Greenwood v. Compucredit Corp., C 08-04878 CW.

• Citation: 617 F.Supp.2d 980
• Decision Date: 01 April 2009
• Docket Number: No. C 08-04878 CW.,C 08-04878 CW.
• Parties: Wanda GREENWOOD, Ladelle Hatfield and Deborah McCleese, on behalf of themselves and others similarly situated, Plaintiffs, v. COMPUCREDIT CORPORATION; Columbus Bank and Trust, jointly and individually, Defendants.
• Court: U.S. District Court — Northern District of California

617 F.Supp.2d 980

Wanda GREENWOOD, Ladelle Hatfield and Deborah McCleese, on behalf of themselves and others similarly situated, Plaintiffs, v. COMPUCREDIT CORPORATION; Columbus Bank and Trust, jointly and individually, Defendants.

No. C 08-04878 CW.

United States District Court, N.D. California.

April 1, 2009.

Order Denying Leave to Seek Reconsideration May 11, 2009.

Jay Edward Smith, Adrian John Barnes, Laurie Adrea Traktman, Gilbert & Sackman, Los Angeles, CA, Christopher Joseph Nicholson, Gregory Hascal Hawley, U.W. Clemon, Ghawley & Waadlaw, Birmingham, AL, Kasie Moore Braswell, Steven Anthony Martino, William Lloyd Copeland, Taylor-Martino P.C., Richard

R. Rosenthal, Law Offices of Ricard R. Rosenthal, P.C., Mobile, AL, for Plaintiffs.

Susan L. Germaise, McGuirewoods LLP, Los Angeles, CA, David L. Hartsell, McGuirewoods LLP, Chicago, IL, James R. McGuire, Morrison & Foerster LLP, San Francisco, CA, Tim A. O'Brien, Morrison & Foerster LLP, Washington, DC, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO COMPEL ARBITRATION

CLAUDIA WILKEN, District Judge.

Defendants Compucredit Corporation and Columbus Bank and Trust move to compel Plaintiffs Wanda Greenwood, Ladelle Hatfield and Deborah McCleese to arbitrate their claims brought pursuant to the Credit Repair Organization Act (CROA). Plaintiffs oppose the motion. The motion was heard on February 26, 2009. Having considered all of the parties' papers and oral argument on the motion, the Court denies Defendants' motion. The Court concludes that CROA prohibits consumers from waiving their right to sue.

BACKGROUND

The following facts are alleged in the complaint. Defendant Compucredit marketed a subprime credit card under the brand name Aspire Visa to consumers with low or weak credit scores through massive direct-mail solicitations and the internet. Compucredit is the exclusive marketer and advertiser of Aspire Visa credit cards and the credit cards are issued by Columbus Bank and Trust. Compucredit marketed the card by representing to consumers that an Aspire Visa credit card could be used by the consumer to "rebuild your credit," "rebuild poor credit," and "improve your credit rating." The promotional materials also noted that there was "no deposit required," and that consumers would immediately receive $300 in available credit when they received their credit card. However, once Columbus Bank and Trust issued the credit card, consumers were charged a $29 finance charge, a monthly $6.50 account maintenance fee and a $150 annual fee. These fees were immediately assessed against the $300 credit limit before the consumer received the credit card. Although Compucredit's promotional materials mentioned these fees, it did so in small print, buried in other information in the advertisement, and not in proximity to its representations that no deposit was required. Plaintiffs allege that Defendants' actions constitute several violations of the CROA and of California's Unfair Competition Law.

Before receiving an Aspire Visa credit card, each Plaintiff received a mailing entitled, Pre-Approved Acceptance Certificate. The Acceptance Certificate includes the following paragraph:

By signing, I request an Aspire Visa card and ask that an account be opened for me. I certify that everything I have stated in the Acceptance Certificate is true and accurate to the best of my knowledge. I have read and agree to be bound by the "Summary of Credit Terms" and "Terms of Offer" printed on the enclosed insert, which insert includes a discussion of arbitration applicable to my account, and is incorporated here by reference.

(emphasis in original). Plaintiffs signed the Acceptance Certificate. The "Terms of the Offer" states, in very small bold print in all capitals,

IMPORTANT—THE AGREEMENT YOU RECEIVE CONTAINS A BINDING ARBITRATION PROVISION. IF A DISPUTE IS RESOLVED BY BINDING ARBITRATION, YOU WILL NOT HAVE THE RIGHT TO

GO TO COURT OR HAVE THE DISPUTE HEARD BY A JURY, TO ENGAGE IN PRE-ARBITRATION DISCOVERY EXCEPT AS PERMITTED UNDER THE CODE OF PROCEDURE OF THE NATIONAL ARBITRATION FORUM ("NAF"), OR TO PARTICIPATE AS PART OF A CLASS OF CLAIMANTS RELATING TO SUCH DISPUTE. OTHER RIGHTS AVAILABLE TO YOU IN COURT MAY BE UNAVAILABLE IN ARBITRATION.

In even smaller print, the "Summary of Credit Terms" contains the following:

ARBITRATION PROVISION (AGREEMENT TO ARBITRATE CLAIMS)

Any claim, dispute or controversy (whether in contract, tort, or otherwise) at any time arising from or relating to your Account, any transferred balances or this Agreement (collectively, "Claims"), upon the election of you or us, will be resolved by binding arbitration pursuant to this Arbitration Provision and the Code of Procedure ("NAF Rules") of the National Arbitration Forum ("NAF") in effect when the Claim is filed. If for any reason the NAF cannot, will not or ceases to serve as arbitration administrator, we will substitute another nationally recognized arbitration organization utilizing a similar code of procedure.

Upon such an election, neither you nor we will have the right to litigate in court the claim being arbitrated, including a jury trial, or to engage in pre-arbitration discovery except as provided under NAF Rules. In addition, you will not have the right to participate as representative or member of any class of claimants relating to any claim subject to arbitration. Except as set forth below, the arbitrator's decision will be final and binding. Other rights available to you in court might not be available in arbitration.

The agreement also provides, "This Agreement, and your Account, and any claim, dispute or controversy (whether in contract, tort or otherwise) ... are governed by and construed in accordance with applicable federal law and the laws of Georgia."¹

LEGAL STANDARD

I. Motion to Compel Arbitration

Under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., written agreements that controversies between the parties shall be settled by arbitration are valid, irrevocable, and enforceable. 9 U.S.C. § 2. A party aggrieved by the refusal of another to arbitrate under a written arbitration agreement may petition the district court which would, save for the arbitration agreement, have jurisdiction over that action, for an order directing that arbitration proceed as provided for in the agreement. 9 U.S.C. § 4. The FAA further provides that:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, 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 ....

9 U.S.C. § 3.

If the court is satisfied "that the making of the arbitration agreement or the failure to comply with the agreement is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." Id. The FAA reflects a "liberal federal policy favoring arbitration agreements." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (quoting Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). A district court must compel arbitration under the FAA if it determines that: 1) there exists a valid agreement to arbitrate; and 2) the dispute falls within its terms. Stern v. Cingular Wireless Corp., 453 F.Supp.2d 1138, 1143 (C.D.Cal.2006) (citing Chiron Corp. v. Ortho Diagnostic Sys., 207 F.3d 1126, 1130 (9th Cir.2000)).

DISCUSSION

I. Motion to Compel Arbitration

Plaintiffs argue that the Court should not compel arbitration because the arbitration agreement is void under the CROA as to the national class, and it is void and unconscionable under California law as to the California class. Defendants clarify in their reply brief that they move to compel arbitration of the CROA claims as to the national class only, not of the claims pursued by the California class under California law. Therefore, the Court need not address whether the arbitration provision is void and unconscionable under California law.

Plaintiffs argue that the arbitration agreement is void as to the national class because the CROA contains specific provisions disallowing any waiver of a consumer's right to sue in court for CROA violations.² Each credit repair organization is required to (1) inform the consumer of his or her right to sue, (2) provide such information to the consumer in a separate document containing a verbatim copy of an eight-paragraph text specified by Congress, which enumerates the "right to sue," (3) obtain from the consumer a signature confirming receipt of such information and (4) keep such signed confirmations on file for two years from the date of signing. 15 U.S.C. § 1679c(a)-(c). The written disclosure specifically states that consumers "have a right to sue a credit repair organization that violates the Credit Repair Organization Act." 15 U.S.C. § 1679c (emphasis added). This disclosure document must be provided to every consumer "before any contract or agreement between the consumer and the credit repair organization is executed." Id. § 1679c(a). The CROA contains a non-waiver provision, which states:

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.

15 U.S.C. § 1679f(a) (emphasis added). Based on these sections, Plaintiffs argue that they have a right to sue under CROA that cannot be waived. The issue of arbitration under CROA appears to be one of first impression in the Ninth Circuit.

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