Black v. JP Morgan Chase & Co., Civil Action No. 10 - 848
| Decision Date | 25 August 2011 |
| Docket Number | Civil Action No. 10 - 848 |
| Court | U.S. District Court — Western District of Pennsylvania |
| Parties | KARIN J. BLACK, et al, Plaintiff, v. JP MORGAN CHASE & CO., et al, Defendants. |
It is respectfully recommended that the Motion of Defendant Discover Financial Services to Compel Arbiration (ECF No. 28) be granted and the Motion to Dismiss the Complaint (ECF No. 28) be denied as moot. It is further recommended that this case be stayed only as to Defendant Discover Financial Services while Plaintiff submits her claim to arbitration.
Plaintiff, Karin Black, has filed a purported class action complaint, alleging that the Defendants violated the Sherman Act, 15 U.S.C. §1. Generally, Black alleges that the Defendants—consumer lenders, credit reporting agencies, and credit scoring companies— conspired to restrain the availability of consumer loans and inflate or fix the price of that credit at artificially high levels, by sharing pricing data in the form of credit history information. Plaintiff also alleges a national boycott of consumers who are unable or unwilling to pay monopolistic prices. (Compl. ¶ 67.) She seeks an order declaring that this action be maintained as a classaction and declaring Plaintiff as representative of the Classes and her counsel as counsel for the Classes; an order enjoining the Defendants' anti-competitive conduct; and an award of damages for herself and the Classes.1
In response to the Complaint, Defendant Discover Financial Services ("DFS"), one of three lender defendants in this case, has filed a motion to compel arbitration of Plaintiff's individual claims or, in the alternative, to dismiss the Complaint (ECF No. 28), which is the subject of this Report and Recommendation. In support of its alternative argument seeking dismissal of the Complaint pursuant to Rule 12(b)(6), DFS joins in the memorandum of law filed by the other two lender defendants, JP Morgan Chase & Co. and Bank of America Corporation.2 Plaintiff filed a memorandum of law opposing the motion to compel arbitration and reply brief. On February 10, 2011, the Court heard oral argument on DFS's motion. As the motion has been fully briefed and argued, it is now ripe for disposition.
The standard of review on a motion to compel arbitration is the same as the standard of review on a motion for summary judgment. Quilloin v. Tenet HealthSystem Philadelphia, Inc., 763 F.Supp. 2d 707, 715 (E.D.Pa. 2011) (quoting Hopkins v. New Day Fin., 643 F.Supp. 2d 704, 713-14 (E.D.Pa. 2009) (citing Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 & n. 9 (3d Cir.1980))); see also Kirleis v. Dickie, McCamey & Chilcote, 560 F.3d 156, 159 n. 3 (3d Cir.2009). "'Accordingly, the Court may consider all affidavits, exhibits and discovery in therecord.'" Quilloin, 763 F.Supp. 2d at 715 (quoting Hopkins, 643 F.Supp. 2d at 713-14 (citing Par-Knit Mills, 636 F.2d at 54 & n. 9)). A motion to compel arbitration should be granted only where there is "'no genuine issue of fact concerning the formation of the agreement'" to arbitrate. Kirleis, 560 F.3d at 159 (quoting Par-Knit Mills, 636 F.2d at 54). "In making this determination, the party opposing arbitration is entitled to 'the benefit of all reasonable doubts and inferences that may arise."' Id.
The facts relating to DFS's motion to compel arbitration are straightforward and are not disputed.4 Plaintiff's Discover Card is issued by Discover Bank, a federally issued bank chartered and incorporated in the State of Delaware, with its principal place of business in Delaware. (Declaration of Leo Linian ("Linian Decl."), ¶¶ 2-4, ECF No. 28-2.) Discover Bank operates a facility in Delaware that provides a full array of retail and depository banking services to its customers. (Linian Decl., ¶ 3.) DFS Services LLC is the servicing affiliate of Discover Bank and, as such, administers a variety of the business aspects of the Discover Card program, including the servicing and collection of credit card accounts, the issuance of statements, the handling of disputes and settlement with merchants. (Linian Decl., ¶¶ 2, 5.) Both DFS Services LLC and Discover Bank (collectively, "Discover") are subsidiaries of DFS, are incorporated in the State of Delaware, and have their principal places of business in Illinois. (Linian Decl., 2-3.)
Plaintiff has been a Discover credit card member since 1999. (Linian Decl., ¶6.) When Ms. Black's application was approved, her credit card and the Cardmember Agreement were mailed to her at the address she provided in her application, per Discover's standard practice. (Linian Decl., ¶7.) The Cardmember Agreement provides that by using her credit card, Ms. Black agrees to the terms of the Cardmember Agreement. According to Discover's records, Ms. Black did use her card thereafter. (Linian Decl., ¶ 8.)
The Discover Cardmember Agreement provided to Plaintiff in 1999 contained a broad arbitration provision that encompassed "any past, present or future claim or dispute (whether based upon contract, tort, statute, common law or equity) between you and us arising from or relating to your Account . . .." (Ex. 1 to Linian Decl. at 8, ECF No. 28-3.) This Cardmember Agreement also provided that it would be governed by Delaware law and applicable federal laws. (Ex. 1 to Linian Decl. at 10.)
The arbitration provision of the Cardmember Agreement has been amended several times since Plaintiff first opened her Discover Card account pursuant to the "Change of Terms" provision of the Cardmember Agreement (Linian Decl. ¶9; Ex. 1 to Linian Decl. at 8), and Delaware law, 5 Del. C. §952(a).5 When a change has been made to the terms of the Cardmember Agreement, Discover inserts and mails a Notice of Change to the Cardmember Agreement with the billing statements of all Discover card members who have open accounts and are receiving statements. (Linian Decl., ¶ 9.) The Cardmember Agreement provides Ms. Black with the right to reject any such changes to the terms of the Cardmember Agreement and close her account. (Id.) According to Discover's records, Ms. Black did not reject any of the changes that Discover Banks made to the terms of her Cardmember Agreement. (Id.)
As amended, the arbitration provision in the 2009 Cardmember Agreement applicable to the current dispute states in relevant part:
Arbitration of Disputes. Agreement to arbitrate. In the event of any past, present or future claim or dispute (whether based upon contract, tort, statute, common law or equity) between you and us arising from or relating to your Account, any prior account you have had with us, your application, the relationships which result from your Account or the enforceability or scope of this arbitration provision, of the Agreement, or of any prior agreement, you or we may elect to resolve the claim or dispute by binding arbitration. IF EITHER YOU OR WE ELECT ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM. PRE-HEARING DISCOVERY RIGHTS AND POST-HEARING APPEAL RIGHTS WILL BE LIMITED. NEITHER YOU NOR WE SHALL BE ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN ARBITRATION BY OR AGAINST OTHER CARDMEMBERS WITH RESPECT TO OTHER ACCOUNTS, OR LITIGATE IN COURT OR ARBITRATE ANY CLAIMS AS A REPRESENTATIVE OR MEMBER OF A CLASS OR IN A PRIVATE ATTORNEY GENERAL CAPACITY ("Class Action Waiver").
Ex. 10 to Linian Decl. at 11, ECF No. 28-4. The arbitration clause also delineates who shall conduct the arbitration:
In addition, the arbitration clause provides that Discover Bank's "rights and obligations under this arbitration provision shall inure to the benefit of and be binding upon our parent corporations, subsidiaries, affiliates (including, without limitation, DFS Services LLC), predecessors, successors, assigns, as well as the officers, directors and employees of each ofthese entities, . . .." Id. at 12. As DFS is the parent corporation of Discover Bank (Linian Decl., ¶2), the arbitration provision is binding upon DFS.
In 2003, Plaintiff was given the option of rejecting the arbitration provision without cancelling her account or affecting any of her other rights or privileges under the remainder of the Cardmember Agreement. (Linian Decl., ¶11; Ex. 4, ECF No. 28-3.) In particular, Discover Bank inserted into, and mailed with, Plaintiff's billing statement a "NOTICE OF RIGHT TO REJECT ARBITRATION," which became effective April 1, 2003. (Linian Decl., The Notice of Right to Reject Arbitration required that notice of rejection be made in writing and provided to Discover Bank by March 25, 2003. (Ex. 4.) According to Discover's records, Plaintiff did not exercise her right to opt out of, or otherwise reject, the arbitration provision. (Linian Decl., ¶11.)
Similarly, in 2004, 2005, 2006, 2007 and 2008, Discover Bank also sent to Plaintiff notices of amendments to the "Arbitration of Disputes" section, included with her billing statements. (Linian Decl., ¶¶ 12-16; Exs. 5-9 attached thereto, ECF No. 28-4.)
The Federal Arbitration Act ("FAA") "'creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate . . . .'" 9 U.S.C. § 1, et seq.; John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 136 (3d Cir. 1998) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp....
To continue reading
Request your trial