September 26, 2022. In a fiery response to Coinbase’s opening brief in its appeal of the district court’s denial of Coinbase’s motion to compel arbitration, Tycko & Zavareei LLP’s (TZ) Appellate Practice Group comprehensively detailed why the cryptocurrency exchange’s one-sided and unfair arbitration clauses are unenforceable. TZ represents Abraham Bielski, who alleges he was defrauded of more than $30,000 on Coinbase’s platform due to the platform’s lax security, and that Coinbase failed to investigate or help him recover his lost funds. After attempting to contact the crypto platform through regular customer support channels and receiving only canned replies, Mr. Bielski sought a remedy for his losses, and those of others similarly situated, in the United States District Court for the Northern District of California. The district court ruled that Coinbase’s arbitration and delegation clauses were unconscionable, and thus unenforceable, under California law. TZ’s Appellate Practice Group represents Mr. Bielski in the Ninth Circuit and the United States Supreme Court.
Specifically, the brief asserts:
The Arbitration Agreement is unconscionable.
The district court correctly identified the ways in which Coinbase’s arbitration agreement unjustly favors the company over its customers, with “ambiguous, unjustified procedural hurdles” customers must overcome to even get to arbitration and the requirement that customers send all disputes they have with Coinbase to arbitration, while not requiring Coinbase to arbitrate any legal claims it brings against customers.
The district court properly concluded that severance is not feasible.
Because all the provisions in Coinbase’s arbitration agreement contain the same one-sided requirement that only customers arbitrate their disputes against Coinbase, there is no realistic way to remove the unconscionable language to save the agreement.
Coinbase’s dispute-resolution procedures thwart Mr. Bielski’s ability to effectively vindicate his statutory rights in a neutral forum.
The various hoops consumers must jump through to get to arbitration or the courthouse frustrate their right to seek justice under the federal Electronic Funds Transfer Act, which allows consumers to sue financial institutions for failing to live up to their obligations to investigate and remedy illegitimate funds transfers.
Coinbase will now have an opportunity to file a reply brief. Once briefing is complete, the Ninth Circuit will decide whether to hear oral argument or decide the appeal on the briefs.
The case is Bielski v. Coinbase, Inc., No. 22-15566 (9th Circuit).