Will We See "Ulysses" Arbitration Clauses In The Wake Of Coinbase, Inc. v. Suski?

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Before Ulysses sailed past the sirens, he tied himself to the ship's mast. He was trying to prevent himself from jumping into the sea, even if that's what he'd later want to do.
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Before Ulysses sailed past the sirens, he tied himself to the ship's mast. He was trying to prevent himself from jumping into the sea, even if that's what he'd later want to do. The legal equivalent of this is a so-called dead hand constraint. This is where decisions from the past reach into the future to limit our choices. In that way, the "dead hand" from the past keeps exercising control over the present.

We see it in constitutional law, where we still follow the framing generation's edicts. We see it in corporate law, where a board of directors defending against a hostile takeover adopts a poison pill to constrain (and deter) future directors. And we see it in psychiatric care, where a person may consent to be hospitalized in the future, even if that person later doesn't want to be.

Thanks to the Supreme Court's decision this term in Coinbase, Inc. v. Suski, we may start to see a kind of dead hand, or Ulysses, clause in arbitration agreements.

In Coinbase, a user of Coinbase's cryptocurrency platform sued for false advertising and other related claims. Under ordinary circumstances, this dispute would have been arbitrated. That's because Coinbase had a terms of service with a robust arbitration agreement. The agreement did what most arbitration agreements do. It required arbitration of users' claims, and it sent second-tier questions over whether a dispute must be arbitrated to an arbitrator. The latter clause is often called a delegation clause because it delegates arbitrability questions to an arbitrator.

But circumstances were not ordinary. Suski and Coinbase had another contract from a promotional sweepstakes that Coinbase had run, and the sweepstakes contract contained a forum selection clause that appeared to conflict with the terms of service's arbitration clause. The courts, this new clause said, "shall have sole jurisdiction of any controversies regarding the [sweepstakes] promotion." The forum selection clause thus presented two issues: did it displace the arbitration agreement, and who decides whether it displaced the arbitration agreement?

The issue before the Court was the latter—who decides. Coinbase argued that an arbitrator must decide, pointing to its delegation clause. But the Court disagreed: Because the forum selection clause may have also displaced the delegation clause, a court, not an arbitrator, had to decide this threshold question. The Court explained that its ruling was a matter of basic contract interpretation of what the parties had agreed to delegate. In other words, the parties had not agreed to delegate that particular question, whether the delegation clause itself had been displaced.

The dizzying layers aside, Coinbase presents a dilemma. What should a company do to prevent itself from inadvertently undoing the delegation clause in its terms of service—a clause that's meant to ensure an arbitrator decides all threshold questions about arbitrability? Coinbase's problem is hardly unique. Contractual relationships with users are becoming more complex and multilayered, increasing the risk that subsequent contracts displace earlier ones.

Here is where we may start to see a dead hand, or Ulysses, clause become useful. In general, it would be a clause that makes it far harder for a later agreement to replace the delegation clause in an earlier agreement, by reaching into the future to constrain later contracting. The parties in later contracting would have to specifically untie the knot created by the earlier contract.

Justice Gorsuch in his concurring opinion all but invites companies to insert such a clause, and he offers an example. He wrote: "[I]magine a master contract providing that 'all disputes arising out of or related to this or future agreements between the parties, including questions concerning whether a dispute should be routed to arbitration, shall be decided by an arbitrator.' Absent some later amendment, a provision like that would seem to require a court to step aside."

There can of course be variations. Consider, for example: "All issues concerning the delegation clause, including whether the delegation clause has been amended or superseded by a subsequent agreement, shall be decided by an arbitrator."

Whether using Justice Gorsuch's "master" clause or some other dead hand variation of it, if a company wants to ensure that any disputes relating to arbitration be resolved by an arbitrator, it would be wise to consider this added protection in its terms of service.

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