Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-01503/USCOURTS-cand-3_15-cv-01503-8/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1332 Diversity-Interpleader Action

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Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

BITSTAMP LTD.,

Plaintiff,

v.

RIPPLE LABS INC., et al.,

Defendants.

Case No. 15-cv-01503-WHO 

ORDER GRANTING MOTION TO 

COMPEL ARBITRATION AND STAY 

PROCEEDINGS

Re: Dkt. No. 40

INTRODUCTION

Cross-plaintiff Ripple Labs, Inc. filed a cross-complaint against cross-defendants Jed 

McCaleb and Jacob Stephenson for allegedly breaching a settlement agreement between Ripple 

Labs and McCaleb.1 The agreement contains an arbitration provision, and McCaleb and 

Stephenson now move to compel arbitration. Because the arbitration clause clearly and 

unmistakably assigns the question of arbitrability to the arbitrator and Stephenson is equitably 

entitled to enforce the arbitration clause, I GRANT the motion and STAY this matter pending 

arbitration.

BACKGROUND

Ripple Labs is an open source software developer that operates a decentralized ledger 

payment standard known as the Ripple “protocol.” XRP is a digital currency used exclusively by 

Ripple Labs within that protocol. McCaleb is a founder and former Chief Technology Officer of 

 

1

This matter started as a complaint for interpleader filed by Bitstamp LTD. against defendants 

Ripple Labs, Stephenson, McCaleb, and Nancy Harris. Dkt. No. 1.

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Ripple Labs. On August 13, 2014, after McCaleb’s departure from Ripple Labs, McCaleb and 

Ripple Labs executed a settlement agreement limiting McCaleb’s sales of the XRP he owned and 

controlled. The agreement also contains three provisions which are relevant to McCaleb’s and 

Stephenson’s motion to compel arbitration. The first, section 9, is entitled “Governing Law,” and 

states: 

This Agreement shall be governed by, construed and interpreted in 

accordance with, the laws of the State of California, without 

reference to choice of law principles. 

Settlement Agreement § 9. Next, section 10, entitled, “Specific Performance,” provides that: 

Each party acknowledges and agrees that each party hereto will be 

irreparably damaged in the event any of the provisions of this 

Agreement are not performed by the Parties in accordance with their 

specific terms or are otherwise breached. Accordingly, it is agreed 

that the Parties shall be entitled to an injunction to prevent breaches

of this Agreement, and to specific enforcement of this Agreement 

and its terms and provisions in any action instituted in any court of 

the United States or any state having subject matter jurisdiction. 

Each of the parties to this Agreement consents to venue and personal 

jurisdiction for any such equitable action arising from or relating to 

enforcement of this Agreement sought in the U.S. District Court for 

the Northern District of California or any court of the State of 

California having subject matter jurisdiction. 

Id. § 10. Finally, section 11, entitled “Dispute Resolution,” states that:

Any dispute, claim or controversy arising out of or relating to this

Agreement or the breach, termination, enforcement, interpretation or 

validity thereof, including the determination of the scope or 

applicability of this agreement to arbitrate, shall be determined by 

arbitration in San Francisco, California before one arbitrator. The 

arbitration shall be administered by JAMS pursuant to its 

Comprehensive Arbitration Rules and Procedures and in accordance 

with the Expedited Procedures in those Rules. Judgment on the 

Award may be entered in any court having jurisdiction. This clause 

shall not preclude parties from seeking provisional remedies in aid 

of arbitration from a court of appropriate jurisdiction, as provided in 

Paragraph 10 herein.

Id. § 11. 

Ripple Labs alleges that McCaleb breached the settlement agreement when he directed 

Stephenson, who is his cousin, to sell XRP in amounts exceeding the agreed-upon limits and 

without notifying it. In Ripple Labs’s cross-complaint, it contends that Stephenson and McCaleb 

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co-owned and controlled an account containing XRP. Dkt. No. 9. It also asserts that Stephenson 

tortiously interfered with the agreement by selling XRP in violation of the agreement at 

McCaleb’s direction. It seeks injunctive relief and specific performance against McCaleb and

damages against Stephenson. 

McCaleb and Stephenson moved to compel arbitration pursuant to an arbitration clause in 

the agreement. Dkt. No. 40. I heard argument on July 16, 2015.

LEGAL STANDARD

Agreements “evidencing a transaction involving commerce” are within the purview of the

Federal Arbitration Act (“FAA”). 9 U.S.C. § 2. “When an agreement falls within the purview of 

the FAA, there is a strong default presumption that the FAA, not state law, supplies the rules for 

arbitration.” Johnson v. Gruma Corp., 614 F.3d 1062, 1066 (9th Cir. 2010) (internal punctuation 

and citations omitted). “To overcome that presumption, parties to an arbitration agreement must 

evidence a ‘clear intent’ to incorporate state law rules for arbitration.” Id. (citations omitted). 

The FAA “leaves no place for the exercise of discretion by a district court, but instead 

mandates that district courts shall direct the parties to proceed to arbitration on issues as to which 

an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 

(1985) (emphasis in original). “Thus, the district court's role is limited to determining whether a 

valid arbitration agreement exists and, if so, whether the agreement encompasses the dispute at 

issue.” Lifescan, Inc. v. Premier Diabetic Serv., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). “If the 

answer is yes to both questions, the court must enforce the agreement.” Id. However, “there is a 

presumption of arbitrability in the sense that an order to arbitrate the particular grievance should 

not be denied unless it may be said with positive assurance that the arbitration clause is not 

susceptible of an interpretation that covers the asserted dispute.” AT&T Tech., Inc. v. Comm. 

Workers of Am., 475 U.S. 643, 650 (1986) (internal quotation marks and modifications omitted). 

“Doubts should be resolved in favor of coverage.” Id.

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DISCUSSION

The parties dispute whether the FAA or the California Arbitration Act governs the 

arbitration clause; whether the Court or the arbitrator should decide the threshold issue of 

arbitrability; and whether Stephenson, who is not a signatory to the arbitration agreement, can 

compel arbitration. I address each issue in turn.

I. FEDERAL LAW GOVERNS THE ARBITRATION CLAUSE 

The settlement agreement states that “[t]his Agreement shall be governed by, construed 

and interpreted in accordance with, the laws of the State of California.” Settlement Agreement §9. 

Ripple Labs claims that the plain language of the California choice-of-law provision means that 

California law, the California Arbitration Act (“CAA”), governs arbitration issues. As McCaleb 

and Stephenson correctly assert, however, the arbitration clause is governed by federal arbitration 

law (the FAA).

The Ninth Circuit instructs that “courts should apply federal arbitrability law absent ‘clear 

and unmistakable evidence’ that the parties agreed to apply non-federal arbitrability law.” Cape 

Flattery Ltd. v. Titan Maritime, 647 F.3d 914, 921 (9th Cir. 2011). If “the agreement is 

ambiguous concerning whether [non-federal] law also applies to determine whether a given 

dispute is arbitrable in the first place,” federal arbitrability law applies. Id. 

While the parties used a general choice-of-law provision to cover the entire agreement,

they did not specify that any of the CAA provisions should govern arbitrability questions. 

Settlement Agreement § 9. A boilerplate choice-of-law clause does not overcome the presumption 

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that federal arbitration law applies.2 See, e.g., Tompkins v. 23andMe, Inc., 13-cv-05682-LHK, 

2014 WL 2903752, at *9 (N.D. Cal. June 25, 2014) (general California choice-of-law provision 

too ambiguous to warrant application of state arbitrability law); Anderson Plant, LLC v. Batzer 

Const., Inc., 2014 WL 800293, at *4 (E.D. Cal. Feb. 27, 2014); Freaner v. Valle, 2011 WL 

5596919, at *4 (S.D. Cal. Nov. 17, 2011). Even a provision specifying the law by which the

arbitration itself is to be conducted is too “ambiguous” to overcome this presumption. See Cape 

Flattery, 647 F.3d at 921 (provision applying English arbitration law “ambiguous concerning 

whether English law also applies to determine whether a given dispute is arbitrable in the first 

place”). Accordingly, Ripple Labs has not overcome the presumption that the FAA applies. 

II. THE PARTIES ASSIGNED THE QUESTION OF ARBITRABILITY TO THE 

ARBITRATOR

McCaleb and Stephenson argue that the arbitrator should decide the threshold question of 

arbitrability because the arbitration provision provides that “the scope or applicability of this 

agreement to arbitrate, shall be determined by arbitration in San Francisco, California before one 

arbitrator.” Settlement Agreement § 11 (italics added). They also point to the arbitration 

provision’s incorporation of the JAMS Comprehensive Arbitration Rules and Procedures, which 

 

2 Ripple Labs invokes Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Jr. U., 489 

U.S. 468 (1989), to argue that the choice-of-law provision means that the CAA governs the 

arbitration agreement. But since Volt, the Supreme Court has clarified that general choice-of-law 

provisions do not override the default application of the FAA. In Mastrobuono v. Shearson 

Lehman Hutton, Inc., 514 U.S. 52, 63-64 (1995), the Court addressed an agreement, like this one, 

with a state choice-of-law provision and an arbitration clause incorporating the rules of a specific 

arbitrator. Id. at 58-59. The Court resolved this apparent friction by holding that “the best way to 

harmonize the choice-of-law provision with the arbitration provision is to read [the state choiceof-law language] to encompass substantive principles that [state] courts would apply, but not to 

include special rules limiting the authority of arbitrators.” Id. at 63-64. I am bound by 

Mastrobuono to the extent that it is inconsistent with Volt. See Wolsey, Ltd. v. Foodmaker, Inc., 

144 F.3d 1205, 1211-13 (9th Cir. 1998) (explaining that courts are “bound by Mastrobuono, not 

by Volt” in interpreting agreements containing both choice-of-law and arbitration clauses). 

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likewise delegate questions of jurisdiction and arbitrability to the arbitrator. Id. 

In opposition, Ripple Labs argues that the arbitration provision (including its reference of 

the arbitrability question to the arbitrator) does not apply to its claims because it seeks only 

injunctive relief and specific performance against McCaleb and those claims are governed by 

section 10 of the settlement agreement, which provides, in relevant part:

[T]he Parties shall be entitled to an injunction to prevent breaches of 

this Agreement, and to specific enforcement of this Agreement and 

its terms and provisions in any action instituted in any court of the 

United States or any state having subject matter jurisdiction.” 

Ripple Labs contends that by not capitalizing the term “agreement” in section 11, the 

arbitration provision, as indicated below, the parties intended to narrow the scope of the arbitration 

clause so that it does not govern the “Specific Performance” section:

Any dispute, claim or controversy arising out of or relating to this 

Agreement or the breach, termination, enforcement, interpretation or 

validity thereof, including the determination of the scope or 

applicability of this agreement to arbitrate, shall be determined by 

arbitration in San Francisco, California before one arbitrator.

Settlement Agreement § 11 (emphasis added). It asserts that the parties consistently used 

“Agreement” (capitalized) to refer to the settlement agreement as a whole, so “agreement” (not 

capitalized) must not refer to the agreement as a whole. 

Under federal law, “[t]he question whether parties have submitted a particular dispute to 

arbitration . . . is an issue for judicial determination unless the parties clearly and unmistakably 

provide otherwise.”3 Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (internal 

citations, quotation marks, and modifications omitted). If the parties clearly and unmistakably 

assign the arbitrability question to the arbitrator, “the court should perform a second, more limited 

 

3 California law applies a substantially identical test. See, e.g., Tiri v. Lucky Chances, Inc., 226 

Cal. App. 4th 231, 241-42 (2014) (affirming delegation of arbitrability question to arbitrator where 

the parties’ intent to delegate was “clear and unmistakable” and delegation was not revocable 

pursuant to state law contract defenses).

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inquiry to determine whether the assertion of arbitrability is ‘wholly groundless.’” Qualcomm Inc. 

v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006). 

An arbitration provision that explicitly refers arbitrability questions to an arbitrator is 

evidence that the parties clearly and unmistakably have referred the arbitrability question to an 

arbitrator. See, e.g., Anderson v. Pitney Bowes, Inc., 04-cv-4808 SBA, 2005 WL 1048700, at *3 

(N.D. Cal. May 4, 2005) (“one need not reference extrinsic materials” where an arbitration clause 

“facially gives an arbitrator the exclusive authority to determine his or her own jurisdiction”). In 

addition, in the Ninth Circuit, incorporation of an arbitrator’s arbitration rules constitutes evidence 

that the parties agreed to arbitrate arbitrability.4 See Oracle Am., Inc. v. Myriad Grp. A.G., 724 

F.3d 1069, 1074 (9th Cir. 2013) (“as long as an arbitration agreement is between sophisticated 

parties to commercial contracts, those parties shall be expected to understand that incorporation of 

the [arbitrator’s] rules delegates questions of arbitrability to the arbitrator”); see also id.

(“Virtually every circuit to have considered the issue has determined that incorporation of [an 

arbitrator’s] arbitration rules constitutes clear and unmistakable evidence that the parties agreed to 

arbitrate arbitrability.”). 

Ripple Labs’s argument that the arbitrability reference in section 11 does not apply to its 

claims is unconvincing. The Ninth Circuit rejected a similar argument in Oracle. There, the 

arbitration clause incorporated the arbitrator’s rules, which, like the JAMS rules, assigned the 

arbitrability question to the arbitrator. 724 F.3d at 1074. Oracle argued that a separate provision

vesting courts with exclusive jurisdiction over intellectual property claims demonstrated the 

parties’ intent to have a court determine whether intellectual property claims were arbitrable in the 

first place. See Oracle, 724 F.3d at 1075-76. The Ninth Circuit disagreed, explaining that Oracle 

 

4 California courts also view the incorporation of rules delegating the arbitrability question to the 

arbitrator as “clear and unmistakable evidence” of the parties’ intent to delegate the arbitrability 

question to the arbitrator. See, e.g., Dream Theater, Inc. v. Dream Theater, 124 Cal. App. 4th 547, 

557 (2004). 

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“conflate[d] the scope of the arbitration clause, i.e., which claims fall within the carve-out 

provision, with the question of who decides arbitrability.” Id. at 1076 (emphasis in original). The 

court noted that whether the determination of whether Oracle’s were in fact carved-out from the 

arbitration provision was separate from the agreement to refer that determination to the arbitrator 

in the first instance. Id. (“The decision that a claim relates to intellectual property rights . . . 

constitutes an arbitrability determination, which the parties have clearly and unmistakably 

delegated to the arbitrator by incorporating the UNCITRAL rules.”). 

Like Oracle, Ripple Labs conflates the scope of the arbitration clause with the question of 

who decides arbitrability. By incorporating the JAMS rules into the arbitration clause, the parties 

clearly and unmistakably overcame the default rule and assigned the arbitrability question to the 

arbitrator. See Oracle, 724 F.3d at 1074; see also Bernal v. Sw. & Pac. Specialty Fin., Inc., 12-cv05797 SBA, 2014 WL 1868787, at *4 (N.D. Cal. May 7, 2014) (incorporation of arbitrator rules 

“clearly and unmistakably” assigned arbitrability question to arbitrator).

Ripple Labs’s reliance on the lower case “agreement” in the phrase “agreement to 

arbitrate” in section 11 is also unconvincing. By its express terms, section 11 provides that the 

parties agree to arbitrate “[a]ny dispute, claim or controversy arising out of or relating to this 

Agreement or the breach, termination, enforcement, interpretation or validity thereof.” Settlement 

Agreement § 11 (capitalized in original, emphasis added). It is therefore clear that section 11 

applies to the settlement agreement as a whole, not just to disputes relating to section 11.

Having determined that the parties clearly and unmistakably assigned the arbitrability 

question to the arbitrator, I determine whether the assertion of arbitrability is “wholly groundless.” 

Qualcomm, 466 F.3d at 1371. To do so, I “look to the scope of the arbitration clause and the 

precise issues that the moving party asserts are subject to arbitration,” but I do not determine 

whether Ripple Labs’s claims are in fact arbitrable. Id. 

The parties agreed to arbitrate “[a]ny dispute, claim or controversy arising out of this 

Agreement or the breach, termination, enforcement, interpretation or validity thereof[.]” 

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Settlement Agreement § 11. The claims at issue clearly arise out of the agreement or the breach of 

the agreement: Ripple Labs alleges that McCaleb breached the agreement by directing the sale of 

XRP in amounts exceeding the agreed-upon limits and without notifying Ripple Labs. Dkt. No. 9,

¶¶ 53-87. The assertion of arbitrability is not “wholly groundless” and the arbitrator must 

determine whether the parties’ dispute is subject to arbitration.

III. STEPHENSON IS EQUITABLY ENTITLED TO COMPEL ARBITRATION

McCaleb and Stephenson argue that the doctrine of equitable estoppel allows Stephenson 

to enforce the arbitration clause even though he is not a party to the settlement agreement. Ripple 

Labs disagrees, arguing that the narrow exception allowing non-parties to compel arbitration does 

not apply here because it seeks to hold McCaleb and Stephenson liable for distinct claims arising 

from different conduct. McCaleb and Stephenson are right.

The Ninth Circuit looks to state law to determine whether a non-signatory may invoke an 

arbitration clause. Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128 (9th Cir. 2013) (“a 

litigant who is not a party to an arbitration agreement may invoke arbitration under the FAA if the 

relevant state contract law allows the litigant to enforce the agreement”). Under California law, 

“if a plaintiff relies on the terms of an agreement to assert his or her claims against a nonsignatory 

defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause of that 

very agreement.” Goldman v. KPMG LLP, 173 Cal. App. 4th 209, 220 (2009). “Equitable 

estoppel precludes a party from claiming the benefits of a contract while simultaneously 

attempting to avoid the burdens that contract imposes.” Comer v. Micor, Inc., 436 F.3d 1098, 

1101 (9th Cir. 2006) (internal quotation marks omitted). Courts routinely allow non-signatory 

defendants to compel arbitration of tortious interference claims. See, e.g., Molecular Analytical 

Systems v. Ciphergen Biosystems, Inc., 186 Cal. App. 4th 696, 716 (2010); Boucher v. Alliance 

Title Co., 127 Cal. App. 4th 262, 272 (2005); Metalclad Corp. v. Ventana Envtl. Organizational 

P'ship, 109 Cal. App. 4th 1705, 1717 (2003); see also Goldman, 173 Cal. App. 4th at 226 n.10

(“Claims of tortious interference with contract are particularly well suited for imposing equitable 

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estoppel against the signatory: But for the contract containing the arbitration clause, there would 

be no breach and no claim for interference with the contract.”). 

Ripple Labs argues that Boucher is distinguishable because the signatory and nonsignatory defendants were subsidiaries of the same company. But Boucher was not dependent on 

that relationship. Boucher, 127 Cal. App. 4th at 272-73. Rather, the court noted that “[t]he 

fundamental point is that a party may not make use of a contract containing an arbitration clause 

and then attempt to avoid the duty to arbitrate by defining the forum in which the dispute will be 

resolved.” Id. at 272. The court found it significant, as I do here, that the plaintiff’s claims, which 

included tortious interference, “all [made] reference to and presume[d] the existence of the validity 

of [the underlying contract].” Id. 

Ripple Labs alleges that Stephenson acted at the direction and for the benefit of McCaleb

in breaching the settlement agreement. Dkt. No. 9, ¶ 104. As its tortious interference claim relies 

on a valid, binding contract between Ripple Labs and McCaleb, as well as Stephenson’s 

awareness of the contract’s terms prior to inducing McCaleb’s alleged breach, see id., ¶¶ 101, 103, 

the claim is directly entwined with Ripple Labs’s breach of contract claim against McCaleb. “But 

for the contract containing the arbitration clause, there would be no breach and no claim for 

interference with the contract.” See Goldman, 173 Cal. App. 4th at 226 n.10. Accordingly, the 

arbitrator shall determine whether Ripple Labs’s tortious interference claim against Stephenson is 

arbitrable. 

CONCLUSION

McCaleb’s and Stephenson’s motion to compel arbitration is GRANTED. Dkt. No. 40. 

This action is STAYED pending the arbitrator’s determination whether Ripple Labs’s claims are 

arbitrable and, if they are, the resolution of the arbitration. The parties shall jointly advise me 

within 10 days of (i) the arbitrator’s determination that the claims are not arbitrable, (ii) the 

arbitrator’s award, in the event that the arbitrator determines that the claims are arbitrable, or (iii) 

the settlement of this dispute. Beginning six months from the date of this Order, the parties shall 

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file a Joint Status Report every six months apprising the Court of the status of the arbitration. 

IT IS SO ORDERED.

Dated: August 6, 2015

______________________________________

WILLIAM H. ORRICK

United States District Judge

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