OpenSea Seeks to File Former BAYC Owner NFT’s Lawsuit in Arbitration

OpenSea is seeking the lawsuit brought against it by a former owner of Bored Ape Yacht Club NFT, who accused the NFT Marketplace of failing to address “its platform security vulnerabilities” that led to a widely reported breach which cost market users millions of dollars in stolen NFTs. In the motion to compel arbitration it filed this month, OpenSea says plaintiff Timothy McKimmy “has repeatedly and unambiguously agreed to OpenSea’s Terms of Service,” which includes a disclaimer clause. binding arbitration, which makes arbitration “the appropriate forum for this dispute”.

OpenSea argues in the motion to compel arbitration and dismiss plaintiff’s claim that it filed in the U.S. District Court for the Southern District of Texas on May 2 that McKimmy agreed to its Terms of Service “by at at least three different acceptance flows: when buying their first NFT using OpenSea’s services, when connecting their crypto wallets to OpenSea, and when using OpenSea’s mobile app. Specifically, OpenSea, which retains the title of largest market for NFTs with its $13 billion valuation and roster of over 80 million NFTs, alleges that “before buying or selling NFTs using [its] services, users must first connect their third-party crypto wallets, such as MetaMask or Coinbase Wallet, to OpenSea. To do this, OpenSea states that “users must accept [its] Terms of use … [which] notify users in advance, in bold capitals, that the terms “REQUIRE THAT ANY DISPUTE BETWEEN US SHALL BE RESOLVED BY INDIVIDUAL ARBITRATION RATHER THAN BY A JUDGE OR JURY IN COURT”.

As a “regular and frequent user of OpenSea since at least December 2021,” OpenSea claims that McKimmy agreed to its “terms and the arbitration agreements contained therein when it repeatedly purchased NFTs, connected his crypto wallets to OpenSea and logged into the OpenSea mobile app. In this context, OpenSea argues that McKimmy’s negligence and breach of fiduciary duty, trust, contract and implied contractual claims fall within the scope of its arbitration agreements, which it says , are not “so patently unreasonable or impermissible in the light of the mores and practical affairs of the time and place as unenforced[ea]corn.

Expanding on this claim, OpenSea states that, among other things, its arbitration agreements “provide that OpenSea and its users agree to waive their ‘RIGHTS TO SUE IN COURT’ and “choose that all claims and disputes be resolved by arbitration”. “”Beyond that, OpenSea says it “also agrees to pay all arbitration costs up front if a user ‘cannot afford to pay’ and reimburse JAMS’s fees for claims less than $10,000, unless the arbitrator determines the claims are frivolous.”OpenSea users” may also choose how the arbitration is to be conducted (for example, over the phone, in writing, etc.),” the platform says, saying McKimmy “cannot demonstrate that these provisions do not compare favorably to court proceedings, where users could be required to pay their own costs and may be contravened. ints to testify”.

In addition to arguing that McKimmy’s claims fall within its terms and are therefore subject to arbitration, OpenSea also argues that its arbitration agreements “provide ‘clear and unequivocal evidence'” that it and McKimmy “intended an arbitrator, not a court, to decide arbitrability”, with the arbitration agreements “expressly and broadly delegate gateway matters to an arbitrator”, not a court.

In light of the foregoing, OpenSea – which claims to have met and conferred with McKimmy’s attorney on April 28, but that they were unable to resolve the issues underlying its motion for compulsory arbitration – asks the court to grant its request for compulsory arbitration and dismiss McKimmy’s action in its entirety.

Assuming that the court in fact obliges the arbitration, the lawyer and the intellectual property researcher Mike Dunford previously said that McKimmy’s lawsuit against OpenSea “may depend on how much you can get away with waiving under New York contract law”, which is the state that OpenSea lists in the choice of law provision in its terms on duty. (Among other things, the OpenSea Terms state: “You agree that any dispute, controversy, or claim relating in any way to your access to or use of the Service, any product sold or distributed through the Service, or any aspect of your relationship with OpenSea, will be resolved by binding arbitration, rather than in court, including preliminary issues of the arbitrability of any such dispute, controversy or claim.”

OpenSea’s filing comes nearly three months after McKimmy filed its lawsuit against OpenSea, claiming its “unquestionably valuable” Bored Ape NFT (#3475) was allegedly stolen through a phishing attack targeting Internet users. ‘OpenSea, then sold by an unknown third party.

The case is Timothy McKimmy v. OpenSea, 4:22-cv-00545 (SD Tex.).

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