Moss v. BMO Harris Bank, N.A., 24 F. Supp. 3d 281

Background

Plaintiffs (Moss and Hillick) challenge high‑interest online payday loans and sue three banks (BMO Harris, First Premier, Bay Cities) that acted as ODFIs for ACH debits, alleging civil RICO and related claims tied to repayment of loans illegal under New York law.
The named plaintiffs entered five loan agreements with online lenders; each loan contract contains an arbitration clause and an authorization for electronic funds transfers (ACH). Plaintiffs did not sue the lenders, only the ODFI banks that originated the ACH debits.
Defendants are non‑signatories to the loan agreements but performed the ACH origination and received fees; they move to compel arbitration under the agreements’ clauses that require arbitration with the lenders’ “agents” and “servicers.”
Plaintiffs contend the arbitration clauses did not put them on notice they consented to arbitrate with these banks and argue the loans are usurious, which they say affects enforceability; defendants counter that estoppel or third‑party‑beneficiary principles allow them to enforce arbitration.
The court treated the loan agreements as integral to the complaint, applied the Second Circuit’s estoppel/intertwinedness framework, and considered whether plaintiffs’ claims arise from the agreements and whether a sufficiently close relationship exists between signatories and non‑signatories.
Holding: the court granted the motions to compel arbitration and stayed the case, finding plaintiffs estopped from avoiding arbitration because the arbitration clauses and payment authorizations made it foreseeable that agents/servicers (like the ODFIs) would be subject to arbitration.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether non‑signatory ODFIs can compel arbitration	Plaintiffs say they never agreed to arbitrate with these banks; clauses did not put them on notice	ODFIs argue arbitration clauses cover lenders’ "agents"/"servicers" and ACH originators are foreseeable agents	Court: Compel arbitration — plaintiffs are estopped because clauses and ACH authorizations reasonably encompass defendants
Whether plaintiffs’ claims "arise under" the loan agreements	Plaintiffs: claims can proceed even if agreements are invalid	Defendants: claims depend on and arise from the loan agreements and payment authorizations	Court: Claims arise from same subject matter; first prong satisfied
Whether a close relationship exists between signatories and ODFIs	Plaintiffs: ODFIs are remote third parties; Ross distinguishes such facts	Defendants: contracts reference agents/servicers and authorize ACH debits by agents; defendants performed those roles	Court: Close relationship exists — textual link and foreseeable role of ODFIs satisfies second prong
Effect of alleged usury/illegality of loans on arbitration	Plaintiffs: illegal loans and unclean hands should prevent enforcement	Defendants: arbitration clause is severable and arbitrability/validity are for arbitrator absent direct attack on clause	Court: Validity of loans reserved for arbitrator; no distinct attack on arbitration clause; arbitration ordered

Key Cases Cited

Arciniaga v. Gen. Motors Corp., 460 F.3d 231 (2d Cir.) (strong federal policy favoring arbitration)
Ross v. Am. Exp. Co., 547 F.3d 137 (2d Cir.) (estoppel/intertwinedness doctrine; limits where nonsignatory is remote)
Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354 (2d Cir.) (rejecting estoppel where nonsignatory too remote)
Choctaw Generation Ltd. P’ship v. Am. Home Assur. Co., 271 F.3d 403 (2d Cir.) (textual linkage can justify estoppel)
In re A2P SMS Antitrust Litig., 972 F. Supp. 2d 465 (S.D.N.Y.) (applying two‑part intertwinedness test to compel arbitration for nonsignatories)
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S.) (arbitration clause severability; arbitrator decides contract validity absent direct challenge to clause)
Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1 (U.S.) (federal policy favoring prompt arbitration)