In a closely watched decision on the important issue on the enforceability of arbitration clauses in online agreements, In re BAM Trading Services, Inc., no. 22-cv-03461 (N. D. Cal.), Hahn Loeser Attorneys Michael J. Gleason and Jeffrey A. Brauer obtained an order on behalf of BAM Trading Services, Inc. compelling a plaintiff to arbitrate his claims rather than proceed in court with a proposed nationwide class action. BAM operates the cryptocurrency trading platform Binance. US. Plaintiff brought a putative class action in the United States District Court for the Northern District of California against BAM and its CEO following the May 2022 collapse of the algorithmic stablecoin UST.
In addition to denying any allegations of wrongdoing, BAM moved to compel arbitration of the plaintiff’s claims based on the arbitration clause in the Terms and Conditions that the plaintiff agreed to when creating and using his BAM account. The plaintiff made many arguments to defeat the arbitration clause citing rapidly developing law in the Ninth Circuit Court of Appeals including questioning the sufficiency of incorporating the American Arbitration Association rules as a delegation clause and raising questions as to whether the Terms of Use were procedurally or substantively unconscionable due to adhesiveness, non-mutuality, lack of user sophistication, cost-splitting, and a pre-dispute procedure. After several years of briefing on these key issues, during which time the law on these issues evolved significantly in the Ninth Circuit, the district court rejected the plaintiff’s challenges and compelled the plaintiff to abide by the arbitration agreement with BAM. In addition, the district court compelled arbitration of the claims against BAM’s CEO, even though he was a non-signatory to the arbitration agreement.
Long Term Effects
The court’s detailed analysis will likely serve as a roadmap on how Federal Courts will analyze future cases involving online agreements, particularly those governed by California law. See also (Note: some links may contain paywalls): Binance US Wins Bid to Send Crypto User’s Suit to Arbitration (bloomberglaw.com); Binance Can Arbitrate Suit Over Terra Stablecoin Collapse (Law360); Will Binance class action over Terra collapse be forced into arbitration? (Reuters).
