295 F. Supp. 3d 14
D.D.C.2018Background
- Plaintiff opened a Credit One credit card account on Sept. 4, 2014, activated and used the card; no signed cardholder agreement is in the record.
- Credit One's standard practice (per affidavit) is to mail a Cardholder Agreement, including an arbitration clause, with the card; records show no opt-out notation for Plaintiff.
- The Cardholder Agreement states that use/receipt of the card manifests assent and contains an arbitration clause covering disputes “relating to your account,” including enforceability and class waivers.
- The account was assigned through a series of transfers (Credit One → MHC → Sherman → Defendant); the agreement defines “Credit One” to include successors and assigns.
- Plaintiff sued for debt collection/related claims; Defendant moved to compel arbitration, dismiss the case, and strike class allegations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of an arbitration agreement | No agreement because Plaintiff never received or signed the Cardholder Agreement | Business records and activation/use of card create a presumption the mailed Cardholder Agreement (including arbitration clause) was received and accepted | Court found a rebuttable presumption of mailing/receipt; Plaintiff failed to rebut — arbitration agreement exists |
| Who decides gateway issues (delegation clause) | Delegation clause doesn’t explicitly mention "formation," so court should decide whether an agreement formed | Delegation clause delegates application, enforceability, interpretation of the agreement to the arbitrator | Court held delegation clause covers challenges to the card agreement as a whole; arbitrator decides gateway issues |
| Whether assignee may enforce arbitration clause | Defendant as assignee lacks authority absent specific proof of assignment and that arbitration rights transferred | Cardholder Agreement defines Credit One to include successors and assigns; assignments in record show transfer to Defendant | Court held Defendant, as assignee, may enforce the arbitration agreement |
| Scope of arbitration (claims covered) | Plaintiff’s debt-collection claims fall outside arbitration scope | Arbitration clause broadly covers claims relating to the account, including collection matters and class claims (to be arbitrated individually) | Court held Plaintiff’s claims fall within the arbitration clause’s broad scope |
Key Cases Cited
- CompuCredit Corp. v. Greenwood, 565 U.S. 95 (recognizes strong federal policy favoring enforcement of arbitration agreements)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (arbitration agreements are enforceable under FAA; state-law defenses preempted where they conflict)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (challenges to the contract as a whole go to the arbitrator because arbitration clause is severable)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (parties can clearly and unmistakably agree that arbitrator decides gateway procedural questions)
- Awuah v. Coverall North America, Inc., 554 F.3d 7 (First Circuit on delegation clauses and who decides threshold arbitrability issues)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 723 F.2d 155 (resolve doubts in favor of arbitration; interpret arbitration clauses broadly)
- IOM Corp. v. Brown Forman Corp., 627 F.3d 440 (First Circuit standard that arbitration clauses should be construed broadly)
- Hoefs v. CACV of Colorado, LLC, 365 F. Supp. 2d 69 (business records and mailbox rule can establish mailing/receipt of cardholder agreements)