Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA CHARLES P. SAMENOW,
Plaintiff , v. Civil Action No. 16-1346 (CKK) CITICORP CREDIT SERVICES, INC.,
Defendant. MEMORANDUM OPINION
(May 25, 2017)
Defendant, by the real party-in-interest, Citibank, N.A., has moved this Court to compel an arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. , of Plaintiff’s claims under the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691 et seq. , stemming from the termination of five credit card accounts, apparently without explanation. Plaintiff is proceeding pro se . The pending motion pertains to this and four related actions, [1] which were previously consolidated by the Court, with each action corresponding to one of the five credit card accounts at issue. [2] Defendant also requests a stay of this consolidated action until the arbitration is resolved. Upon consideration of the pleadings, [3] the relevant legal authorities, and the record for *2 purposes of the pending motion, the Court GRANTS Defendant’s [16] Motion to Compel Arbitration and Stay Action. This action shall remain STAYED pending conclusion of the arbitration.
I. BACKGROUND
Plaintiff opened five credit card accounts with Defendant in the District of Columbia between 2010 and 2016. Opp’n Mem. at 6. In March 2016, Defendant terminated these accounts, allegedly “without providing . . . a reason for its action.” Id . Each of the five accounts is associated with a card agreement that was mailed to Plaintiff (the “Card Agreements”). Decl. of Kelly Booth, ECF No. 16-2, ¶¶ 6–10. Defendant has provided copies of “exemplar” versions of these Card Agreements, which were created by Defendant in the course of its regularly conducted business activity, and Plaintiff does not challenge the accuracy of these documents. Id . ¶ 3. For two of the credit lines, with account numbers ending in 1436 and 3347 (the “1436 Account” and the “3347 Business Account”), the original Card Agreements mailed to Plaintiff at the time the accounts were opened contained arbitration provisions. Id . ¶¶ 6, 10. For the other three credit lines, those with account numbers ending in 4726, 1489, and 0386 (the “4726, 1489, and 0386 Accounts”), the original Card Agreements did not contain arbitration provisions, but were subsequently added through notices of amendment mailed to Plaintiff between September and October 2015. Id . ¶¶ 7– 9. The Court refers to the arbitration provisions found in the five Card Agreements as the • Mem. of Law in Opp’n of Mot. to Compel Arbitration and Stay Action, ECF No. 22 (“Opp’n Mem.”);
• Reply Mem. in Supp. of Def.’s Mot. to Compel Arbitration and Stay Action, ECF No. 23 (“Reply”);
• Sur-Reply to Def.’s Reply Mem. in Supp. to Compel Arbitration and Stay Action, ECF No. 24 (“Surreply”). Because the Court finds that Plaintiff’s Surreply was helpful to its resolution of this matter, the
Court GRANTS Plaintiff’s [24] Motion for Leave to File Surreply.
“Arbitration Agreements.”
The language in each such agreement is approximately the same, except for the following differences: (a) all five accounts provided for arbitration before the American Arbitration Association, but two provide additional options ( infra at 16); (b) two agreements include a severability clause, but the others do not (this is irrelevant to the Court’s decision, as there is no finding that any portion of the agreements is invalid); and (c) four of the agreements indicate that the rules of the arbitral forum are trumped by the terms of the Card Agreements, to the extent there is a conflict between the two ( infra at 16–17). See Opp’n Mem. at 8–9 (conceding that these are the only material differences between the five Arbitration Agreements). Finally, each of the Card Agreements contains a choice-of-law provision specifying that federal and South Dakota law “govern[] the terms and the enforcement of this agreement.” Def.’s Mem. at 3 (citing Decl. of Kelly Booth, ECF No. 16-2, Exs. 1–5).
II. LEGAL STANDARD
The FAA provides that “a written provision in . . . a contract . . . to settle by arbitration a
controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable
save upon any grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. §
2. The final phrase in section 2 of the FAA “permits agreements to arbitrate to be invalidated by
generally applicable contract defenses, such as fraud, duress, or unconscionability” under the
applicable state law.
AT&T Mobility LLC v. Concepcion
,
A motion to compel arbitration is treated as “a request for summary disposition of the issue
of whether or not there had been a meeting of the minds on the agreement to arbitrate.”
Aliron
Int’l, Inc. v. Cherokee Nation Indus., Inc.
,
If arbitration is compelled, section 3 of the FAA permits the district court to stay proceedings pending completion of the arbitration. 9 U.S.C. § 3 (the court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement”).
III. DISCUSSION
The analysis below proceeds in three parts. First, the Court concludes that Plaintiff’s contract defenses must be assessed under District of Columbia law. Second, the Court finds that Plaintiff assented to the Arbitration Agreements, and third, that those agreements are not procedurally or substantively unconscionable. As a result, and because the claims at issue are *5 plainly covered by the terms of the Arbitration Agreements, arbitration shall be compelled, and this matter shall be stayed.
A. Choice of Law
As a threshold issue, the parties disagree on the law that should apply to determine the validity and enforceability of the Arbitration Agreements. Defendant contends that South Dakota law should apply because of the choice-of-law provisions in the Card Agreements. Plaintiff challenges the enforceability of those provisions, and furthermore contends that District of Columbia law should apply given the factual nexus between the contracting of the Card Agreements and the District of Columbia. In particular, Plaintiff resides, claims to have entered the Card Agreements, and claims to have predominately used the credit cards in the District of Columbia. Opp’n Mem at 6, 31.
In an action brought pursuant to the FAA, such as this one, “‘federal courts use the conflict
of law principles applied by the state in which they sit.’”
McMullen v. Synchrony Bank
, 164 F.
Supp. 3d 77, 87 (D.D.C. 2016) (citing
Aneke v. Am. Exp. Travel Related Servs.
, Inc., 841 F. Supp.
2d 368, 375 (D.D.C.2012)). Consequently, the Court applies District of Columbia law in the first
instance to determine what state law should apply in adjudicating Plaintiff’s challenges to the
Arbitration Agreements. As a general rule, District of Columbia law holds that “‘parties to a
contract may specify the law they wish to govern, as part of their freedom to contract, as long as
there is some reasonable relationship with the state specified.’”
Ekstrom v. Value Health, Inc.
, 68
F.3d 1391, 1394 (D.C. Cir. 1995) (citing
Norris v. Norris
, 419 A.2d 982, 984 (D.C. 1980)).
Defendant contends that under this standard, South Dakota law should apply as the Arbitration
Agreements call for the application of South Dakota law, and Defendant’s corporate residence is
in South Dakota, meaning that there is a “reasonable relationship” between the contracts and that
*6
state. Nonetheless, this line of analysis is flawed in that it presumes the validity of the choice-of-
law provision in the Arbitration Agreements, which Plaintiff expressly challenges in his opposition
as both procedurally and substantively unconscionable. Surreply at 3. As a result, the Court would
first need to determine whether a valid and enforceable agreement exists, by application of District
of Columbia law, before it could enforce the choice-of-law provisions, and apply South Dakota
law.
See Amirmotazedi v. Viacom, Inc.
,
Given the circumstances of this case, however, the Court need not reach this far. “Under
District of Columbia choice-of-law principles, the absence of a true conflict compels the
application of District of Columbia law by default.”
Signature Tech. Sols. v. Incapsulate, LLC
, 58
F. Supp. 3d 72, 80 (D.D.C. 2014) (internal quotation marks and alternations omitted);
see also GEICO v. Fetisoff
, 958 F.2d 1137, 1141 (D.C. Cir. 1992) (“Under [the District of Columbia]
approach, the first step is to determine whether a ‘true conflict’ exists . . . .”). A false conflict is
one where the laws of the two states are “1) the same; 2) different but would produce the same
outcome under the facts of the case; or 3) when the policies of one state would be furthered by the
application of its laws while the policy of the other state would not be advanced by the application
of its laws.”
Greaves v. State Farm Ins. Co.
,
B. Existence of an Agreement to Arbitrate
In his opposition, Plaintiff does not appear to contest that he entered the Card Agreements and their attendant Arbitration Agreements, and only challenges the enforceability of the latter on the basis of procedural and substantive unconscionability. See Opp’n Mem. at 6 (“Plaintiff, entered 5 separate contracts with [Defendant] in the District of Columbia during the period of 2010 – 2016 for credit cards”). However, in his surreply, Plaintiff contends that he “was not aware of the arbitration provision until [he] was informed of it by opposing counsel as part of this dispute.” Surreply at 2. Plaintiff also emphasizes that he does not “admit to having received the ‘Card Agreements’ and ‘Amended Agreements’ with the arbitration and choice of law provision . . . .” Id . Nonetheless, Plaintiff does not proffer any credible factual matter to contest that he received these agreements, and that they each expressly provided that failure to terminate the applicable credit line within a specified time period would be deemed an assent to the terms of the agreement.
Elsewhere in his briefing, Plaintiff discusses at length certain purported differences
between South Dakota and District of Columbia law on contract formation, and in particular, the
requirement of mutual assent as to all material contract terms, but again does not specifically
contest the fact that he received the Card Agreements, and that they called for assent by use of the
credit cards and failure to terminate within a specific period.
See
Opp’n Mem. at 29–30.
Furthermore, the Court notes that while South Dakota law is more specific on the validity of credit
*8
card agreements that call for acceptance by use within a specific time period, District of Columbia
law provides generally that “an offeror is entitled to prescribe an exclusive method of acceptance
. . . ,”
Vaulx v. Cumis Ins. Soc’y, Inc.
, 407 A.2d 262, 264 (D.C. 1979), and that the method of
acceptance can be a physical act,
see Malone v. Saxony Co-op. Apartments, Inc.
,
In sum, the Card Agreements called for assent by use of the credits cards and failure to
terminate within a fixed period. Plaintiff does not contest his receipt of the Card Agreements. Even
if he did, the common law presumes “that a letter properly addressed, stamped, and mailed, and
not returned to the sender, has been delivered to the addressee,”
Kidd Int’l Home Care, Inc. v.
Prince
,
C. Enforceability of the Arbitration Agreements
“In the District of Columbia, a party seeking to avoid a contract because of
unconscionability must prove two elements: an absence of meaningful choice on the part of one
of the parties together with contract terms which are unreasonably favorable to the other party. . .
. These two elements are often referred to as procedural unconscionability and substantive
*10
unconscionability.”
Ruiz v. Millennium Square Residential Ass’n
,
Whether a party had “meaningful choice,” and consequently whether the contract was
procedurally unconscionable, “can only be determined by consideration of all the circumstances
surrounding the transaction.”
Williams v. Walker–Thomas Furniture Co.
,
1. Procedural Unconscionability
Plaintiff challenges the Card Agreements as procedurally unconscionable on two bases. First, with respect to the two Card Agreements that originally included Arbitration Agreements, the 1436 Account and the 3347 Business Account, Plaintiff contends that he did not have a meaningful choice to opt-out of those agreements because the text of the Card Agreements was not disclosed to him at the time he applied for the credit cards, and once he received the Card Agreements, he could only opt-out by closing the relevant credit line, which would have had a negative effect on his credit score. Opp’n Mem at 11–14. The Court finds this line of argumentation wholly unpersuasive.
As an initial matter, the application process for these credit cards includes a link to certain “Terms and Conditions,” which in turn state that “[i]f you are approved for a credit card account, you will receive a Card Agreement before you can use your account”; they further explain that the terms of the Card Agreement take effect upon use of the credit card, or within 30 days, if the account is not cancelled. Opp’n Mem., Ex. B, at 3. While a copy of the Card Agreement is not attached to the Terms and Conditions, Plaintiff concedes that one is accessible from Defendant’s website, although he claims that it is not as conspicuous as the Terms and Conditions. Opp’n Mem. at 12. Even if the Court were willing to entertain this argument from a credit card neophyte, *12 Plaintiff can hardly be considered one, as he was the holder of five credit cards from Defendant alone, and was rejected from another financial institution for “having too many existing accounts.” Opp’n Mem., Ex. G. Consequently, given his experience, and no claimed lack of education, the Court finds it unlikely that Plaintiff was unable, if he were so willing, to navigate the “maze” of Defendant’s credit card application and review the arbitration clauses contained in the Card Agreements.
Even barring this finding, however, there is no doubt that for the two accounts at issue, the
Card Agreements clearly and unambiguously notified him that any related claims would be subject
to arbitration.
See supra
at 2. As noted, Plaintiff contends that he did not have a meaningful
opportunity to opt-out upon receipt of the Card Agreements, but he offers no credible evidence
that opting-out would have had such a dramatic impact on his credit score as to render illusory for
him the choice to terminate the pertinent accounts. In fact, the potential impacts noted by Plaintiff
all seemingly result either in the return of Plaintiff’s credit profile to its original state prior to the
opening of the relevant credit lines, or are simply an unavoidable consequence of applying for
credit cards. Opp’n Mem. at 13 (describing potential impact on “length of credit history,” “credit
card utilization ratio,” and the number of “hard inquiries”). Simply put, it is not unconscionable
under the circumstances for Plaintiff to be required to relinquish the benefit of the bargain that he
obtained from entering the Card Agreements, when he seeks to terminate those agreements shortly
after entering them, and hard inquiries are an unavoidable and well-known consequence of
applying for credit cards. This is not, for example, a case in which a plaintiff relies on the
*13
availability of credit and incurs debt, only to have draconian terms foisted upon them with the
illusory “option” to terminate the account within a short and unrealistic timeframe.
See, e.g., Sears
Roebuck & Co. v. Avery
,
Plaintiff suggests that the arbitration clause is nonetheless procedurally unconscionable because he believed that opting-out of the arbitration provision and/or cancelling his card would have somehow injured his credit rating. However, he has provided no factual basis for that assumption, nor has he cited any legal authority holding that a plaintiff’s subjective belief, even if unsupported or unreasonable, should result in a finding of procedural unconscionability.
Dumanis v. Citibank (S. Dakota), N.A. , No. 07-CV-6070 (CJS), 2007 WL 3253975, at *3 (W.D.N.Y. Nov. 2, 2007). Plaintiff’s additional contention that he lacked meaningful choice because arbitration agreements are “industry standard,” Opp’n Mem. at 14, is wholly unsupported by credible evidence in the record before the Court. Consequently, for all of the foregoing reasons, be existing accounts if they were cancelled, and more generally, Plaintiff has not presented any evidence that financial institutions other than Chase Bank would have similarly declined to extend him credit. Plaintiff seemingly concedes this point by representing that it “is true that most credit card
companies,
but not all
, have similar arbitration agreements . . . [,]” surreply at 6 (emphasis added),
but then elaborates on this position by claiming that he had no alternative other than the “Barclay
Aviator Card,” which also requires arbitration, because only that card offered the same benefits as
those provided by the credit cards at issue in this case for travel on American Airlines, apparently
his preferred carrier.
Id
. Nonetheless, although Plaintiff could have suffered some inconvenience
if he were deprived of “mileage awards . . . and discounts on American Airlines in-flight
purchases,” the law of unconscionability does not recognize such a limited view of what it means
to have an alternative choice.
See Ruiz
,
the Court concludes that Plaintiff has failed to establish procedural unconscionability with respect to the Card Agreements associated with the 1436 Account and the 3347 Business Account.
For the three remaining Card Agreements (i.e., the 4726, 1489, and 0386 Accounts), the Arbitration Agreements were added by so-called “bill stuffer” amendments that were sent to Plaintiff via U.S. mail. Opp’n Mem. at 7; Decl. of Kelly Booth, ECF No. 16-2, at 3. Each of these amendments clearly indicated that “Your new Card Agreement is here,” and on the second page of each such notice, included a heading entitled “Arbitration,” which directed Plaintiff to the third and fourth pages, which described the arbitral process in detail. Decl. of Kelly Booth, ECF No. 16-2, Exs. 2–4. Most importantly, as Plaintiff concedes, each of these notices informed Plaintiff that he could opt-out of the new arbitration provision, without cancellation of the account, by sending notice to Defendant within approximately two months. Id . Consequently, Plaintiff does not challenge the Arbitration Agreements associated with these three accounts on the basis that he lacked “meaningful choice,” but instead claims that Defendant failed to provide adequate notice of the amendments because the pertinent notices were only sent via U.S. mail, and not also by electronic means. Opp’n Mem. at 15–17. In particular, Plaintiff contends that the notices were not sufficiently conspicuous because he had previously received other types of “important” correspondence from Defendant electronically, had been encouraged and did in fact sign up for electronic delivery of billing statements, and tended to only receive “junk” mail from Defendant. Id .
While the Court certainly appreciates the pervasiveness of email correspondence, sending
of legal materials by U.S. mail remains a time-honored and reasonable means of providing notice,
and as noted above, District of Columbia law continues to abide by the presumption that letters
properly addressed and sent via U.S. mail are presumed to be received.
See supra
at 8. This is
*15
especially true here, where the mailings, rather than evidencing any bad faith on the part of
Defendant, instead show an intent to unambiguously relay important changes to the Card
Agreements. In other words, the Court finds no indicia, of any sort, that Defendant sought to
conceal the import of the notices from Plaintiff, and Plaintiff cannot credibly argue that he did not
receive some important materials from Defendant via U.S. mail, as the Card Agreements for the
other two accounts were also sent via U.S. mail. Decl. of Kelly Booth, ECF No. 16-2, ¶¶ 6, 10.
Defendant, moreover, indicates that it was
required
by state and federal law to mail the amended
Card Agreements, as they constituted substantial changes to the terms of Plaintiff’s credit accounts.
See
Reply at 9 (citing S.D. Codified Law § 54-11-12 and 12 C.F.R. § 1026.9). As such, and given
that Plaintiff has adduced no evidence of lack of education or other extenuating circumstances, the
Court has no difficulty in concluding that the mailing of the notice was not unconscionable under
the circumstances of this case.
Cf. Skirchak v. Dynamics Research Corp.
,
*16 2. Substantive Unconscionability
Substantive unconscionability requires a finding that the terms of an agreement are unreasonably unfavorable to the party challenging the enforcement of the contract. Because the Court has determined that the Card Agreements are not procedurally unconscionable, in order for Plaintiff to succeed on the basis of substantive unconscionability, he must show that the terms of the Card Agreements are especially “egregious” or “extreme.” See supra at 10. In the Court’s view, none of the terms challenged by Plaintiff are unreasonably one-sided, let alone so egregious or extreme as to warrant a finding of substantive unconscionability in the absence of procedural unconscionability.
First, Plaintiff contends that the Arbitration Agreements are unfairly one-sided because
they limit the choice of arbitral forum to the American Arbitration Association (“AAA”), with one
account also adding the option to choose JAMS, and another the National Arbitration Forum
(“NAF”). Opp’n Mem. at 18. Of course, Defendant is equally limited to use of these venues, and
while the Court could perhaps countenance this argument if the arbitration provisions were limited
to a particular arbitrator, the AAA is one of the largest and best-known arbitration venues in the
country, with a plethora of arbitrators that can be selected pursuant to its well-established rules of
procedure.
See, e.g.
,
Wallace v. Red Bull Distrib. Co.
,
Plaintiff’s other challenges are aimed less at the specific terms of the Arbitration
Agreements, and more at the public policy of arbitration itself. As an initial matter, the Court’s
determination that the Card Agreements embody valid agreements to arbitrate, “foreclose[s] any
claim [Plaintiff] might have had to a jury trial[,]” and consequently, Plaintiff’s Seventh
Amendment claim is meritless. Opp’n Mem. at 24;
BiotechPharma, LLC v. Ludwig & Robinson,
PLLC
,
*18 Finally, Plaintiff relays a number of public criticisms of the arbitral process, Opp’n Mem.
at 19, 27–28, including arbitration before the AAA, and also points to the District of Columbia
Court of Appeal’s recent decision in
Andrew v. American Import Center
, wherein that court
“recognized that the policy that overwhelmingly favors arbitration has been seriously called into
question by the realization that all too often, arbitration agreements are included in the language
of contracts of adhesion, which consumers must sign in order to make particular purchases.” 110
A.3d 626, 634–35 (D.C. 2015). Nonetheless, in the context of this case pursuant to the FAA, the
principle that guides the Court’s decision is the “emphatic federal policy in favor of arbitral dispute
resolution.”
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.
,
IV. CONCLUSION
In light of the foregoing, the Court concludes that the parties entered into valid and enforceable Arbitration Agreements with respect to the five credit card accounts underlying this consolidated action. The parties do not contest that those Arbitration Agreements cover the Plaintiff’s substantive claims, and the Court agrees, as the agreements call for arbitration of all *19 claims related to the credit accounts, which plainly covers Plaintiff’s claims under the ECOA. Decl. of Kelly Booth, ECF No. 16-2, Exs. 1–5; see Olle v. 5401 W. Ave. Residential, LLC , 569 F. Supp. 2d 141, 148 (D.D.C. 2008) (citing AT & T Techs., Inc. v. Commc’ns Workers of Am. , 475 U.S. 643, 648–49 (1986)). As such, arbitration must be compelled, 9 U.S.C. §§ 2, 4, and Defendant’s request for a stay during the pendency of the arbitration must be granted, 9 U.S.C. § 3. Accordingly, the Court GRANTS Defendant’s [16] Motion to Compel Arbitration and Stay Action. This action shall remain STAYED pending conclusion of the arbitration. Finally, the Court also GRANTS Plaintiff’s [24] Motion for Leave to File Surreply.
An appropriate Order accompanies this Memorandum Opinion.
Dated: May 25, 2017
/s/ COLLEEN KOLLAR-KOTELLY
United States District Judge
Notes
[1] The civil action numbers for the other four cases are: 16-1351, 16-1352, 16-1354, and 16-1356.
[2] Plaintiff asks the Court to consider reversing its prior decision to consolidate these five actions. Opp’n Mem. at 8. In the Order Consolidating Cases, ECF No. 13, the Court indicated that it “may revisit this consolidation decision sua sponte at a later point in these proceedings if, ultimately, there prove to be substantially different legal or factual issues raised with respect to the various claims or defenses in this action.” Having now reviewed the record, which does not reflect any significant factual or legal differences between the consolidated actions, and given that these cases shall now proceed to arbitration, the Court finds no reason to revisit its decision on consolidation.
[3] The Court’s consideration has focused on the following pleadings: • Mem. in Supp. of Def.’s Mot. to Compel Arbitration and Stay Action, ECF No. 16-1 (“Def.’s Mem.”);
[5] As such, and because the Arbitration Agreements are severable from the remainder of the Card Agreements, the Court does not discuss Plaintiff’s challenges to the validity and enforceability of the choice-of-law provisions. Rent-A-Ctr., W., Inc. v. Jackson , 561 U.S. 63, 84, (2010) (“as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract” (internal quotation marks omitted)).
[6] See S.D. Codified Laws § 54-11-9 (“use of an accepted credit card or the issuance of a credit card agreement and the expiration of thirty days from the date of issuance without written notice from a card holder to cancel the account creates a binding contract between the card holder and the card issuer”).
[7] Like District of Columbia law, South Dakota law requires the presence of both substantive and
procedural unconscionability in order to void a contract.
Nygaard v. Sioux Valley Hosps. & Health
Sys.
,
[8] For similar reasons, the Court is also unmoved by Plaintiff’s argument that he lacked meaningful choice because the opening of the five credit lines precluded him from obtaining credit cards from competing institutions. Opp’n Mem at 13. The only evidence of this is a letter from Chase Bank, indicating that he was rejected for another credit card because of “too many existing accounts.” Opp’n Mem., Ex. G, at 1 (emphasis added). Presumably, however, the credit lines would no longer
[10] Plaintiff’s reliance on
Specht v. Netscape Communications Corp.
,
[11] See also Decl. of Kelly Booth, ECF No. 16-2, at 23 (Card Agreement informing Plaintiff that a “single, neutral arbitrator will resolve Claims. The arbitrator will either be a lawyer with at least ten years experience or a retired or former judge, selected in accordance with the rules of the arbitration firm.”).