Gay v. Creditinform
| Decision Date | 19 December 2007 |
| Docket Number | No. 06-4036.,06-4036. |
| Citation | 511 F.3d 369 |
| Parties | Mary GAY, on Behalf of Herself and All Others Similarly Situated, Appellant v. CREDITINFORM; Intersections, Inc. |
| Court | U.S. Court of Appeals — Third Circuit |
James A. Francis (argued), Francis & Mailman, David A. Searles, Donovan Searles, Philadelphia, PA, for Appellant Mary Gay.
Carleton O. Strouss, David R. Fine (argued), Kirkpatrick & Lockhart Preston Gates Ellis, Harrisburg, PA, for Appellee Intersections Inc.
Christopher D. Thomas, Nixon Peabody, Rochester, NY, for Amicus-Appellee National Organization of Consumer Credit Attorneys.
Before: FISHER, ALDISERT and GREENBERG, Circuit Judges.
This case arises from appellant Mary Gay's purchase of credit repair services from defendants CreditInform and Intersections Inc. ("Intersections"). Gay, however, filed a notice of voluntary dismissal as to CreditInform on April 14, 2006,1 and, accordingly, we will refer to Intersections as though it has been the sole defendant throughout the proceedings in the District Court and here. Gay claims that in selling its services Intersections violated its obligations under the Credit Repair Organizations Act, 15 U.S.C. §§ 1679, et seq. ("CROA"), and the Pennsylvania Credit Services Act, 73 Pa. Stat. Ann. §§ 2181, et seq. (West 1993) ("CSA").2 In addition to allegations concerning her purchase of the credit repair services from Intersections, Gay's complaint includes allegations supporting prosecuting the case as a class action. Nevertheless, in response to Intersections' motion to stay the case and compel arbitration, the District Court ordered the parties to arbitrate the dispute on an individual basis pursuant to an arbitration provision included in Gay's purchase agreement ("Agreement") for the credit repair services.
Gay appeals from the District Court's order as she contends that under both the CROA and the CSA she has a right to assert her claims in a judicial forum and that under the CROA she has a right to bring her case as a class action. She further argues that both statutes prohibit a consumer of services that those statutes regulate from waiving those rights. Alternatively, Gay argues that even if the statutes do not provide her with these nonwaivable rights, the arbitration provision in her Agreement with Intersections does not include her claims and is unconscionable and therefore a court should not enforce it. The Supreme Court and, as far as we are aware, no court of appeals has addressed the issues that we now address under the CROA.
For reasons that we will discuss, we will affirm the District Court's order to stay the proceedings and compel arbitration on an individual basis.
Gay alleges that on or about January 21, 2005, she entered into her Agreement with Intersections for the purchase of services related to monitoring and improving her credit history. Gay further alleges that between February 2005 and September 2005, she made monthly payments of $4.99 to Intersections pursuant to the Agreement. According to Gay, she made the payments before Intersections fully performed any services for her. Gay claims that Intersections violated the CROA by requiring her to pay for credit repair services before it rendered them, and violated the CROA and CSA by requiring her to waive certain rights and protections that the statutes afforded to her as a consumer of a product governed by them. Gay also claims that Intersections violated the CROA and the CSA by failing to make disclosures that the statutes required. Additionally, as we have indicated, she makes allegations in support of class action treatment of her claims.
Intersections filed its motion on February 27, 2006, to stay the case and compel arbitration pursuant to the arbitration provision in the Agreement that states:
Any claim arising out of or relating to the Product shall be settled by binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association on an individual basis not consolidated with any other claim.
J.A. at 98. As we have indicated, on June 12, 2006, the District Court granted the motion, stayed the case, and ordered the parties to submit their dispute to arbitration on an individual basis.
Gay subsequently moved to certify the District Court's order for an interlocutory appeal, and on June 29, 2006, the District Court granted her motion. Gay then petitioned us to accept her interlocutory appeal and we granted Gay's petition on August 30, 2006.
The District Court had subject matter jurisdiction over this case pursuant to 28 U.S.C. §§ 1331 and 1367, and we have jurisdiction pursuant to 28 U.S.C. § 1292(b).3
We exercise plenary review over legal questions concerning the applicability and scope of an arbitration agreement. Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 53 (3d Cir.2001). If we reviewed the District Court's interpretation as distinguished from construction of the Agreement, we would apply the clearly erroneous standard. We are not concerned, however, with the sometimes elusive distinction between contractual interpretation and construction as there can be no question that, as we explain below, as written the arbitration clause includes Gay's claim. See id. at 53 n. 2.
A. Did the District Court err in holding that Gay's claims based on the CROA, 15 U.S.C. §§ 1679, et seq., and the CSA, 73 Pa. Stat. Ann. §§ 2181, et seq., are subject to arbitration?
Gay argues that her claims are not arbitrable because both the CROA and the CSA protect a consumer's right to assert her claims in a judicial forum, and the CROA further protects a consumer's right to prosecute her claim on a class action basis. Thus, in her view, there are irreconcilable conflicts between the statutes on the one hand and the arbitration provision in the Agreement on the other hand. She also argues that the arbitration provision does not cover her claims, and that, in any event, it is unconscionable and unenforceable.
Preliminarily we reject out of hand her contention that the arbitration provision does not cover her claims. As we explain below, a court determines whether the parties have agreed to submit a dispute to arbitration. It is perfectly clear that the arbitration provision in Gay's Agreement which covers "[a]ny claim arising out of or relating to the Product" includes Gay's claims. Thus, we pass to the more substantial issues raised on this appeal.
In contending that the statutes preclude arbitration of her claims, Gay points to 15 U.S.C. § 1679g, the CROA provision which prescribes the bases for determining civil liability and includes several references to a "court" and class actions in its discussion of punitive damages. In particular, section 1679g(a)(2) states:
(2) Punitive damages
In the case of any action by an individual, such additional amount as the court may allow.
In the case of a class action, the sum of —
(i) the aggregate of the amount which the court may allow for each named plaintiff; and
(ii) the aggregate of the amount which the court may allow for each other class member, without regard to any minimum individual recovery.
Gay also refers to section 1679g(b), which prescribes the factors to be considered in awarding punitive damages and states:
(b) Factors to be considered in awarding punitive damages
In determining the amount of any liability of any credit repair organization under subsection (a)(2) of this section, the court shall consider, among other relevant factors —
(1) the frequency and persistence of noncompliance by the credit repair organization;
(2) the nature of the noncompliance;
(3) the extent to which such noncompliance was intentional; and
(4) in the case of any class action, the number of consumers adversely affected.
Gay argues that we should construe section 1679g's references to a "court" and class actions in a way that recognizes that the CROA grants a consumer a right to file suit for an alleged violation of the statute in a judicial forum on a class action basis.4
Gay similarly argues that 73 Pa. Stat. Ann. § 2191 grants a consumer the right to sue for an alleged CSA violation in a judicial forum. That section states:
Any buyer or borrower injured by a violation of this act or by the credit services organization's or loan broker's breach of a contract subject to this act may bring an action for recovery of damages. Judgment shall be entered for actual damages, but in no case less than the amount paid by the buyer or borrower to the credit services organization or loan broker, plus reasonable attorney fees and costs. An award, if the trial court deems it proper, may be entered for punitive damages.
As with the CROA, Gay argues that the CSA's reference to a "court" provides a consumer with the right to assert CSA claims in a judicial forum. We note, however, that Gay does not point to language in the CSA to support an argument that it, like the CROA, provides a consumer with the right to bring suit on a class action basis.
In addition to arguing that the statutes create a right for a consumer to an adjudication in a judicial forum, and that the CROA gives a consumer the further right to proceed in a class action, Gay contends that the statutes prohibit a consumer from waiving those rights. Gay refers to a provision of the CROA which provides:
(a) Consumer waivers invalid
Any waiver by any consumer of any protection provided by or any right of the consumer under this subchapter—
(1) shall be treated as void; and
(2) may not be enforced by any Federal or State court or any other person.
(b) Attempt to obtain waiver
Any attempt by any person to obtain a waiver from any consumer of any protection provided...
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