On August 19, the U.S. Court of Appeals for the 11th Circuit granted a petition for a writ of mandamus and directed the U.S. District Court for the Southern District of Florida to vacate its order compelling nonsignatory plaintiffs to arbitrate claims, brought on behalf of a putative class, against a cryptocurrency exchange for allegedly violating RICO, various state consumer protection acts, and state tort law. The plaintiffs (who were not themselves customers of the defendants) alleged that bad actors stole plaintiffs’ cryptocurrency assets and then laundered the stolen cryptocurrency assets through defendants’ cryptocurrency exchange, leveraging defendants’ failure to comply with the BSA/AML, related regulations, and state statutes to launder the stolen cryptocurrency. The defendants moved to compel arbitration based on an arbitration clause in the exchange’s “Terms of Use” agreement, invoking the doctrine of equitable estoppel against the nonsignatory plaintiffs, and the district court granted the motion.

The 11th Circuit held that the plaintiffs’ claims were not subject to the arbitration clause because their claims lacked a “significant relationship” to the Terms of Use, which would be required to enforce the clause under the doctrine of equitable estoppel. The court reasoned that plaintiffs’ claims were, in fact, grounded in violations of duties imposed by federal and state law — specifically the BSA/AML and state consumer protection laws — and not in any contractual rights contained in the Terms of Use. The 11th Circuit rejected the district court’s conclusion that the claims related to the Terms of Use because the complaint referenced defendants’ right to suspend accounts or collect transaction fees on its exchange, noting that although the contractual terms may be factually relevant (including to explain why the defendants allegedly disregarded legal obligations), they do not supply the thrust of the complaint, which did not arise from contractual rights.

The appellate court further held that granting a writ of mandamus, which it characterized as a “drastic and extraordinary remedy,” was appropriate here because the plaintiffs lacked adequate alternative means of relief, including because: (i) they could not appeal as of right the order to compel arbitration under 9 U.S.C. § 16(b)(3); (ii) the district court’s repeated rulings in the defendants’ favor made seeking certification for an interlocutory appeal futile; and (iii) the plaintiffs submitted evidence of claims they would forfeit in the foreign arbitration proceeding and of unreasonable costs they would incur. Following the 11th Circuit’s disposition, the district court vacated its prior March 16 order compelling arbitration on August 20, setting the matter for a status conference to proceed.