[00:00:01] Speaker 01:
Good morning, and welcome.

[00:00:04] Speaker 01:
Judge McEwen, Judge Johnstone, and I are so pleased that you're here.

[00:00:08] Speaker 01:
Thank you for coming to the San Francisco courthouse.

[00:00:11] Speaker 01:
We have already submitted on the briefs and record Next Level Ventures versus Avid Holdings Limited.

[00:00:17] Speaker 01:
So that case is submitted.

[00:00:19] Speaker 01:
We have two cases on argument for the 9 a.m.

[00:00:22] Speaker 01:
calendar.

[00:00:22] Speaker 01:
Let's start with Woody V. Coinbase.

[00:00:24] Speaker 01:
How much time would you like to reserve for rebuttal?

[00:00:29] Speaker 01:
Five minutes.

[00:00:31] Speaker 01:
Go ahead, please.

[00:00:38] Speaker 00:
May it please the court?

[00:00:40] Speaker 00:
To begin, this court should rule the arbitration provisions of either UA is unenforceable.

[00:00:46] Speaker 00:
However, given that Bielski in this court and Sussky in the Supreme Court was decided after the district court opinion, at minimum the court must remand with further instructions to the court.

[00:00:57] Speaker 00:
I want to start with the Supreme Court in Saskie.

[00:01:00] Speaker 02:
May I just want to ask you about that?

[00:01:01] Speaker 02:
Isn't this a legal question?

[00:01:05] Speaker 00:
Well, it is a legal question, Your Honor, in terms of- Why would we remand?

[00:01:09] Speaker 02:
Maybe you can explain that.

[00:01:11] Speaker 00:
Well, not necessarily remand.

[00:01:13] Speaker 00:
Well, I don't think the court should remand.

[00:01:15] Speaker 00:
I think the court should make the decision now.

[00:01:17] Speaker 00:
But I think if the court doesn't want to go that far, it can ask the court to re-decide in light of the new opinions afterwards.

[00:01:23] Speaker 00:
But I think the court should make a decision here.

[00:01:25] Speaker 02:
And if we do that, then we'll be back here a year from now, right?

[00:01:29] Speaker 02:
One way or the other?

[00:01:30] Speaker 00:
It depends.

[00:01:31] Speaker 00:
It depends on what the district court will ultimately decide based on the court's ruling.

[00:01:37] Speaker 00:
But it's a potential possibility, Your Honor.

[00:01:40] Speaker 00:
I wanted to start with, in Soski, where the court says, contrary to what Coinbase is arguing, is that when we have two contracts here, one that sends arbitrability to the arbitrator- But if we disagree with you that there's a distinction between the delegation clauses in the two different user agreements, then would you concede that Soski doesn't apply?

[00:02:02] Speaker 00:
I'm sorry, can you repeat that, Your Honor?

[00:02:04] Speaker 01:
If we view the two 2017 and 2022 agreements as not being materially different for purposes of the dispute here, then would you concede that Suski does not apply?

[00:02:16] Speaker 00:
It would apply in the sense that we still need to determine which contract applies, fundamentally.

[00:02:21] Speaker 01:
But why does that matter if we're saying the terms at issue are materially indistinct?

[00:02:26] Speaker 00:
Because each contract has different obligations and different rights to the user.

[00:02:31] Speaker 00:
The Flair AirDrop might not even be covered under the 2017 agreement.

[00:02:36] Speaker 00:
And we also have the carve-outs in the 2022 agreement.

[00:02:39] Speaker 00:
So that's why it's important to figure out which one applies.

[00:02:42] Speaker 00:
It would be difficult for the court to come to that conclusion, however, because 2017 is delegation by incorporation of the AAA rules.

[00:02:50] Speaker 00:
Here in the 2022, Coinbase has already conceded incorporation by delegation has been negated.

[00:02:56] Speaker 00:
So we're dealing with the delegation provision in section 1.6 of the arbitration agreement.

[00:03:02] Speaker 00:
And so that's why I think it would be hard to come to that conclusion.

[00:03:06] Speaker 00:
But then if the court did come to that conclusion, we'd be going back to the 2017 delegation provision that the district court ruled is what is at play in this situation without determining which version of the agreement applied.

[00:03:20] Speaker 00:
And I guess I would move on to that delegation provision.

[00:03:25] Speaker 00:
So if we're talking about 2017, the issue is, does the level of sophistication of these consumers matter?

[00:03:32] Speaker 00:
And that question is ripe for the Ninth Circuit.

[00:03:35] Speaker 00:
It has not decided that question yet.

[00:03:39] Speaker 00:
I think the ICE case EIESS by Judge Chen in the Northern District of California did a good job summarizing that the majority of lower courts now in the Ninth Circuit have held that incorporation of the AAA rules is insufficient to establish clear and unmistakable evidence of delegation in a consumer contract involving one unsophisticated party.

[00:04:03] Speaker 00:
And again, the district court did not really address, well, it raised or at least wrote down the words unsophisticated party, but didn't really address it in any substance.

[00:04:13] Speaker 00:
And I think Judge Chen did a good job of bringing out the problem, which is that

[00:04:17] Speaker 00:
for an unsophisticated consumer to discover the agreement to delegate, they have to first find the relevant spot in the arbitration provision, then find the reference to the rules, in this case AAA, then go to AAA and find those rules, then find the delegation provision,

[00:04:36] Speaker 00:
and then understand the importance of it.

[00:04:38] Speaker 00:
And I think that's why you see more district courts and California state cases saying- Can we talk about Spizzeri?

[00:04:47] Speaker 00:
Yes.

[00:04:49] Speaker 01:
You say that there is a distinction between when the parties agree to arbitration and when they don't.

[00:04:54] Speaker 01:
So in some instances, depending on that issue, Spizzeri would apply or wouldn't.

[00:05:02] Speaker 01:
I don't see where in Spaziri that distinction is made.

[00:05:05] Speaker 00:
Can you point to- I think this would be a good strategic retreat to the truth, Your Honor, in that Spaziri, for whatever reason, Coinbase decided not to cross-appeal that.

[00:05:16] Speaker 00:
They had the opportunity.

[00:05:17] Speaker 00:
Obviously, it was appealed by the parties in Spaziri.

[00:05:20] Speaker 00:
That argument is simply waived.

[00:05:22] Speaker 03:
Why shouldn't we recuse it?

[00:05:24] Speaker 03:
You filed your reply brief after seeing the 28J.

[00:05:29] Speaker 03:
You both addressed it.

[00:05:32] Speaker 03:
It's before us.

[00:05:33] Speaker 03:
Why doesn't the statute require us to vacate?

[00:05:36] Speaker 00:
Well, Your Honor, because the problem is, is that just wasn't before the court on the appeal.

[00:05:40] Speaker 00:
So all I can say is.

[00:05:42] Speaker 03:
Well, it was.

[00:05:43] Speaker 03:
Now it is.

[00:05:43] Speaker 03:
You spent a page on it.

[00:05:45] Speaker 03:
They spent a couple pages on it.

[00:05:47] Speaker 03:
That's enough for us to consider it.

[00:05:48] Speaker 03:
Can you make an argument, another argument on the merits?

[00:05:51] Speaker 00:
Well, the only argument on the merits, Your Honor, is just that we have a two or three page opinion in Spizzeria that basically says both parties have no conflict at all with the arbitration provision.

[00:06:02] Speaker 00:
There was no dispute whether it applied at all.

[00:06:05] Speaker 00:
the Supreme Court to kind of sweep away all of the case law on objecting to motions to compel arbitration in that two or three page opinion doesn't seem like that was before the court, and it seems like it was outside the scope of what they were considering.

[00:06:23] Speaker 02:
You're basically telling us that we should ignore that section because it was brief?

[00:06:30] Speaker 00:
Not because it was brief, just Your Honor, the only argument I can make is that it wasn't brought up properly on appeal before the court.

[00:06:37] Speaker 00:
It wasn't cross-appealed by Coinbase.

[00:06:40] Speaker 02:
Well, that's different than the Spazeri argument that I thought you just made that there's not much here for us to consider.

[00:06:52] Speaker 00:
Well, in that situation, all I can say again, Your Honor, is that Spazire is just limited to the facts of the case, which is two parties agree to the arbitration.

[00:07:01] Speaker 03:
Well, I guess Spazire is about Section 3.

[00:07:05] Speaker 03:
Can you make an argument under Section 3 that it doesn't mean what it says?

[00:07:09] Speaker 03:
Shall, on application of one of the parties, stay trial of the action?

[00:07:13] Speaker 03:
undermined all of our prior precedent on this question.

[00:07:16] Speaker 03:
So what part of that shall on application of one of the parties stay the trial of the action doesn't apply here.

[00:07:24] Speaker 00:
Well, I think, and I'm sorry, Your Honor, I don't know if this is section three or section four, but in section, in one of those sections, the court is supposed to provide at minimum a hearing on the issue of arbitration.

[00:07:34] Speaker 00:
And so we didn't get that in terms of, and that goes into the limited discovery that we've argued.

[00:07:40] Speaker 00:
I would have to say that it would be difficult for plaintiffs if we were back in front of the district court with Spazeri and that case concluded and the court obviously stayed pending arbitration.

[00:07:53] Speaker 00:
I would not be able to make a very compelling argument at that point.

[00:07:56] Speaker 03:
Why wouldn't your arguments, going now to the merits of the delegation, your arguments about arbitrability swallow the arbitration clause?

[00:08:06] Speaker 03:
Isn't the question about even which agreement controls a question of arbitrability covered by delegation?

[00:08:16] Speaker 00:
Yes, Your Honor.

[00:08:16] Speaker 00:
And that really depends on which agreement we're even talking about.

[00:08:19] Speaker 00:
Because if you look at the 2022 UA, we've got, and I want the court to realize that,

[00:08:24] Speaker 00:
The contrary to what Coinbase argues, this isn't the arbitration provision.

[00:08:29] Speaker 00:
This is section 1.6 in the arbitration agreement that says, quote, the authority of the arbitrator.

[00:08:36] Speaker 00:
The arbitration agreement starts at section 1.1 that lists what the scope of arbitration is.

[00:08:42] Speaker 00:
So the authority of the arbitrator, this whole 212 worded sentence, is a delegation provision, and lower courts have held that

[00:08:51] Speaker 00:
When you have one sentence and then you have this modifying phrase, except the following, and then you list it, it's applying to both, and the Hahn and the McGuire case stood for this proposition, is that when you have these, this is going to apply to both delegability, arbitrability, and the scope of the arbitration.

[00:09:13] Speaker 00:
Coinbase could have easily, and it did in the 2021 UA, and the comparison on page 27 of our opening brief I think summarized this well,

[00:09:21] Speaker 00:
They could have put the period at the very beginning of that first sentence, stopping everything, making it clear that delegation was an all-encompassing aspect, but they put the exceptions, the four exceptions, and it doesn't also kind of make sense because

[00:09:38] Speaker 00:
It's very clear, for example, exception four, which version of the arbitration agreement applies is decided by a court.

[00:09:45] Speaker 00:
Why do we send that to the arbitrator to decide that needs to go back to the court?

[00:09:50] Speaker 00:
I mean, at minimum, that would go to procedural unconscionability of the provision itself.

[00:09:54] Speaker 01:
You make a surplusage argument with regard to this 1.6 section.

[00:09:59] Speaker 01:
Can you identify exactly what is the language that you think is surplusage?

[00:10:06] Speaker 00:
It's the entire exceptions, your honor, because if those entire exceptions... One through four.

[00:10:11] Speaker 00:
One through four.

[00:10:12] Speaker 01:
Okay.

[00:10:12] Speaker 00:
Because if those exceptions don't go to both the scope of arbitration and the delegability, then it's basically rendered meaningless because if you go to section 1.1,

[00:10:24] Speaker 00:
of the arbitration agreement.

[00:10:25] Speaker 00:
There's also exclusions for small claims court and trademark infringements.

[00:10:30] Speaker 00:
So why are these exceptions not put over there in section 1.1?

[00:10:35] Speaker 00:
Again, this is section 1.6 authority of the arbitrator.

[00:10:39] Speaker 00:
The whole sentence is based on delegation.

[00:10:42] Speaker 00:
I think I'm at the end of my time.

[00:10:45] Speaker 01:
All right.

[00:10:45] Speaker 01:
Thank you.

[00:10:46] Speaker 01:
You have four minutes and 56 seconds.

[00:11:06] Speaker 04:
Good morning, and may it please the court.

[00:11:08] Speaker 04:
Stephen Ragland with Kekerva, Ness, and Peters on behalf of appellees, who I'll collectively refer to as Coinbase.

[00:11:15] Speaker 04:
I may also at times refer to appellants as plaintiffs, given their posture below.

[00:11:21] Speaker 04:
This case here in front of this court begins and ends with Spaziri, which was decided on May 16th, 2024, while this appeal was pending.

[00:11:31] Speaker 04:
Pursuant to Spizzeri, this court has no appellate jurisdiction to adjudicate the merits of what happened below.

[00:11:38] Speaker 03:
I guess use the word jurisdiction.

[00:11:44] Speaker 03:
How do we know this is jurisdictional?

[00:11:45] Speaker 03:
We've been trying to be a little bit more precise, given some of the Supreme Court's guidance here.

[00:11:51] Speaker 03:
What in the FAA makes this jurisdictional?

[00:11:54] Speaker 04:
Section 16A3 of the FAA provides for the jurisdiction here.

[00:12:00] Speaker 04:
That is specifically and explicitly the only basis for jurisdiction before this court.

[00:12:06] Speaker 04:
That provides that an appeal may be taken from a final decision with respect to an arbitration that is subject to this title.

[00:12:14] Speaker 01:
So a dismissal is a final decision?

[00:12:16] Speaker 04:
Correct.

[00:12:17] Speaker 01:
And even, as Siri says under, what is that, Section 16,

[00:12:22] Speaker 01:
that the final order is immediately appealable.

[00:12:25] Speaker 01:
Yes.

[00:12:25] Speaker 01:
Then why don't we have jurisdiction over everything?

[00:12:27] Speaker 04:
Well, Your Honor, jurisdiction as the merits disappeared with Smith v. Spizeri when it was decided, because what Judge Donato did below was everything right except for dismissal instead of staying.

[00:12:40] Speaker 04:
He actually dismissed pursuant to Forrest v. Spizeri, which was the then controlling Ninth Circuit authority that said he had that discretion.

[00:12:47] Speaker 04:
That, of course, went up as Smith to the Supreme Court.

[00:12:49] Speaker 04:
The Supreme Court said Section 3 of the FAA means exactly what it says.

[00:12:54] Speaker 04:
There's no discretion for the district court.

[00:12:56] Speaker 04:
And so what Zeri did was reverse, remand, and then it needs to enter a state.

[00:13:04] Speaker 02:
So this court should- So that's really, with clear jurisdictional language, which we have,

[00:13:11] Speaker 02:
What Spaziere did really was to change what then is the status of the case in the district court.

[00:13:17] Speaker 02:
Yes, Your Honor.

[00:13:17] Speaker 02:
And all you're asking us to do is basically remand for entry of a stay.

[00:13:23] Speaker 02:
Is that correct?

[00:13:24] Speaker 04:
Yes, Your Honor.

[00:13:25] Speaker 04:
We believe the correct approach is to remand to the district court with instructions to enter a section three of the FAA stay pending arbitration.

[00:13:33] Speaker 03:
Mr. Ragland, I guess I see your argument with respect to section 16 and an appellate jurisdiction, but with respect to, are you contending that section three does contain jurisdictional language?

[00:13:46] Speaker 04:
Section three.

[00:13:47] Speaker 03:
I mean, that's the error that you're assigning to the district court that it shall have stayed.

[00:13:55] Speaker 04:
Section 3 actually divests the court, or actually it doesn't provide for jurisdiction, because what it provides is that upon being satisfied that the issue involved is referral to arbitration,

[00:14:11] Speaker 04:
On the application of one of the parties, the district court shall stay pending arbitration.

[00:14:14] Speaker 03:
Do we have to reach the jurisdictional question if we just excuse whatever waiver arguments might be there and just reach the merits that, jurisdictional or not, the district court heard under Spaziri?

[00:14:32] Speaker 04:
Frankly, Your Honor, I think that would be an error, because Smith v. Spaziri is very clear that jurisdiction, and perhaps I didn't

[00:14:40] Speaker 04:
I misunderstood your question, but under Smith v. Pezzeri, because the FAA Section 3 is mandatory to the district court, it may not dismiss

[00:14:53] Speaker 04:
Absent the dismissal here, there would have been no basis under 16A3 to appeal, and there's no other basis for appellate jurisdiction.

[00:15:01] Speaker 03:
Okay, so the jurisdiction is the appellate jurisdiction, not whether the district court itself had jurisdiction, which would be a strange way to describe a mandatory stay.

[00:15:11] Speaker 03:
Correct, Your Honor.

[00:15:12] Speaker 03:
Which keeps jurisdiction in the district court.

[00:15:14] Speaker 03:
Okay, I understand.

[00:15:15] Speaker 03:
Thank you.

[00:15:15] Speaker 04:
And arguments were made as to waiver.

[00:15:18] Speaker 04:
I'd like to address those.

[00:15:19] Speaker 04:
Obviously, I'm happy to answer any of Your Honor's questions.

[00:15:22] Speaker 01:
You know, I do have a question about 1.6.

[00:15:24] Speaker 01:
I'm having a difficult time of seeing how it doesn't limit the delegation provision.

[00:15:37] Speaker 04:
Certainly.

[00:15:38] Speaker 04:
So first, we believe that this doesn't need to be reached, but we've

[00:15:45] Speaker 04:
hold that row, we can go on.

[00:15:47] Speaker 04:
Every court that has looked at this provision 1.6 in the 2022 user agreement has held that it's clear and unmistakable that it's a delegation provision.

[00:15:58] Speaker 04:
That's Judge Donato here, Judge Chesney in the Pearl v. Coinbase case, Judge Thompson also- Right.

[00:16:04] Speaker 01:
Okay.

[00:16:04] Speaker 01:
Let's say 1.6 is a delegation provision.

[00:16:06] Speaker 01:
What says that the four exceptions only modify the arbitration clause and not the delegation provision?

[00:16:15] Speaker 01:
That's where I'm having difficulty, because it looks like, to me, it's limiting the delegation provision.

[00:16:22] Speaker 04:
Well, we laid this out, Your Honor, in our briefing, and the issue is that section 1.6 is titled authority of the arbitrator.

[00:16:30] Speaker 04:
It speaks to two authorities that the arbitrator has.

[00:16:33] Speaker 04:
One is the type of dispute that the arbitrator may preside over, and the second is who decides what gets arbitrated.

[00:16:42] Speaker 04:
Both of those are delegated in 1.6.

[00:16:44] Speaker 04:
So reading that, it reads that the arbitrator shall have the power to adjudicate all disputes, including without limitation.

[00:16:54] Speaker 04:
That without limitation is key, including without limitation, arbitrability.

[00:16:58] Speaker 04:
Except here's four issues that are not within the scope of the arbitrator's power to adjudicate.

[00:17:07] Speaker 04:
There's two things happening, scope and who decides.

[00:17:10] Speaker 04:
The four exceptions go to the scope of what may be before the arbitral forum, but the delegation provision.

[00:17:16] Speaker 01:
Well, what if I disagree with you and say, no, you just told me this is saying what has been delegated to the arbitrator and these are four exceptions to that delegation?

[00:17:27] Speaker 01:
Well, that's the way it reads to me, but please explain.

[00:17:31] Speaker 04:
Sure, I would disagree with Your Honor, but I know how much power that gives me.

[00:17:35] Speaker 04:
But the reason is the other cases that have looked at a similar structure all deal with an arbitration provision

[00:17:44] Speaker 04:
that has a delegation pursuant to reference to the AAA rules.

[00:17:48] Speaker 04:
For example, the Hahn case, which was, you know, magistrate judge below, the other cases, all look at a situation that says all disputes will be arbitrable except for the following, and the AAA rules apply.

[00:18:03] Speaker 04:
That's where the delegation is.

[00:18:04] Speaker 04:
Here, we have an explicit delegation.

[00:18:07] Speaker 04:
It's not by reference to the AAA rules.

[00:18:09] Speaker 04:
In 1.6, it says that all of these get decided

[00:18:13] Speaker 04:
by the arbitrator.

[00:18:14] Speaker 03:
Well, it may be explicit, but it also could be ambiguous.

[00:18:18] Speaker 03:
I'm thinking this isn't an issue here, but exception three, all disputes about whether a party is satisfied any condition precedent to arbitration shall be decided only by a court of competent jurisdiction.

[00:18:31] Speaker 03:
Is it not odd to have an arbitrator decide whether a condition precedent to arbitration has been satisfied?

[00:18:39] Speaker 04:
I'm not sure that it is, Your Honor.

[00:18:40] Speaker 04:
For one, this is the bargain the parties made, and this is what they agreed to.

[00:18:43] Speaker 03:
Well, that's the question.

[00:18:44] Speaker 04:
Fair enough.

[00:18:45] Speaker 04:
But I see it akin to the fact that the court will decide if a contract was formed.

[00:18:51] Speaker 04:
That's, in many ways, a condition pressed into arbitration.

[00:18:54] Speaker 04:
Did the parties enter into a contract with an arbitration clause?

[00:18:57] Speaker 04:
That is specifically for the court to decide.

[00:18:59] Speaker 04:
This is no different than that.

[00:19:00] Speaker 04:
This is something that the court decides as a threshold matter.

[00:19:04] Speaker 04:
And everything else, I'm sorry, the court, sorry, not a threshold matter.

[00:19:08] Speaker 03:
But I think that's your friend's argument.

[00:19:10] Speaker 03:
If the court decides that as a threshold matter, then we're... It decides it as a merits matter, rather.

[00:19:15] Speaker 04:
I'm sorry, not a threshold matter.

[00:19:16] Speaker 04:
It decides as a merits matter, ultimately, what happens.

[00:19:20] Speaker 03:
So how does this work?

[00:19:21] Speaker 03:
Walk me through, we've obviously got a very strong policy in favor of arbitration.

[00:19:26] Speaker 03:
The stay is issued, it goes off to the arbitrator, and all of these

[00:19:32] Speaker 03:
the condition precedent, the arbitrability, all of these threshold issues are then subject to arbitration and then come back after the full arbitration for a court to decide that it was all a waste of time.

[00:19:48] Speaker 04:
Not exactly, Your Honor.

[00:19:50] Speaker 04:
What would happen is, if the state had been properly entered, it would then go to AAA.

[00:19:55] Speaker 04:
The arbitrator, the plaintiffs could then bring whatever motions they want to say, this falls within any of the four buckets that are accepted for the court.

[00:20:04] Speaker 04:
And therefore, arbitrator, you should send this back to Judge Donato, because this falls within bucket number two.

[00:20:11] Speaker 04:
The arbitrator makes that decision.

[00:20:12] Speaker 04:
and may well send it back to the court if it falls within that.

[00:20:15] Speaker 04:
That is about the arbitrator determining his or her scope.

[00:20:19] Speaker 02:
So that authority versus delegation.

[00:20:21] Speaker 04:
Correct, Your Honor.

[00:20:23] Speaker 02:
Would you touch on the sophisticated versus the unsophisticated issue?

[00:20:29] Speaker 04:
Certainly.

[00:20:32] Speaker 02:
Ninth Circuit proviso of this only applies to this case, or we're only deciding this case.

[00:20:37] Speaker 04:
Right.

[00:20:38] Speaker 04:
Right, Your Honor.

[00:20:38] Speaker 04:
Yes.

[00:20:39] Speaker 04:
And Brennan, they specifically did say, of course, we're not saying it doesn't apply to unsophisticated.

[00:20:44] Speaker 04:
We're just dealing with sophisticated here.

[00:20:46] Speaker 04:
Well, first, it's important in thinking about the sophistication issue that there actually was no challenge.

[00:20:54] Speaker 04:
This has been waived because below,

[00:20:57] Speaker 04:
the plaintiffs did not address any issue, did not present any evidence as to their sophistication or lack thereof.

[00:21:05] Speaker 04:
All there was was one reference in a footnote in their motion to compel arbitration opposition that coinbase hadn't presented sophistication evidence.

[00:21:20] Speaker 04:
But that's not effective.

[00:21:25] Speaker 04:
And, forgive me, Your Honor, let me just go to the- Well, what about in these declarations?

[00:21:29] Speaker 01:
They say there was nothing indicating I was waiving my rights to a jury trial, waiving my rights to participate in class action.

[00:21:35] Speaker 01:
I didn't even know what arbitration was until Coinbase filed this motion to compel.

[00:21:40] Speaker 01:
That's Dallas Woody's declaration.

[00:21:42] Speaker 01:
I mean, why wouldn't this satisfy at least raising the issue of sophistication?

[00:21:48] Speaker 04:
Well, Your Honor, because they don't actually raise the issue of sophistication.

[00:21:51] Speaker 04:
What the delegations say is, ah, the user agreement doesn't look like what I remembered.

[00:21:56] Speaker 04:
I'm not really sure this happened.

[00:21:58] Speaker 04:
There's no definitive declaration of that.

[00:22:00] Speaker 04:
And they maybe say, oh, I don't know what the arbitration was.

[00:22:04] Speaker 01:
No, he says, I didn't even know what arbitration was until Coinbase filed this motion to compel it.

[00:22:12] Speaker 01:
I mean, Mr. Woody is not a lawyer.

[00:22:13] Speaker 01:
Why is he not unsophisticated?

[00:22:17] Speaker 04:
Well, because they didn't make that argument, Your Honor.

[00:22:19] Speaker 04:
They didn't say that that's the reason why we are not sophisticated, and that's why we should fall into the, I guess, Brennan exception that doesn't exist yet, or that this Court should decide that issue.

[00:22:33] Speaker 04:
But importantly, there's nothing in the record about their non-sophistication specifically.

[00:22:40] Speaker 04:
For example, in Phil Lowe's case, Phil Lowe Falcon versus Amazon, the Ninth Circuit

[00:22:47] Speaker 04:
commented that the appellants had raised the sophistication issue, but they didn't actually present any competent evidence below.

[00:22:53] Speaker 04:
That statement is not competent evidence.

[00:22:56] Speaker 04:
That's just a statement, oh, I didn't know what it was.

[00:22:58] Speaker 04:
It's not specifically saying, I did not know about how this worked.

[00:23:05] Speaker 04:
I didn't know how to read.

[00:23:07] Speaker 04:
Whatever the sophistication may be, that's an open issue.

[00:23:09] Speaker 02:
Or here's my background and why I didn't.

[00:23:12] Speaker 04:
Exactly, Your Honor.

[00:23:15] Speaker 04:
Also, the Patrick, I'd advise the court to look at, or I'd point the court to Patrick versus Running Warehouse, where this court said that on appeal where the plaintiff asserted a lack of sophistication, they offered no evidence concerning their sophistication or lack thereof.

[00:23:31] Speaker 04:
And so there was no evidence offered here.

[00:23:33] Speaker 04:
Also, there was a waiver because at most it was raised in a footnote.

[00:23:37] Speaker 04:
And as we explained in our brief, that's not sufficient to preserve.

[00:23:44] Speaker 01:
unconscionability claims that the plaintiffs make is as to batch arbitration, where if there are a hundred more, I guess, individual claims, they will be consolidated before one arbitrator.

[00:23:59] Speaker 01:
It does seem like it's a backdoor to class actions, but it just allows you to go before an arbitrator instead of a judge and makes it much more expensive, I assume, for plaintiff's counsel to litigate this.

[00:24:10] Speaker 01:
Why is this just not a backdoor class action?

[00:24:13] Speaker 01:
You're going to take 100 individual cases, consolidate them before one arbitrator.

[00:24:19] Speaker 04:
That issue is not relevant to this case, Your Honor.

[00:24:22] Speaker 04:
This is not a batch arbitration case.

[00:24:24] Speaker 04:
It's not alleged to be.

[00:24:25] Speaker 01:
But that's what they're claiming is unconscionable, right, is the batch arbitration.

[00:24:29] Speaker 04:
They make no argument that it applies to them or that it has any effect on them whatsoever.

[00:24:33] Speaker 01:
But what's your response?

[00:24:34] Speaker 01:
They've made the argument.

[00:24:35] Speaker 01:
I mean, obviously, it's not clear whether we're even going to address this ultimately because of Spirizzi, but what's your response?

[00:24:41] Speaker 01:
Because they do make an unconscionability argument as to that 1.8 provision.

[00:24:45] Speaker 04:
Well, the issue with that is that argument is not directed at the delegation provision.

[00:24:49] Speaker 04:
That's directed at the arbitration agreement as a whole.

[00:24:51] Speaker 04:
They don't specifically say why that affects the delegation provision.

[00:24:56] Speaker 04:
And under Bielski and

[00:24:59] Speaker 04:
Prima Paint and Rent-A-Center, they have to specifically challenge the delegation provision with their arguments and not just make general arguments that apply to the arbitration agreement as a whole.

[00:25:09] Speaker 04:
Here, they didn't do that.

[00:25:11] Speaker 04:
They made arguments specifically about the user agreement.

[00:25:15] Speaker 04:
And at 2ER 154 to 157, which is their opposition to the motion to compel arbitration,

[00:25:23] Speaker 04:
Each of the topic sentences talk about the user agreements are this.

[00:25:27] Speaker 04:
The user agreements are that.

[00:25:29] Speaker 04:
Other sections, 1.8 and 1.4, of the arbitration agreement is this or that.

[00:25:34] Speaker 04:
There's no specific challenge to the delegation provision, so as Judge Donato held correctly, they failed to challenge it effectively.

[00:25:43] Speaker 03:
What should we do if we find the delegation provision ambiguous?

[00:25:48] Speaker 03:
You've color-coded it.

[00:25:50] Speaker 03:
It's a single sentence.

[00:25:51] Speaker 03:
I'm guessing you may not draft it again if you had the opportunity in quite the same way.

[00:25:57] Speaker 04:
Well, again, with the caveat, the Spazeri caveat, remand to Judge Gennado for further interpretation because he did not specifically address that.

[00:26:06] Speaker 04:
He found that they were clear, unmistakable, and enforceable.

[00:26:10] Speaker 04:
Other courts within the circuit have found the same.

[00:26:12] Speaker 04:
However, further

[00:26:14] Speaker 04:
analysis is required, then I think Judge Donato can perform that analysis.

[00:26:19] Speaker 01:
Can we get back to Bilski?

[00:26:21] Speaker 01:
I mean, I see what you're saying about you have to specifically mention a provision that you're challenging, but there's also language in that same decision saying that when you're a court evaluating an unconscionability challenge to a delegation provision, you can look at the provision in context of the agreement as a whole, and at least Mr. Woody's claiming, well, I did do that.

[00:26:43] Speaker 04:
Well, Your Honor, I think we have to go back to Prima Paint and Renta Center, where the Supreme Court said that in Prima Paint, the arbitration clause is a severable contract within a contract.

[00:26:53] Speaker 04:
You look at that without regard to the overall contract.

[00:26:56] Speaker 04:
Then they took that in Renta Center and said the delegation provision within an arbitration agreement is also a severable contract within a contract.

[00:27:04] Speaker 04:
So you look at that.

[00:27:05] Speaker 04:
And so challenges to the overall arbitration agreement are not sufficient to challenge the arbitration provision.

[00:27:12] Speaker 04:
because under Rent-A-Center, PrimaPaint, and Bielski now, those have to be challenged specifically with specific arguments directed towards that provision, and that wasn't done here.

[00:27:24] Speaker 04:
Instead, they said generally that there's an unconscionability that relates to the user agreements as a whole or the arbitration agreement sections that are not section 1.6, which is the delegation provision, and never said that because

[00:27:40] Speaker 04:
Section 1.6 delegation provision says the arbitrator should have the power to determine his or her own jurisdiction.

[00:27:47] Speaker 04:
That's unconscionable because of A, B, or C. They never said that.

[00:27:50] Speaker 04:
So they didn't sufficiently challenge it.

[00:27:52] Speaker 04:
And that's where we are with Bielski.

[00:27:54] Speaker 04:
So Bielski recognized that the same arguments that apply to the arbitration agreement as a whole might apply to the delegation provision and can be argued.

[00:28:06] Speaker 04:
it emphasized that still the challenge must be directed towards specific provisions of the delegation provision.

[00:28:14] Speaker 04:
And that just wasn't done here.

[00:28:16] Speaker 01:
You are two minutes over your time.

[00:28:17] Speaker 01:
Let me see if my colleagues have any.

[00:28:20] Speaker 01:
Does the court need anything on waiver because I have tones?

[00:28:22] Speaker 01:
No, thank you.

[00:28:23] Speaker 04:
Thank you.

[00:28:45] Speaker 00:
There's a few things I want to address to the court.

[00:28:48] Speaker 00:
First, because I'm really stressing that the court should not divest itself of jurisdiction, I want to bring the court's attention to the fact that it would be a manifest injustice to follow Spirisi in light of the fact that both Spirisi and Bielski came after the district court opinion.

[00:29:05] Speaker 00:
Because if the court follows Spirisi,

[00:29:08] Speaker 00:
the district court, we never got our chance for the judge to follow Bielski either.

[00:29:13] Speaker 03:
Mr. Rispoli, that's a question of timing, not of whether we could get to it eventually under the FAA.

[00:29:19] Speaker 03:
We just can't get to it now.

[00:29:21] Speaker 00:
Well, the problem is that, initially, every plaintiff has a right to challenge the delegation provision, and the court didn't address that provision in light of what the Bielski ruling was.

[00:29:31] Speaker 00:
So the court, at minimum, plaintiffs owed their right to have that analysis, and I want to say that

[00:29:37] Speaker 00:
It's very clear that plaintiffs did challenge the delegation provision in the context of all the other provisions as Bielski set forth, which is that if you have a defined term, you have to look at that in the context of the delegation provision.

[00:29:52] Speaker 00:
And we've got in the delegation provision what is a, quote, dispute, the arbitration agreement.

[00:29:58] Speaker 00:
waiver of class and other non-individualized relief, batch arbitration.

[00:30:02] Speaker 00:
These are all provisions that are defined in the delegation provision itself, and that's a reason that they're so substantively unconscionable.

[00:30:10] Speaker 03:
I want to say with the exclusions... Which ones are you... Which exceptions are you claiming are the best fit for your case?

[00:30:19] Speaker 00:
Well, for sure, it's batch arbitration.

[00:30:21] Speaker 00:
First, it's

[00:30:22] Speaker 03:
What's your response to your friend's argument that it's not an issue?

[00:30:25] Speaker 00:
Well, it's somewhat ridiculous to say that we're not in a batch arbitration, because this is a class action.

[00:30:29] Speaker 00:
We are, by rule, FRCP 23A1, not allowed to list the thousands of people that are involved in this class action.

[00:30:36] Speaker 00:
That's the numerosity requirement.

[00:30:38] Speaker 00:
So we just have two reps.

[00:30:40] Speaker 00:
It's disingenuous from Coinbase, because they know exactly how many XRP holders they have.

[00:30:45] Speaker 00:
And they know exactly everybody that was entitled to the Songbird airdrop.

[00:30:49] Speaker 00:
And they know it's well over several thousand.

[00:30:52] Speaker 00:
So this case would clearly be in the batch arbitration situation and again that's another reason why we would need limited discovery if we even go backwards again for the court as an initial matter when we have such sharply contradicting declarations because as the court mentioned the declarations go to a lot of specific issues which is that both said you know first of all we don't know what arbitration is or these technical terms but

[00:31:21] Speaker 00:
They could not manage the technical problems with the Coinbase user interface.

[00:31:25] Speaker 00:
They struggled with technical support.

[00:31:27] Speaker 00:
They didn't understand the technical pros of the UA's and they've also put in their declarations.

[00:31:34] Speaker 01:
Does that mean they're technologically unsophisticated or legally unsophisticated if they can't figure out the user interface?

[00:31:39] Speaker 00:
Well, it goes to evidence of both, because we're talking about the sophistication in the context of being able to agree or even assent to these problems or even use the platform.

[00:31:54] Speaker 02:
I think there's quite a difference between understanding the agreement and having problems with platform and technical access, and that's really what the bulk of that

[00:32:08] Speaker 02:
talks about.

[00:32:08] Speaker 02:
That goes to their claim, like, we really can't use and access this platform.

[00:32:16] Speaker 02:
That's not the same as I'm unsophisticated as far as the arbitration agreement.

[00:32:22] Speaker 00:
That's true, Your Honor, but then there's no problem at all because both declarants have no idea what arbitration is or the technical terms that are listed in the arbitration agreement.

[00:32:32] Speaker 00:
That aspect would already be satisfied.

[00:32:35] Speaker 00:
And I would say in the cases that we've cited in our reply at 16 through 19 in the opening at 21, 23, we've got unsophistication determined for mobile phone customers, bank customers, franchisees, music teacher and an architect.

[00:32:50] Speaker 00:
personal genetics, consumer, employees, cooks.

[00:32:54] Speaker 00:
So I think that that minimum case is met.

[00:32:57] Speaker 00:
I do want to quickly say with the exclusions in the Coinbase agreement, counsel stated that every court that's reviewed this has said, oh, these exclusions are not going to delegation.

[00:33:08] Speaker 00:
That's not exactly true.

[00:33:10] Speaker 00:
In the cases in those Coinbase cases, and this is in page 31 of our opening brief,

[00:33:17] Speaker 00:
They never actually addressed that issue because, again, this was pre-Bealski.

[00:33:21] Speaker 00:
They said, we're not going to get to the delegation provision, or we're not going to get to these substantive questions because the delegation provision wasn't properly challenged.

[00:33:30] Speaker 00:
So this has never actually been fully addressed by the court.

[00:33:34] Speaker 00:
You know, and I think just the discussion about

[00:33:37] Speaker 00:
all of these issues, the color coding, the negation of AAA versus section 1.6 and 22, this is a summary judgment standard for motions that compel arbitration in the Ninth Circuit, and it's not clear and unmistakable evidence.

[00:33:52] Speaker 00:
And at minimum, we have the conflicting issues with discovery, and we have this third party agreement between Coinbase and Flare networks that we've never had the

[00:34:04] Speaker 00:
opportunity to discuss or even get in discovery, it is not true that what Coinbase provided in their reply is the only agreement in a $10 million plus financial transaction between Coinbase and Flare networks.

[00:34:21] Speaker 00:
We do, with our public injunction question, I will just say aside from the briefing,

[00:34:26] Speaker 00:
that the Department of Financial Protection and Innovation in California?

[00:34:30] Speaker 01:
What you said was against California law, right?

[00:34:33] Speaker 01:
You said if the class size is big, that converts a private relief into public relief.

[00:34:37] Speaker 01:
But that's not what California Supreme Court law says, right?

[00:34:41] Speaker 00:
Well, it's not a conversion in that sense, but it's also not to the extent that the size doesn't necessarily matter.

[00:34:51] Speaker 01:
And what I mean- But I think there's California Supreme Court case law that says you don't look to the size of the class to determine whether relief is private or public.

[00:34:58] Speaker 01:
You agree with that, right?

[00:34:59] Speaker 00:
Yes, I do.

[00:35:00] Speaker 00:
And I would just say in brief that

[00:35:02] Speaker 00:
The Department of Financial Protection and Innovation has issued an injunction to Coinbase on similar but not identical behavior for cryptocurrency staking rewards.

[00:35:10] Speaker 00:
And they're saying, we are protecting the public, specifically public investors in crypto asset products.

[00:35:16] Speaker 01:
And if there's any- You're a minute and a half over your time.

[00:35:18] Speaker 01:
I'd like you to just do a quick wrap up, unless my colleagues have any other questions.

[00:35:23] Speaker 01:
Okay, if you could just wrap up, please.

[00:35:24] Speaker 00:
Sure.

[00:35:25] Speaker 00:
It's just if the court goes through it, we have to figure out under Sussky which contract applies.

[00:35:30] Speaker 00:
And if it's 2017, we've got the sophistication argument.

[00:35:34] Speaker 00:
If it's 2022, we have the clear and unmistakable delegation issue.

[00:35:38] Speaker 00:
And then we've got the unconscibility issue, most notably with the batch arbitration.

[00:35:43] Speaker 00:
And those are really the focus for the court.

[00:35:47] Speaker 00:
And I just don't think

[00:35:49] Speaker 00:
the court can use Sporizzi as a chance to get rid of jurisdiction here because of the nature and the way it was presented and also because we have the same issues with plaintiff then, if we're going back in time doing that, would never have gotten their shot under Bielski for that type of analysis.

[00:36:05] Speaker 00:
All right.

[00:36:05] Speaker 01:
You're two minutes, 23 seconds over.

[00:36:08] Speaker 01:
Thank you.

[00:36:08] Speaker 01:
All right.

[00:36:09] Speaker 01:
Thank you to both counsel.

[00:36:11] Speaker 01:
These were very helpful arguments.

[00:36:12] Speaker 01:
Thank you very much.

[00:36:13] Speaker 00:
Thank you.