Daugherty v. Experian Information Solutions, Inc.
847 F. Supp. 2d 1189
N.D. Cal.2012Background
- Plaintiff opened a Sears National Bank credit card in 1998 with an agreement that allowed changes to terms and assignment, but no arbitration provision at that time.
- Between 1999 and 2003 Sears mailed new agreements each including a change-of-terms, an arbitration, and an assignment provision; the 2003 change-in-terms notice notified a change in ownership and arbitration terms.
- In 2003 Citibank USA, N.A. acquired Sears accounts; later corporate mergers led to Citibank, N.A. as the successor defendant.
- The 2003 notice amended the governing law to federal law and South Dakota law and included an arbitration clause; a 2006 cardholder agreement also contained a similar arbitration clause and a change-in-terms provision.
- Plaintiff received the 2006 agreement and did not cancel within 30 days; he canceled his account by letter in November 2006, but the 2006 agreement stated it was binding unless cancelled within 30 days.
- Plaintiff later alleged inaccurate credit reporting by Experian, Trans Union, and Equifax and asserted several FCRA and California CCRA claims against Defendant and the other agencies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity and enforceability of the arbitration clause | Arbitration clause may be invalid because amendment rights were not properly reserved and/or cancellation affected enforceability. | Arbitration clause valid under SD law; amendment-right reserved and coverage includes Plaintiff's claims. | Arbitration clause valid and enforceable; covers the claims. |
| Choice-of-law and its effect on arbitration validity | California should govern the dispute and potentially limit arbitration validity. | South Dakota law governs due to choice-of-law provision; SD law controls validity of the arbitration clause. | South Dakota law governs validity of the arbitration clause. |
| Right of Defendant to unilaterally amend terms under SD law | Defendant lacked authority to unilaterally amend terms to add arbitration. | The agreement expressly reserved the right to amend terms; amendment was proper. | Defendant had the right to amend; arbitration clause valid. |
| Effect of Plaintiff's cancellation timing on binding arbitration | Cancellation before the 2006 arbitration clause took effect rendered the clause non-binding. | Mailbox rule and timing show Plaintiff received the 2006 agreement and did not cancel within 30 days; clause binding. | Plaintiff did not cancel before the clause became effective; arbitration provision binding. |
Key Cases Cited
- Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (9th Cir. 2000) (Arbitration enforcement scope under FAA; limited district-court role)
- Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (S. Ct. 2000) (presumption of validity of arbitration agreements; burden on party resisting arbitration)
- Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220 (1987) (arbitration agreements presumptively valid and enforceable)
- Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (Cal. 1992) (choice-of-law determination and substantial relationship in Restatement approach)
- Schikore v. BankAmerica Supplemental Ret. Plan, 269 F.3d 956 (9th Cir. 2001) (mailbox rule and receipt timing for contract terms)
- Leicht v. Bateman Eichler, Hill Richards, Inc., 848 F.2d 130 (9th Cir. 1988) (stay when issues are referable to arbitration under FAA)
- Central Delta Water Agency v. U.S. Fish and Wildlife Service, 653 F.Supp.2d 1066 (E.D. Cal. 2009) (attorney general opinions are judicially noticeable)