74 F.4th 1003
9th Cir.2023Background
- Iliana Perez, a noncitizen DACA recipient, received a Citibank student loan in 2010 under a loan agreement that contained a broad arbitration clause and a delegation clause. Discover later acquired that loan.
- In 2018 Perez electronically applied for a Discover consolidation loan; that application included an arbitration clause with a 30‑day post‑consummation opt‑out right. Perez did not opt out at the time because the consolidation application was denied and she believed the loan never consummated.
- Perez alleges Discover denied the consolidation application because she is undocumented and sued under 42 U.S.C. § 1981 and California’s Unruh Act, asserting individual and class claims.
- Discover moved to compel arbitration based on (1) the Citibank loan arbitration clause (as successor owner) and (2) the Discover consolidation‑loan application arbitration clause.
- The district court initially compelled arbitration under the Discover agreement, but after Perez timely exercised the 30‑day opt‑out the court reconsidered and rescinded the arbitration order, finding the opt‑out applied and that the Citibank agreement did not cover Perez’s discrimination claims.
- Discover appealed; the Ninth Circuit affirmed, holding Discover is judicially estopped from contesting the opt‑out and that the Citibank agreement did not form an agreement to arbitrate the challenged discrimination claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Discover is estopped from arguing Perez’s post‑application opt‑out does not apply to claims that accrued before the opt‑out | Perez: Discover previously told the court the opt‑out could be effective now and persuaded the court; Discover is estopped from reversing that position | Discover: Opt‑out applies only to future claims, not to claims that accrued before the opt‑out | Court: Discover is judicially estopped from arguing the opt‑out does not apply to Perez’s discrimination claims (prior inconsistent position persuaded the court and reversal would give unfair advantage) |
| Whether the 2010 Citibank arbitration clause requires arbitration of Perez’s 2018 discrimination claims arising from the consolidation‑loan denial | Perez: The Citibank agreement governs only disputes arising out of the original student loan and could not reasonably be read to cover a later, separate consolidation‑loan denial | Discover: As successor holder, Discover can invoke the Citibank arbitration clause (broad "arising out of or in connection with [the] loan" language) and its delegation clause | Court: No agreement to arbitrate those discrimination claims was formed under California contract principles; it would be unreasonable/absurd to bind Perez to arbitrate an unrelated later dispute under the old loan agreement |
| Whether the delegation‑clause rule of Henry Schein requires sending arbitrability to an arbitrator here | Perez: Schein presupposes a valid arbitration agreement and does not apply where no arbitration agreement governs the dispute | Discover: Delegation clause would require an arbitrator to decide scope/enforceability | Court: Distinguished Schein — because there is no agreement to arbitrate these claims under the Citibank contract, Schein does not compel arbitration here |
Key Cases Cited
- Revitch v. DIRECTV, LLC, 977 F.3d 713 (9th Cir. 2020) (scope of arbitration interpreted by reference to parties’ reasonable expectations; avoids absurd results binding a signer to unrelated later disputes)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (delegation clauses require courts to enforce arbitrator determination of arbitrability when a valid arbitration agreement exists)
- New Hampshire v. Maine, 532 U.S. 742 (2001) (elements and purpose of judicial estoppel to protect judicial integrity)
- Caremark, LLC v. Chickasaw Nation, 43 F.4th 1021 (9th Cir. 2022) (if parties formed an agreement containing an enforceable delegation clause, arbitrator decides threshold arbitrability questions)
- United Nat. Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772 (9th Cir. 2009) (judicial estoppel: court reliance on a party’s earlier position satisfies the ‘‘persuaded the court’’ element)
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) (arbitration is a matter of consent; courts must ensure a contract to arbitrate exists)