In Re: Celsius Network LLC
1:24-cv-02063
S.D.N.Y.Apr 22, 2024Background
- Celsius Mining LLC (debtor) and Luna Squares LLC (defendant) entered into three related agreements: a Co-Location Agreement with a broad arbitration clause, a Promissory Note (no arbitration clause), and a Security Agreement.
- Celsius made a $20 million loan to Luna under the Promissory Note to support Luna's obligations under the Co-Location Agreement.
- In an adversary proceeding, Celsius asserted ten claims against Luna and other defendants, four based on the Co-Location Agreement and six based on the Promissory Note.
- The Bankruptcy Court compelled arbitration of only the four claims directly related to the Co-Location Agreement, reasoning the arbitration clause did not cover Promissory Note claims.
- Defendants appealed, arguing that all claims should be arbitrated and that the arbitrator should determine the scope of arbitrability due to the broad language and incorporation of AAA Rules.
- The District Court reviewed the matter de novo and vacated the Bankruptcy Court’s order, sending all claims to arbitration and staying the adversary proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of Arbitration Clause | Arbitration limited to claims under Co-Location Agreement | Arbitration covers any dispute relating in any way to Agreement | Arbitration clause is broad and covers any related disputes |
| Who Decides Arbitrability | Court must decide if claims fall within arbitration agreement | Arbitrator decides arbitrability due to AAA Rules incorporation | Arbitrator decides the scope of arbitrable claims |
| Claims under Promissory Note Subject to Arbitration | Promissory Note lacks arbitration clause; not arbitrable | Covered because they relate to Co-Location Agreement | Claims relating in any way to Co-Location Agreement arbitrable |
| Bankruptcy Concerns Preclude Arbitration | Some claims should remain due to bankruptcy jurisdiction | No bankruptcy concerns prevent sending all claims to arbitration | No bankruptcy issues block arbitrating these claims |
Key Cases Cited
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (arbitration is a matter of contract; only disputes agreed to by the parties can be arbitrated)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (U.S. 1985) (court generally decides if there’s an agreement to arbitrate unless issue delegated)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (U.S. 2019) (if parties clearly delegate arbitrability to arbitrator, court cannot decide the issue)
- Contec Corp. v. Remote Sol. Co., 398 F.3d 205 (2d Cir. 2005) (incorporating AAA Rules can be clear evidence of intent to arbitrate scope issues)
- Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72 (2d Cir. 1998) (broad arbitration clauses include any dispute in connection with an agreement)