Kramer v. Coinbase, Inc. ( 2024 )

Filed 9/12/24 Certified for Publication 10/4/24 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
DARREN KRAMER et al.,
Plaintiffs and Respondents,
A167779
v.
COINBASE, INC., et al., (San Francisco City & County
Super. Ct. No. CGC-23-604357)
Defendants and Appellants.
Plaintiffs Darren Kramer, Manish Aggarwal, Mostafa El Bermawy, and
Amish Shah filed a complaint against Defendant Coinbase, Inc. (Coinbase)
for public injunctive relief under the Consumer Legal Remedies Act (Civ.
Code, § 1750 et seq.; CLRA), the California False Advertising Law (Bus. &
Prof. Code, § 17500, et seq.; FAL), and the California Unfair Competition
Law (Bus. & Prof. Code, § 17200, et seq.; UCL). The trial court denied
Coinbase’s motion to compel arbitration on the basis that plaintiffs sought
public injunctive relief not subject to arbitration. We disagree with
Coinbase’s argument on appeal that plaintiffs’ claims are subject to
arbitration because they seek private injunctive relief, and we affirm the trial
court order.1
1 On September 9, 2024, Coinbase filed an unopposed request for
judicial notice of two requests for dismissal without prejudice filed in the
superior court by plaintiffs Kramer, El Bermawy, and Aggarwal. We grant
the request. (Evid. Code, § 452, subd. (d)(1).) We do not opine on whether
the superior court had jurisdiction to dismiss any plaintiffs while an appeal
FACTUAL AND PROCEDURAL BACKGROUND
Coinbase operates an online platform for buying, selling, and
transferring cryptocurrencies. Prospective users create accounts to access
Coinbase’s services.
Plaintiffs are individuals who opened and utilized accounts on
Coinbase’s cryptocurrency platform. As part of creating their accounts, users
are required to accept the terms of a user agreement. Plaintiffs accepted
updated user agreement terms in 2022 as part of maintaining their Coinbase
accounts. That user agreement contained an arbitration provision, which
states in relevant part, “you and Coinbase agree that any dispute, claim,
disagreements arising out of or relating in any way to your access to or use of
the Services or of the Coinbase Site, any Communications you receive, any
products sold or distributed through the Coinbase Site, the Services, or the
User Agreement and prior versions of the User Agreement, including claims
and disputes that arose between us before the effective date of these Terms
. . . will be resolved by binding arbitration, rather than in court . . . .”
The Federal Action
Plaintiffs Aggarwal and El Bermawy filed a class action complaint in
federal court (Aggarwal I) relating to various losses they sustained on
Coinbase’s platform. Aggarwal and El Bermawy alleged hackers gained
access to their respective accounts and stole funds, and Coinbase failed to
protect the accounts, mitigate their losses, or provide support following the
thefts. The federal complaint alleged thirteen statutory and common law
claims, including violations of the CLRA, FAL, and UCL. It sought various
remedies, including “[i]njunctive relief, including public injunctive relief,”
was pending, and note none of the plaintiffs requested dismissal of this
appeal.
2
declaratory relief, compensatory damages, statutory damages, treble
damages, restitution, disgorgement, punitive damages, and attorneys’ fees
and costs.
Coinbase moved to compel Aggarwal I to arbitration pursuant to the
terms of its user agreement. The court granted the motion. (Aggarwal v.
Coinbase, Inc. (N.D. Cal. 2023) 685 F.Supp.3d 867, 882.) The court first
concluded the unilateral contract modification provision did not render the
arbitration provision illusory. (Id. at p. 877.) The court then concluded the
parties delegated the question of arbitrability to the arbitrator, and that
delegation clause was not unconscionable. (Id. at pp. 879, 881–882.) The
court did not address whether the complaint sought public injunctive relief
and, if so, whether such a claim could be compelled to arbitration under
existing California law.
The Current Action
While Aggarwal I was pending, plaintiffs filed a complaint in San
Francisco Superior Court.2 The complaint, which arises from the same facts
set forth in Aggarwal I, asserts Coinbase misrepresented its security
features, alleges claims under the CLRA, FAL, and UCL, and exclusively
seeks “public injunctive relief.”
Coinbase again moved to compel arbitration under the terms of its user
agreement. Coinbase argued plaintiffs entered into valid and enforceable
arbitration agreements, and, as relevant to this appeal, the complaint fell
within the scope of the arbitration provision because plaintiffs sought private
injunctive relief.
2 Coinbase removed the initial complaint to federal court based on
diversity jurisdiction, and plaintiffs dismissed the action. They then refiled
the current complaint, adding a California plaintiff.
3
The trial court denied the motion to compel arbitration. In so holding,
the court rejected Coinbase’s argument that plaintiffs were seeking private
injunctive relief. It explained, “Here, the complaint plainly shows that
plaintiffs are only seeking public injunctive relief. . . . Plaintiffs do not
request any sort of relief that would solely benefit them or existing Coinbase
customers. In fact, . . . defendants’ allegedly misleading scheme has already
harmed plaintiffs and plaintiffs are aware of defendants’ practice. It is thus
unclear how the requested injunction will benefit plaintiffs.” The court
further noted the “federal action buttresses plaintiffs’ contention that they
are merely seeking public injunctive relief in this case since plaintiffs are
seeking individual relief in [Aggarwal I].”
Coinbase timely appealed.
DISCUSSION
On appeal, Coinbase argues plaintiffs’ claims are subject to arbitration
because they seek private injunctive relief. It further contends plaintiffs
failed to prove otherwise.
An order denying a petition to compel arbitration is appealable. (Code
Civ. Proc., § 1294, subd. (a).) When, as here, a trial court’s order denying a
petition to compel arbitration is based on a question of law, we review the
denial de novo. (Clifford v. Quest Software Inc. (2019) 38 Cal.App.5th 745,
749 (Clifford).)
I. Injunctive Relief
“In McGill [v. Citibank, N.A. (2017) 2 Cal.5th 945 (McGill)], the
Supreme Court, relying on its earlier decisions in Broughton v. Cigna
Healthplans (1999) 21 Cal.4th 1066 . . . (Broughton) and Cruz v. PacifiCare
Health Systems, Inc. (2003) 30 Cal.4th 303 . . . (Cruz), distinguished between
the two types of injunctive relief: Private injunctive relief is ‘relief that
4
primarily “resolve[s] a private dispute” between the parties . . . and
“rectif[ies] individual wrongs” . . . and that benefits the public, if at all, only
incidentally.’ [Citation.] Public injunctive relief is ‘relief that “by and large”
benefits the general public . . . and that benefits the plaintiff, “if at all,” only
“incidental[ly]” and/or as “a member of the general public.” ’ [Citation.] ‘To
summarize, public injunctive relief under the UCL, the CLRA, and the false
advertising law is relief that has “the primary purpose and effect” of
prohibiting unlawful acts that threaten future injury to the public.
[Citation.] ‘Relief that has the primary purpose or effect of redressing or
preventing injury to an individual plaintiff—or to a group of individuals
similarly situated to the plaintiff—does not constitute public injunctive
relief.’ ” (Ramsey v. Comcast Cable Commc’ns, LLC (2023) 99 Cal.App.5th
197, 204–205 (Ramsey).) The court explained an arbitration provision that
waives a plaintiff’s right to seek public injunctive relief is invalid and
unenforceable. (McGill, supra, 2 Cal.5th at pp. 951–952.)
The court then applied this framework to the case before it. The
plaintiff, McGill, had filed a class action lawsuit against Citibank based on its
marketing of a credit protection plan and its handling of a claim she filed
pursuant to the plan after she lost her job. (McGill, supra, 2 Cal.5th at
p. 953.) The complaint alleged various violations of California’s consumer
protection laws, including the CLRA, UCL, and the false advertising laws,
and sought “an injunction prohibiting Citibank from continuing to engage in
its illegal and deceptive practices,” in addition to other relief. (McGill, at
p. 953.)
The court identified two examples of what constituted public injunctive
relief. “[A]n injunction under the CLRA against a defendant’s deceptive
methods, acts, and practices ‘generally benefit[s]’ the public ‘directly by the
5
elimination of deceptive practices’ and ‘will . . . not benefit’ the plaintiff
‘directly,’ because the plaintiff has ‘already been injured, allegedly, by such
practices and [is] aware of them.’ ” (McGill, at p. 955.) Likewise, “an
injunction under the UCL or the false advertising law against deceptive
advertising practices ‘is clearly for the benefit of . . . the general public’; ‘it is
designed to prevent further harm to the public at large rather than to redress
or prevent injury to a plaintiff.’ ” (McGill, at p. 955.)
The court thus noted (1) the complaint was brought under the
consumer protection statutes, (2) it alleged “ ‘unfair, deceptive, untrue, and
misleading’ ” advertising and marketing, and “ ‘false, deceptive, and/or
misleading’ ” representations and omissions, and (3) it sought an injunction
“ ‘to ensure compliance’ ” with these laws, and to enjoin Citibank from
“ ‘continuing to falsely advertise or conceal material information and conduct
business via the unlawful and unfair business acts and practice complained
herein.’ ” (McGill, supra, 2 Cal.5th at pp. 956–957.) “In light of these
allegations and requests for relief,” the court concluded the complaint sought
public injunctive relief and the plaintiff adequately explained “ ‘how the
public at large would benefit from’ that relief.” (Id. at p. 957.)
A. Plaintiffs’ Complaint Seeks Public Injunctive Relief
Several courts have analyzed whether a complaint asserts public or
private injunctive relief under the framework set forth in McGill.
In Mejia v. DACM Inc. (2020) 54 Cal.App.5th 691 (Mejia), the plaintiff
purchased a used motorcycle, with most of the purchase financed with a
“WebBank-issued Yamaha credit card” he obtained through the dealership.
(Id. at p. 694.) Mejia subsequently sued the defendant, alleging it violated
various state laws, including the CLRA and UCL, by “failing to provide its
customers with a single document setting forth all the financing terms for
6
motor vehicle purchases made with a conditional sale contract.” (Id. at
p. 695.) The complaint requested an injunction requiring the defendant to
provide consumers with a single document containing all required
information. (Id. at p. 696.) On appeal, the defendant argued McGill was
inapplicable. It asserted the complaint sought a private—not public—
injunction because the injunction would “benefit only a ‘narrow group of Del
Amo customers’––the class of similarly situated individuals who, like Mejia,
would buy a motorcycle from Del Amo with a conditional sale contract.”
(Mejia, at p. 702.) The Fourth District Court of Appeal rejected this
argument, quoting the following analysis with approval from Mejia’s brief:
“ ‘[T]he prayer is plainly one for a public injunction given that Mejia “seeks to
enjoin future violations of California’s consumer protection statutes, relief
oriented to and for the benefit of the general public.” [Citation] . . . Mejia’s
prayer does not limit itself to relief only for class members or some other
small group of individuals; it encompasses “consumers” generally.’ ” (Id. at
p. 703.)
Maldonado v. Fast Auto Loans, Inc. (2021) 60 Cal.App.5th 710(Maldonado) reached a similar conclusion. In that case, the plaintiffs alleged
violations of the CLRA, UCL, and FAL based on the defendant charging
unconscionable interest rates on loans. (Id. at p. 713.) The plaintiffs
requested injunctive relief ordering the defendant to “cease and desist its
unlawful practices” and prohibiting future violations. (Id. at pp. 715–716.)
On appeal, the defendant argued “the relief sought ‘is private because it will,
at best, benefit [the Customers] and a discrete, narrowly-defined group of
other . . . customers.’ ” (Id. at p. 720.) The court rejected this argument,
explaining the “operative allegations and specific requests for relief” alleged
(1) the defendant’s misconduct “was ongoing and ‘injurious to the public and
7
consumers,’ ” (2) the defendant “was continuing to provide high interest loans
without proper licensing,” and (3) the “ ‘unlawful conduct will continue’ ”
injunctive relief prohibiting “ ‘future violations.’ ” (Id. at p. 721.) The court
thus held the complaint sought public injunctive relief: “In short, the
Customers’ complaint and prayer does not limit the requested remedies for
only some class members, but rather encompasses all consumers and
members of the public. Moreover, an injunction under the CLRA against
Lender’s unlawful practices will not directly benefit the Customers because
they have already been harmed and are already aware of the misconduct.”
(Maldonado, at p. 721.)
More recently, in Ramsey, supra, 99 Cal.App.5th 197, the plaintiff
alleged Comcast misrepresented its pricing and discounts in violation of the
CLRA and UCL. (Id. at pp. 201–202.) The complaint sought to: “(1) enjoin
Comcast from engaging in ‘unfair or deceptive acts or practices and correcting
all false and misleading statements and material omissions . . . to prevent
future injury to the general public’; (2) require Comcast to ‘halt their practice
of issuing secret discounts’; (3) require Comcast to ‘comply with their legal
obligations and utilize only truthful and complete advertisements,
statements, and representations’; and (4) enjoin Comcast from ‘continuing
their unlawful and unfair business practices.’ ” (Id. at p. 206.) The court
concluded “[a]n injunction that seeks to prohibit a business from engaging in
unfair or deceptive practices and marketing, requires it to provide enhanced
pricing transparency, and requires it to comply with our consumer protection
laws, does have the primary purpose and effect of protecting the public, and
thus falls within McGill’s definition of public injunctive relief.” (Ramsey, at
p. 206.)
8
The court then addressed the question of “whether an injunction that
benefits both existing and potential Comcast subscribers qualifies as a public
injunction under McGill.”3 (Ramsey, at p. 207.) The court followed Mejia,
supra, 54 Cal.App.5th 691, and Maldonado, supra, 60 Cal.App.5th 710, and
concluded “[w]hile the requested injunction in those cases and here may not
benefit the entire public as a ‘diffuse whole,’ we agree with the court in
Maldonado that ‘a requested injunction cannot be deemed private simply
because [a business] could not possibly advertise to, or enter into agreements
with, every person in California . . . .’ . . . McGill did not require that public
injunctive relief have such a universal reach.” (Ramsey, supra, 99
Cal.App.5th at p. 211.)
We find the reasoning in Mejia, Maldonado, and Ramsey equally
applicable here. Plaintiffs’ complaint alleges violations of the CLRA, UCL,
and FAL. The complaint asserts Coinbase is aware of the importance of
security to consumers and thus advertises itself to the public as the “ ‘most
trusted’ and ‘most secure’ cryptocurrency platform.” It does so via
information on its website and in online, television, and newspaper
advertisements. The complaint further alleges ongoing harm toward the
public, including: (1) “Coinbase’s misrepresentations about its security
continue to deceive members of the general public;” (2) “These
misrepresentations are targeted to entice consumers into creating accounts
and depositing their hard-earned funds with Coinbase”; (3) “Coinbase knew
3 The court rejected Comcast’s argument that the injunctive relief
would only benefit “a ‘limited group of existing Comcast subscribers,’ ” noting
the complaint asserted that consumers “ ‘rely on the representations made by
service providers in determining whether to purchase their services’ ” and
truthful advertisements would also benefit “any member of the public who
considers signing up with Comcast.” (Ramsey, at p. 207.)
9
that its various claims about being a ‘secure’ platform were false and
misleading but made those statements to induce members of the general
public (including Plaintiffs) to do business with Coinbase”; and (4) “If
Coinbase is permitted to continue its deceptive and misleading practices,
members of the public will suffer irreparable injuries beyond the harm of
losing substantial sums of money.” All three causes of action then state they
exclusively seek public injunctive relief.
These allegations assert harm against the general public. While the
complaint contains allegations specific to the individual harm suffered by
each plaintiff, those allegations exemplify how Coinbase’s actual conduct
differs from its marketing statements to the public. And the complaint does
not seek relief for those plaintiff-specific injuries. As explained in Ramsey,
“[a]n injunction that seeks to prohibit a business from engaging in unfair or
deceptive practices and marketing . . . does have the primary purpose and
effect of protecting the public, and thus falls within McGill’s definition of
public injunctive relief.”4 (Ramsey, supra, 99 Cal.App.5th at p. 206.)
In response, Coinbase asserts plaintiffs’ complaint seeks relief for
themselves and similarly situated individuals. It contends plaintiffs’
allegations are more analogous to those in Clifford, supra, 38 Cal.App.5th
745, Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5th 485(Torrecillas), Cottrell v. AT&T Inc. (9th Cir., Oct. 26, 2021, Case No. 20-
16162) 2021 WL 4963246 (Cottrell), and Croucier v. Credit One Bank, N.A.
(S.D. Cal., Jun. 11, 2018, Case No. 18CV20-MMA (JMA)) 2018 WL 28368894 Coinbase asserts false advertising claims do not per se affect the
public interest. We need not address this argument because we conclude the
specific allegations here adequately demonstrate that the complaint asserts
public injunctive relief.
10
(Croucier), all of which concluded the plaintiffs were seeking private
injunctive relief.
We disagree. The cases cited by Coinbase involved complaints that
focused on harm to the plaintiff and did not seek broader injunctive relief.
For example, both Clifford and Torrecillas involved alleged wage and hour
violations. In Clifford, the plaintiff alleged his employer misclassified him as
an exempt employee. (Clifford, at p. 748.) The Torrecillas plaintiff
challenged the employer’s failure to pay him certain wages and business
expense reimbursements. (Torrecillas, at pp. 499–500.) In both cases, the
courts noted the alleged violations were directed at the plaintiff, the
complaint did not allege similar conduct toward the general public, and the
complaint only sought injunctive relief related to the plaintiff or similarly
situated employees. (Clifford, at p. 753 [complaint alleged violations
“directed at Clifford only,” “does not allege Quest directed similar conduct at
other employees, much less the public at large,” and the “requests for
injunctive relief under the UCL are similarly limited to [Clifford] as an
individual.”]; Torrecillas, at pp. 499–500 [complaint sought “an injunction
prohibiting [the employer] from ‘continuing to engage in the practices
described above,’ ”—i.e., failing to pay Torrecillas certain wages and business
expense reimbursements—and noting any injunctive relief would only benefit
“Torrecillas and possibly [the employer’s] current employees, not the public at
large.”].)
Similarly, the claims in Cottrell and Croucier addressed conduct
directed solely at existing customers who were similarly situated to the
plaintiffs, not conduct directed at potential customers or the general public.
In Cottrell, the plaintiff alleged AT&T improperly charged customers for
accounts without authorization and sought “an injunction requiring AT&T ‘to
11
provide an accounting of all monies obtained’ through unauthorized accounts
and services; to give customers ‘individualized notice’ of the violations
committed and of their legal rights; and to refrain from committing future
violations of the California law by signing customers up for products or
services without authorization.” (Cottrell, supra, 2021 WL 4963246 at p. *1.)
The court found this requested relief constituted private injunctive relief
because it would only benefit “AT&T customers—‘a “group of individuals
similarly situated to” ’ Cottrell.” (Id. at p. *2.) Likewise, in Croucier, the
plaintiff alleged Credit One Bank engaged in improper debt collection
methods by utilizing an “ ‘automatic telephone dialing system’ ” after he
revoked his consent to be contacted by such a system. (Croucier, supra, 2018
WL 2836889 at p. *1.) The court concluded the plaintiff’s UCL claim sought
private injunctive relief because the alleged violations focused on “unlawful
conduct directed only at the Plaintiff, rather than the public at large.” (Id. at
p. *4.) In so holding, the court noted the complaint “does not specifically
allege similar conduct directed at . . . the public at large.” (Id. at p. *4.)
As noted above, and unlike the claims in Clifford, Torrecillas, Cottrell,
and Croucier, plaintiffs’ pending complaint alleges that Coinbase directed its
conduct toward the public. The complaint asserts Coinbase is continuing to
misrepresent its security measures precisely to deceive the general public
into creating accounts, investing money, and utilizing its services.5 The
5 Coinbase asserts statements regarding its security are “primarily
directed at existing Coinbase users,” not the public. But the complaint
alleges otherwise. It identifies numerous statements on Coinbase’s public-
facing website and asserts such advertising regarding its security is designed
to encourage individuals to create accounts and deposit funds. Likewise, the
complaint identifies marketing statements in Coinbase’s “social media
advertising” and “search engine marketing,” X (formerly Twitter) statements
by company executives, and online, television, and newspaper
advertisements. While the complaint identifies some statements that are
12
complaint seeks injunctive relief to bar Coinbase from continuing to make
such statements to the public.
Coinbase also contends the requested relief primarily benefits users or,
at most, potential users, of its platform and not the general public. Similar
arguments have been considered and rejected. In McGill, for example, the
California Supreme Court concluded that enjoining deceptive marketing
constituted public relief, rather than benefitting only those individuals who
use the bank’s services. (McGill, supra, 2 Cal.5th at p. 957; see also Mejia,
supra, 54 Cal.App.5th at pp. 702–703 [rejecting as “illogic[al]” the argument
that requiring a defendant to give disclosure forms when selling vehicles
would benefit only “the class of similarly situated individuals who . . . would
buy a motorcycle from [the defendant]” under the same type of contract].)
And as discussed in Part I.A., ante, the Ramsey court explained an injunction
benefiting existing and potential customers was sufficient to constitute public
relief; the requested injunction did not need to “benefit the entire public as a
‘diffuse whole.’ ” (Ramsey, supra, 99 Cal.App.5th at p. 211.)
Next, Coinbase contends plaintiffs’ statements that they would like to
continue utilizing Coinbase if the security lapses were remedied indicates the
requested relief is private in nature. However, such statements are
irrelevant because the complaint does not seek any relief that would require
Coinbase to alter its security measures. Here, the causes of action focus on
Coinbase’s misrepresentation regarding the quality of its security:
(1) “Defendants have violated the CLRA by, among other things, representing
only accessible once an individual initiates the sign-up process, the majority
of statements identified in the complaint are directed to the general public.
At this stage, the question is what relief is being sought by the complaint, not
whether plaintiffs can ultimately prove Coinbase engaged in such conduct or
whether they are ultimately entitled to such relief.
13
that its services have ‘characteristics,’ ‘uses,’ and ‘benefits’ ‘that they do not
have’ ”; (2) “Defendants violated the FAL by seeking to induce consumers,
including Plaintiffs, to do business with Defendants by disseminating false
and misleading statements regarding Defendants’ products and services”; (3)
“Defendants’ conduct is fraudulent because it is likely to deceive reasonable
consumers, whether because certain statements are literally false or because
Defendants’ conduct otherwise has a capacity, likelihood or tendency to
deceive or confuse the public.” The complaint asserts these
misrepresentations are “likely to deceive reasonable consumers.” The
requested injunctive relief is thus focused on prohibiting Coinbase’s
misrepresentations regarding its security features—not altering those
features. This is relief that primarily benefits the public. (See McGill, supra,2 Cal.5th at pp. 951.) And it does not benefit plaintiffs because they are
already aware of Coinbase’s security features.
Stout v. Grubhub Inc. (N.D. Cal. Dec. 3, 2021, Case No. 21-cv-04745-
EMC) 2021 WL 5758889 (Stout) provides a useful discussion of how to
classify different types of injunctions. In that case, the plaintiff alleged
Grubhub induced individuals to sign up for a Grubhub+ subscription based
on the promise of “ ‘Unlimited Free Delivery,’ ” which Grubhub then breached
by adding a “ ‘CA Driver Benefits Fee’ ” to every Grubhub delivery order. (Id.
at p. *1.) The complaint then sought two different injunctions: (1) “an order
enjoining Grubhub from charging the CA Driver Benefits Fee on Grubhub+
subscribers”; and (2) “an order enjoining Grubhub ‘from continuing to engage,
use, or employ [its] practice of misrepresenting [its] delivery fees.’ ” (Id. at
pp. *1–2.)
In assessing whether the complaint sought public injunctive relief, the
court found that an injunction prohibiting Grubhub from continuing to
14
charge Grubhub+ subscribers would constitute private injunctive relief. The
court explained this requested relief “is not public injunctive relief because it
is primarily designed to benefit Grubhub+ subscribers only, even if the public
may incidentally benefit.” (Stout, supra, 2021 WL 5758889 at p. *7.)
Conversely, the court found the second requested injunction—an order
enjoining Grubhub from its misrepresentation of delivery fees—constituted
“public injunctive relief; the relief sought is a prohibition of false advertising
which affects not just existing Grubhub customers but the broader public.”
(Ibid.)
Here, Coinbase appears to confuse an injunction requiring it to modify
its security features—which has not been requested—with an injunction
requiring it to cease misrepresentations regarding its security features. And
such an injunction, like the second injunction requested in Stout, constitutes
public injunctive relief because it would affect the broader public.6
B. Plaintiffs Did Not Fail to Meet Their Burden of Proof
Coinbase asserts plaintiffs failed to carry their burden of proof by
failing to offer any evidence regarding how the public would benefit from the
injunctive relief.
6 Coinbase asserts a different conclusion was reached in Woody v.
Coinbase Global, Inc. (N.D. Cal., Oct. 17, 2023, Case No. 23-CV-00190-JD)
2023 WL 6882750 (Woody). While that court concluded the plaintiff sought
private injunctive relief, it did so based on its finding that the damages and
equitable relief sought “would . . . affect only Coinbase customers.” (Id. at
p. *4.) The court presumably reached this conclusion because the complaint
involved misrepresentations regarding an “airdrop” of new digital assets to
Coinbase customers holding a specific digital currency unit, XRP, in their
accounts. (Woody v. Coinbase Global, Inc. (Case No. 23-CV-00190-JD) 2023
WL 6476303 [First Amended Complaint].) As such, the misrepresentations
only related to existing customers holding XRP in their accounts—i.e.,
plaintiffs and similarly situated individuals.
15
This argument has been rejected by the California Supreme Court in
McGill. In McGill, the defendant, Citibank, argued “that ‘ “the party
resisting arbitration bears the burden of proving that the claims at issue are
unsuitable for arbitration.” ’ ” (McGill, supra, 2 Cal.5th at p. 958.) The
Supreme Court first noted “Citibank cites no authority—and we are aware of
none—applying this principle, which governs an effort to resist arbitration of
a claim the parties agreed to arbitrate, to an effort to pursue a claim the
parties excluded from arbitration.” (Ibid.) The court then rejected Citibank’s
argument, explaining, “[a]t this stage of the proceeding—a motion to compel
arbitration—it is premature to consider whether [the plaintiff] ‘has . . .
established’ these allegations with proof or how her failure to do so would
ultimately affect her request for injunctive relief.” (Ibid.) The California
Supreme Court resolved the question of whether the plaintiff sought public
injunctive relief based solely on the complaint’s “allegations and requests for
relief.” (Id. at p. 957.)
Multiple courts of appeal have followed this approach. (See, e.g.,
Maldonado, supra, 60 Cal.App.5th at p. 721 [“Customers’ complaint and
prayer does not limit the requested remedies for only some class members,
but rather encompasses all consumers and members of the public.”]; Ramsey,
supra, 99 Cal.App.5th at p. 212 [“Because the relief Ramsey requests both
‘seeks to enjoin future violations of California’s consumer protection statutes,’
and is ‘oriented to and for the benefit of the general public,’ it falls within
McGill’s definition of public injunctive relief.”].) Even those courts that
concluded plaintiffs were seeking private injunctive relief have likewise relied
on complaint allegations. (See, e.g., Clifford, supra, 38 Cal.App.5th at p. 754
[“Our review of Clifford’s complaint discloses no request for injunctive relief
that would impact the public”]; Hodges v. Comcast Cable Commc’ns, LLC (9th
16
Cir. 2021) 21 F.4th 535, 549 [evaluating complaint allegations and concluding
“these requests [for injunctive relief] on their face stand to benefit only
Comcast ‘cable subscribers.’ ”]; California Crane Sch., Inc. v. Google LLC
(N.D. Cal. 2022) 621 F.Supp.3d 1024, 1032 [addressing specific claims and
relief as alleged in the complaint].)
To the extent cases have required additional evidence, those cases
involve plaintiffs who seek to avoid enforcement of an arbitration provision
by alleging fraud (see Strauch v. Eyring (1994) 30 Cal.App.4th 181, 187;
Rosenthal v. Great W. Fin. Sec. Corp. (1996) 14 Cal.4th 394, 413), or other
challenges to the circumstances under which the arbitration agreement was
executed (see Owens v. Intertec Design, Inc. (1995) 38 Cal.App.4th 72, 74
[challenging validity of arbitration provision based on numerous grounds,
including his location, location of witnesses, location where contract was
executed, and assertion of economic coercion]).
While we agree with Coinbase that courts should not blindly rely on a
complaint’s prayer for public injunctive relief, such is not the case here.
Plaintiffs’ complaint does not superficially request such relief but contains
supporting allegations and facts. The complaint identifies specific
statements at issue, how those statements were conveyed by Coinbase, and
why those statements would allegedly mislead the public. These statements,
if ultimately proven at trial, would support a claim for public injunctive
relief. McGill indicates such statements are sufficient at this stage to oppose
arbitration. (See McGill, supra, 2 Cal.5th at p. 958.)
In sum, the trial court did not err in concluding the complaint seeks
public injunctive relief and may not be compelled to arbitration.7
7 We thus do not reach Coinbase’s arguments regarding prejudice or
whether it is appropriate to affirm on other grounds.
17
II. Aggarwal I Does Not Compel a Different Conclusion
Finally, Coinbase appears to suggest that the order compelling
arbitration in Aggarwal I should impact this court’s analysis. Coinbase
asserts the existence of Aggarwal I indicates this action was filed for
“gamesmanship.” It contends plaintiffs’ delay in filing this complaint, along
with the similar factual allegations, indicates the complaint is for the purpose
of obtaining financial compensation and leverage in the federal action.
While both actions may involve substantially the same plaintiffs and
arise from the same set of facts, Aggarwal I alleges various causes of action
and seeks relief not sought in this matter. For example, Aggarwal I alleges
violations of the Electronic Funds Transfer Act, related Regulation E, and the
California Uniform Commercial Code. It also alleges causes of action for
bailment, conversion, breach of contract, breach of the implied covenant of
good faith and fair dealing, negligence, and unjust enrichment. The
complaint, apart from seeking injunctive relief, also seeks declaratory relief,
compensatory damages, statutory damages, restitution, disgorgement, and
punitive damages.
The fact that Aggarwal I also asserts CLRA, FAL, and UCL claims does
not alter our analysis. In Croucier, supra, 2018 WL 2836889, the original
complaint focused on conduct against the plaintiff and sought compensatory
and statutory damages. (Id. at p. *5.) When the plaintiff amended the
complaint to add a claim under the UCL, the court declined to find that the
requested injunction sought public relief. The court explained, “Plaintiff did
not cite new facts or reasoning supporting the additional claim. . . . The
addition of the public relief claim in the absence of new factual information,
and its use as a means to avoid arbitration, further indicates that the
purpose of the relief sought is unique to Plaintiff.” (Ibid.) Here, as explained
18
above, the causes of action and requested relief in the pending complaint are
focused solely at Coinbase’s misrepresentations directed to the public.
Accordingly, the current complaint contains allegations supporting its public
relief claim.8
DISPOSITION
The order is affirmed. Plaintiffs may recover their costs on appeal.
(Cal. Rules of Court, rule 8.278(a)(1), (2).)
8 While not specifically argued by Coinbase, we note the California
Supreme Court held in McGill that there is no FAA preemption. (McGill,
supra, 2 Cal.5th at p. 963.) We, like various other appellate courts to
consider the issue, are bound to follow Supreme Court precedent. (See, e.g.,
Ramsey, supra, 99 Cal.App.5th at p. 213 [concluding FAA does not preempt
McGill]; Maldonado, supra, 60 Cal.App.5th at p. 724 [same]; Jack v. Ring
LLC (2023) 91 Cal.App.5th 1186, 1208 [same].) We do so here, concluding
that the FAA does not preempt McGill. Moreover, the “procedural
complexity” concerns raised in Hodges that the Ninth Circuit claimed could
still be preempted by the FAA, such as “requir[ing] evaluation of . . .
individual claims,” are not present here. (Hodges, supra, 21 F.4th at p. 547.)
This case involves alleged misrepresentations regarding the security of its
platform as generally asserted by Coinbase to the public, as compared to
Coinbase’s actual security features.
19
_________________________
Petrou, J.
WE CONCUR:
_________________________
Tucher, P.J.
_________________________
Fujisaki, J.
A167779/Kramer et al., v. Coinbase Inc. et al.
20
Filed 10/4/24
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
DARREN KRAMER et al., A167779
Plaintiffs and Respondents, (City and County of San
v. Francisco Super Ct.
No. CGC-23-604357)
COINBASE, INC., et al.,
Defendants and Appellants. ORDER CERTIFYING
OPINION FOR PUBLICATION
[NO CHANGE IN JUDGMENT]
THE COURT:
The opinion in the above-entitled matter filed on September 12, 2024,
was not certified for publication in the Official Reports. For good cause it now
appears that the opinion should be published in the Official Reports and it is
so ordered.
There is no change in judgment.
Date___October 4, 2024____ ___TUCHER, PJ_____________ P. J.
1
Kramer et al. v. Coinbase, Inc. et al. (A167779)
Trial Court: City and County of San Francisco Superior Court
Trial Judge: Hon. Richard B. Ulmer
Attorneys:
Norton Law Firm, William Fred Norton, Gabrielle Hann, Nathan
Walker, Josephine Petrick, Celine Purcell, Gilbert Walton, Ashley Nakai, for
Defendants and Appellants.
BraunHagey & Borden, Matthew Borden, Jonas Noah Hagey,
John Tobias Rowe, Ronald J. Fisher, for Plaintiffs and Respondents.
2