The US Supreme Court has had a busy term deciding arbitration issues. In a second opinion in a matter of a week, the Court has addressed another arbitration issue that could affect insurance and reinsurance disputes. This time, the issue was conflicting contracts.
In Coinbase, Inc. v. Suski, No. 23-3 (U.S. Sup. Ct. May 23, 2024), the Court addressed the clash between two contracts; one with an arbitration clause and one with a forum selection clause. This is an issue that should be familiar to reinsurance practitioners from reinsurance contracts with an arbitration clause and a service-of-suit clause or forum selection clause. Also, in insurance and reinsurance, periodically a subsequent contract exists that may contain provisions that could supersede the initial insurance or reinsurance contract, so this decision is relevant to those in the insurance/reinsurance space. In this case, the issue was who decides which contract governs, the arbitrator or the court?
In affirming the 9th Circuit, which affirmed the decision of the California District Court, the Supreme Court held that
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, then, 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.
The arbitration clause in the user agreement had a crystal clear delegation clause, which stated that all disputes will be decided by the arbitrator, not by a judge or court. This provision, standing alone, would have resolved the issue because every type of dispute was delegated to the arbitrator to decide. But because a second contract, involving a sweepstakes, had no arbitration clause, but had a forum selection clause, and because the dispute concerned users participation in the sweepstakes, the question was who decides which contract dispute clause governs. Or as the Court put it, “who—a judge or an arbitrator—should decide whether a subsequent contract supersedes an earlier arbitration agreement that contains a delegation clause.”
In deciding that the court gets to decide the issue and not the arbitrator, the Court noted that in its prior cases, the Court addressed three layers of arbitration disputes: (1) merits, (2) arbitrability, and (3) who decides arbitrability. This case involved a fourth: What happens if parties have multiple agreements that conflict as to the third-order question of who decides arbitrability?
Applying traditional contract principles, the Court found that the question of whether the parties agreed to send this dispute to arbitration must be decided by the court. The Court rejected all the reasons presented why that conclusion should be revisited. At bottom, the Court held that a delegation provision in one contract cannot be elevated over conflicting provisions in a subsequent contract. Thus, the court must decide whether the subsequent agreement superseded the first agreement.
