Sheila Horton v. Fedchoice Federal Credit Union
688 F. App'x 153
| 3rd Cir. | 2017Background
- Horton sued FedChoice individually and on behalf of a class, alleging its Courtesy Pay overdraft program charged improper overdraft fees by using "available balance" (actual balance minus anticipated debits) rather than actual balance, breaching account documents and violating federal law.
- Horton’s Account Agreement (attached to complaint) does not contain an arbitration clause; the 2004 Opt-In Agreement is referenced but not in the record.
- FedChoice submitted a 2015 online Service Agreement (not referenced in the complaint) containing a broad arbitration clause and evidence that Horton accepted it online; Horton declared she did not recall seeing or agreeing to it.
- The district court denied FedChoice’s motion to compel arbitration on the pleadings, treating the Service Agreement as a contract of adhesion and finding arbitrability disputed; it permitted limited discovery on arbitrability and allowed a renewed motion after discovery.
- FedChoice appealed, arguing the district court erred by not sending arbitrability to the arbitrator and by declining to compel arbitration before discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court should compel arbitration on the pleadings | Horton: Complaint and attached Account Agreement contain no arbitration clause; Service Agreement not referenced in complaint | FedChoice: Service Agreement and evidence show Horton agreed to arbitration; district court should compel arbitration or defer arbitrability to arbitrator | Court: Denied; arbitration not apparent on complaint face; summary-judgment procedures and limited discovery on arbitrability required |
| Proper procedural standard (Rule 12(b)(6) v. Rule 56) | Horton: Because arbitration clause is not apparent from complaint, summary-judgment/discovery path is required | FedChoice: Evidence of assent warrants dismissal/compel without discovery | Court: Applied Guidotti framework; Rule 56 procedures appropriate because arbitration not clear on complaint face |
| Whether court usurped arbitrator by questioning agreement validity | Horton: District court may evaluate arbitrability when contract not clearly consigning issue to arbitrator | FedChoice: Validity delegated to arbitrator; district court overreached | Court: District court did not decide merits or delegation; it permitted discovery and reserved ruling for after factual development |
| Whether plaintiff’s denial of assent is sufficient to survive summary disposition | Horton: Denial raises factual dispute warranting discovery | FedChoice: Plaintiff’s mere denial insufficient under Par-Knit Mills to defeat evidence of assent | Court: Declined to decide; ordered discovery first per Guidotti before assessing authenticity/weight of assent evidence |
Key Cases Cited
- Guidotti v. Legal Helpers Debt Resolution, LLC, 716 F.3d 764 (3d Cir.) (if arbitration not apparent on complaint, allow limited discovery and use Rule 56)
- Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221 (3d Cir.) (questions of arbitrability are presumptively for judicial determination)
- Puleo v. Chase Bank USA, N.A., 605 F.3d 172 (3d Cir.) (appellate review is plenary for arbitrability questions)
- Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir.) (a bare denial of assent may be insufficient to create a factual dispute over formation)
- CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165 (3d Cir.) (contracts not appended to complaint can nonetheless be integral and justify Rule 12(b)(6) treatment when referenced)
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (U.S.) (arbitrability may be delegated to arbitrator if parties clearly and unmistakably agree)
- S. Jersey Sanitation Co. v. Applied Underwriters Captive Risk Assurance Co., 840 F.3d 138 (3d Cir.) (issues about contract validity generally for arbitrator when delegation clause exists)