The Center celebrates the decision of the California Court of Appeal to publish its groundbreaking decision in Kramer v. Coinbase, Inc., which held that claims for public injunctive relief brought against deceptive product advertisements cannot be forced into private arbitration. Only the second published California appellate decision to address abusive consumer contracting within the cryptocurrency industry, Kramer directly targets the dangerous false claims that have tricked consumers into trusting crypto companies with their savings. The Center led a coalition of nine other legal services and consumer advocacy organizations in successfully petitioning the court to certify this opinion for publication. As a result, the opinion may now be cited throughout California as binding precedent and will be enormously helpful to both litigants and courts in enforcing California’s consumer protection laws.
The Kramer opinion articulates a clear rule that as long as a lawsuit seeks only to stop a company from making deceptive claims about its products, that action cannot be forced into arbitration—even when a motion to compel arbitration of monetary claims arising from the same facts has already been granted. Kramer addressed mandatory arbitration in a specific context where predatory behavior is proliferating rapidly: the cryptocurrency world. Several plaintiffs who had been scammed by third-parties via transactions intermediated by Coinbase sued the company under the California consumer protection laws, alleging that “Coinbase failed to protect the accounts, mitigate their losses, or provide support following the thefts.” Coinbase attempted to force all of these claims into arbitration pursuant to a clause in its terms of service—including a specific set of injunctive relief claims that had been brought separately and that only sought to change Coinbases’s product descriptions to remove misleading assurances about the security of its platform. The court applied and sharpened the broader rule concerning when claims for purely public relief supersede binding arbitration clauses, holding that “an injunction requiring [a service provider] to cease misrepresentations regarding its security features… constitutes public injunctive relief because it would affect the broader public.”
The opinion establishes a clear blueprint for how to successfully bring claims against abusive cryptocurrency companies for violating consumer protection laws—something that many plaintiffs have struggled to do given the novelty and complexity of the field. As a powerful tool for holding cryptocurrency exchanges accountable for making deceptive assertions about the security of their platforms, this opinion cuts right to the heart of what makes cryptocurrencies so dangerous: their lack of regulation and tendency to be used for fraud. The opinion also clarifies and expands the broader rule concerning which claims for public injunctive relief can overcome mandatory arbitration provisions in consumer services contracts.
The Center, along with the California Association for Microenterprise Opportunity (CAMEO), Consumer Federation of California, Contra Costa Senior Legal Services, Elder Law & Advocacy, Katherine & George Alexander Community Law Center, Legal Aid of Marin, Legal Assistance for Seniors, National Consumer Law Center, and Public Counsel filed a letter explaining to the Court of Appeal why this important decision merited publication. Two other letters urged the same result. And the court ultimately agreed.
Publication of the Court’s decision in Kramer sends a powerful message that companies—even largely-unregulated cryptocurrency exchanges—cannot abuse mandatory arbitration provisions to avoid liability for violating consumer protection laws. The now-citable opinion will help consumers hold businesses of all kinds accountable for violations of public rights.