Cavlovic v. J.C. Penney Corporation, 884 F.3d 1051

Background

Cavlovic filed a putative class action in Kansas alleging J.C. Penney used a "False Former Price Advertising Scheme," based on a 2014 in-store purchase where an inflated "original" price produced an allegedly excessive discount calculation.
Cavlovic paid with a J.C. Penney–branded credit card that was originally issued under a 2008 agreement (GE Money Bank) and later governed by successor agreements; she also was a member of J.C. Penney’s 2014 Rewards Program and earned points on the purchase.
J.C. Penney moved to compel arbitration based on (a) the credit card agreement (the parties ultimately treated the 2012 credit card agreement as controlling) and (b) the 2014 Rewards Program agreement, each containing arbitration clauses.
The magistrate judge (and district court on review) held: (1) J.C. Penney could not invoke the 2012 credit card arbitration clause because it was not a party and the clause allowed only the cardholder or the bank to demand arbitration; and (2) Cavlovic’s deceptive-pricing claims fell outside the scope of the 2014 Rewards Program arbitration clause.
The district court also found J.C. Penney waived any venue objection to having the District of Kansas resolve whether to compel arbitration under the Rewards agreement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a nonparty (J.C. Penney) can compel arbitration under the 2012 credit-card agreement	Cavlovic: card agreement permits arbitration only by the cardholder or bank; it does not permit a third-party demand	J.C. Penney: third parties can sometimes enforce arbitration clauses under state contract principles	Held: J.C. Penney cannot compel arbitration under the 2012 agreement because Utah law requires clear intent to benefit a third party and the contract did not grant J.C. Penney the right to demand arbitration
Whether Cavlovic's claims fall within the 2012 agreement's scope	Cavlovic: her deceptive-pricing claims are not covered by the narrower 2012 clause	J.C. Penney: arbitration clause is broad and covers disputes "relating to" the account	Held: Claims fall outside the 2012 agreement’s scope (magistrate/district court conclusion affirmed)
Whether venue bars the District of Kansas from deciding to compel arbitration under the 2014 Rewards agreement	Cavlovic: arbitration forum clause (Collin County, Texas) controls	J.C. Penney: initially relied on Texas venue but moved to Kansas to compel arbitration	Held: J.C. Penney waived venue objection by seeking relief in Kansas; district court could decide the arbitration question
Whether Cavlovic's deceptive-pricing claims "arise from or relate to" the 2014 Rewards Program agreement	Cavlovic: claims concern deceptive pricing, not the Rewards Program; they do not arise from the agreement	J.C. Penney: purchase and rewards points link the dispute to the Rewards Program; clause is broad	Held: Claims do not arise from or relate to the Rewards Program in substance; arbitration clause does not cover these deceptive-pricing allegations

Key Cases Cited

Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (third-party enforcement of arbitration clause possible under state contract law)
1mage Software, Inc. v. Reynolds & Reynolds Co., 459 F.3d 1044 (10th Cir. 2006) (venue rule in Ansari is waivable)
Ansari v. Qwest Communications Corp., 414 F.3d 1214 (10th Cir. 2005) (district court lacks authority under §4 to compel arbitration in a different district specified by the parties)
Sanchez v. Nitro-Lift Techs., L.L.C., 762 F.3d 1139 (10th Cir. 2014) (applies 1mage Software waiver principle to arbitration venue)
Jacks v. CMH Homes, Inc., 856 F.3d 1301 (10th Cir. 2017) (framework: determine who may enforce arbitration clause, then whether claims fall within its scope)
Dumais v. Am. Golf Corp., 299 F.3d 1216 (10th Cir. 2002) (separates existence of arbitration agreement from scope inquiry)
BBVA Compass Inv. Sols., Inc. v. Brooks, 456 S.W.3d 711 (Tex. App. 2015) (arbitrability turns on the substance of the claim under Texas law)