, 2021, Mr. Aggarwal created a Coinbase account and accepted the Coinbase User Agreement that was in effect. (Id., Ex. 3.)
Coinbase periodically updates its User Agreement. (Id. ¶ 16.) Coinbase emailed Mr. Aggarwal on January 26, 2022 and Mr. El Bermawy on January 27, 2022, informing Plaintiffs of a forthcoming update to the User Agreement, effective January 31, 2022 (“2022 User Agreement”). (Id. ¶ 17.) Coinbase's email bore the subject line, “Update to Coinbase User Agreement.” The body of the email contained a bulleted outline of the User Agreement updates present in the 2022 User Agreement:
(Image Omitted) (Id. ¶ 20.) Relevant here is the second bullet on the email that reads, “Clarity on Dispute Resolution: We've revised our arbitration agreement to streamline the process for resolving problems you may experience.” (Id.) The email also contains the underlined text, “entire agreement here,” appearing in blue hyperlinked text. (Id.) A user who clicks the hyperlinked “entire agreement here” is given access to the full terms of the 2022 User Agreement. (Id. ¶ 21.)
If an existing Coinbase user had not yet logged into their Coinbase account to accept the 2022 User Agreement on or after February 3, 2022, they were routed to a landing page that presented users, accessing Coinbase via the web or through a mobile app, with the terms of the 2022 User Agreement:
(Image Omitted)
(Dkt. No. 21-2, Declaration of Hamzah Zia (“Zia Decl.”) ¶ 6, Ex. 1.) The landing page advised users that Coinbase was updating the User Agreement. (Id.) The full text of the updated 2022 User Agreement was provided to Coinbase users in a scroll box. (Id.) Underneath the scroll box, users were presented with a blue button labeled, “Accept terms.” (Id.) If a user clicked the “Accept terms” button, they agreed to the terms of the 2022 User Agreement. (Id.)
A disclaimer appears, regarding Appendix 5 (“Arbitration Agreement”), in bold and allcaps towards the top of the 2022 User Agreement that states:
APPENDIX 5 OF THIS AGREEMENT, CONTAIN[S] PROVISIONS GOVERNING HOW TO RESOLVE DISPUTES BETWEEN YOU AND COINBASE. APPENDIX 5 INCLUDES AN AGREEMENT TO ARBITRATE WHICH REQUIRES, WITH LIMITED EXCEPTIONS, THAT ALL DISPUTES BETWEEN YOU AND U.S. SHALL BE RESOLVED BY BINDING AND FINAL ARBITRATION. APPENDIX 5 ALSO CONTAINS A CLASS ACTION AND JURY TRIAL WAIVER.
(Black Decl., Ex. 8, Appx. 5.) Section 1.1 (“Applicability of Arbitration Agreement”) of the Arbitration Agreement also states:
Subject to the terms of this Arbitration Agreement, you and Coinbase agree that any dispute, claim, disagreements arising out of or relating in any way to your access to or use of the Services or of the Coinbase Site, any Communications you receive, any products sold or distributed through the Coinbase Site, the Services, or the User Agreement and prior versions of the User Agreement, including claims and disputes that arose between us before the effective date of these Terms (each, a ‘”Dispute”) will be resolved by binding arbitration, rather than in court[.]
(Id.) Also relevant is Section 1.6 (“Authority of Arbitrator”) of the Arbitration Agreement, which clarifies the scope of disputes falling under the arbitrator's authority:
The American Arbitration Association's (“AAA”) rules, including the AAA's “Consumer Arbitration Rules,” are incorporated into Section 1.4 (“Rules and Forum”) of the Arbitration Agreement. (Id.) Those rules state: “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” AAA Consumer Arbitration Rules, R-14(a). The AAA rules are not provided in the arbitration agreement but are accessible on the AAA's website, https://www.adr.org/sites/default/files/Consumer%20Rules.pdf.
On February 4, 2022, Mr. El Bermawy logged into his Coinbase account via Coinbase Pro iOS mobile app and agreed to the updated 2022 User Agreement. (Zia Decl., Ex. 2.) Similarly, Mr. Aggarwal logged into his Coinbase account via Coinbase Pro iOS mobile app and agreed to the updated 2022 User Agreement on February 5, 2022. (Id., Ex. 3.)
Mr. Aggarwal alleges that in April 2022, hackers gained access to his Coinbase account and “drained it of more than $200,000” of cryptocurrency. (Dkt. No. 14, First Amended Complaint (“FAC”) ¶ 3.) Mr. Aggarwal alleges that he attempted to alert Coinbase of the theft but was instead routed through its “automated complaint process.” (Id.) Similarly, Mr. El Bermawy alleges that in July 2022, hackers robbed his account of cryptocurrency. (Id. ¶ 4.) Mr. El Bermawy alleges that “Coinbase failed to assist [him] in recovering his stolen cryptocurrency” and he “canceled his account.” (Id.)
On September 29, 2022, Plaintiffs filed their amended complaint. (Dkt. No. 14.) Plaintiffs brought claims against Coinbase for: (i) violation of the Electronic Funds Transfer Act (“EFTA”), 15 U.S.C. § 1693 et seq., (ii) violation of the EFTA and Regulation E Customer Service Provisions, 15 U.S.C. § 1693f(f)(6) and 12 C.F.R. § 1005.11(a)(7), (iii) violation of the EFTA and Regulation E Disclosure Provisions, 15 U.S.C. § 1693c and 12 C.F.R. § 1005.7, (iv) violation of California Uniform Commercial Code Division 8, Cal. Com. Code § 8507(b), (v) bailment, California Common Law and Civil Code §§ 1813, et seq., (vi) conversion, (vii) breach of contract, (viii) breach of implied covenant of good faith and fair dealing, (ix) negligence, (x) violation of Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750, et seq., (xi) violation of California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500, et seq., (xii) violation of Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq., and (xiii) unjust enrichment. Plaintiffs bring this case on behalf of themselves, and all persons similarly situated. (Id. ¶ 200.) They seek certification of the following class:
All current and former Coinbase users and/or consumers in the United States who registered for a Coinbase account from April 1, 2021 through such time as Class notice is given, who maintained funds and/or cryptocurrency in their Coinbase accounts, and who were subsequently deprived of access to, or lost their funds and/or cryptocurrency.
(Id. ¶ 107.)
Coinbase now moves the Court to compel Plaintiffs to arbitrate their claims. The Court will address additional facts as necessary in the analysis.
The FAA establishes that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. A district court must compel arbitration under the FAA if it finds (i) a valid agreement to arbitrate exists, and (ii) the agreement covers the dispute. Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015) (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002)). The party moving to compel arbitration has the burden to prove that an agreement to arbitrate exists by a preponderance of the evidence. Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951, 972 (1997). The party challenging enforcement of an arbitration agreement bears the burden of proving any fact necessary to its defense by a preponderance of the evidence. Id.
Under the FAA, parties may agree to have an arbitrator decide “‘gateway' questions of ‘arbitrability,' such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.” Henry Schein, Inc. v. Archer and White Sales, Inc., 139 S.Ct. 524, 529 (2019) (quoting Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68-69 (2010)). The FAA represents a “liberal federal policy favoring arbitration agreements,” and courts must resolve doubts concerning the scope of arbitrable issues in favor of arbitration. Moses H. Cone Mem 'I Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).
Even so, “a party cannot be required to submit to arbitration...
To continue reading
Request your trial