Burgos v. Trans Union, LLC, CIVIL ACTION NO. 16-CV-6338

• Decision Date: 18 May 2017
• Docket Number: CIVIL ACTION NO. 16-CV-6338
• Citation: Burgos v. Trans Union, LLC, CIVIL ACTION NO. 16-CV-6338 (E.D. Pa. May 18, 2017)
• Parties: ALI BURGOS Plaintiff v. TRANS UNION, LLC, et. al., Defendants
• Court: U.S. District Court — Eastern District of Pennsylvania

ALI BURGOSPlaintiff v. TRANS UNION, LLC, et. al., Defendants

CIVIL ACTION NO. 16-CV-6338

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

May 18, 2017

MEMORANDUM AND ORDER

JOYNER, J.

This Federal Credit Reporting Act case is presently before the Court on Motion of Defendant Credit One Bank to Compel Arbitration.

Factual Background

This case arose in September, 2016 when in the course of applying for a mortgage, PlaintiffAli Burgos learned that Defendants Credit One and Midland Credit Management (to whom Credit One had transferred Plaintiff's account) had inaccurately reported her credit data to the three nationwide consumer reporting agencies - Equifax, Trans Union and Experian.Upon discovering this incorrect reporting, Plaintiff disputed the reports with Equifax, Trans Union and Experian, each of which purportedly acknowledged receipt of Plaintiff's dispute and reported the dispute to Credit One and Midland.Thereafter, Trans Union, Equifax and Experian notified Plaintiff that the reported accounts had been "verified" and that the alleged inaccuracies within the trade lines of Credit One and Midland would not be corrected.Plaintiff avers that she filed a second dispute with Defendants on October 2, 2016 with the same outcome.

Plaintiff submits that the defendants were negligent and willful in their refusal to investigate and/or to employ proper procedures in investigating her disputes and to correct the inaccuracies in her credit reports with the result that the information which the defendants are continuing to disseminate concerning Plaintiff is false and misleading.As a consequence, Plaintiff's credit score is lower than it should be, she has had to refrain from applying for additional credit and she was caused to be charged a higher interest rate on her mortgage.Plaintiff claims that Defendants' actions violated the Fair Credit Reporting Act, 15 U.S.C. §1681, et. seq., the Fair Debt Collections Practices Act, 15 U.S.C. §1692, et. seq., and that she suffered defamation of her character.Although each of the defendants have filed an answer to the complaint, Defendant Credit One now moves to compel this matter to arbitration on the basis of an agreement to arbitrate contained within the credit card application and the cardholder agreement issued by Credit One to Plaintiff when it mailed her the card.Plaintiff opposes arbitration for the reason that the arbitration agreement issubstantively unconscionable.

Standards Governing Motions to Compel Arbitration

The FAA requires district courts to stay judicial proceedings and compel arbitration of claims covered by a written and enforceable arbitration agreement.James v. Global Tellink Corp., No. 16-1555, 2017 U.S. App. LEXIS 5448 at *4-*5(3d Cir.Mar. 29, 2017)(citing9 U.S.C. §3).As articulated by the U.S. Court of Appeals for the Third Circuit in Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764(3d Cir.2013), the standards to be applied to motions to compel arbitration differ depending upon the state of the existing record of the case and on what may or may not appear from the face of the complaint.According to Guidotti:

when it is apparent, based on "the face of a complaint, and documents relied upon in the complaint," that certain of a party's claims "are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery's delay."... (citation omitted).But if the complaint and its supporting documents are unclear regarding the agreement to arbitrate, or if the plaintiff has responded to a motion to compel arbitration with additional facts sufficient to place the agreement to arbitrate at issue, then "the parties should be entitled to discovery on the question of arbitrability before a court entertains further briefing on the question."After limited discovery, the court may entertain a renewed motion to compel arbitration, this time judging the motion under a summary judgment standard.In the event that summary judgment is not warranted because "the party opposing arbitration can demonstrate, by means of citations to the record," that there is "a genuine dispute as to the enforceability of the arbitration clause," the "court may then proceed summarily to a trial regarding "the making of the arbitration agreement or the failure, neglect, or refusal to perform the same," as Section 4 of the FAAenvisions."

Id, at 776(quotingSomerset Consulting, LLC v. United Capital Lenders, LLC, 832 F. Supp. 2d 474, 482(E.D. PA.2011)and9 U.S.C. §4);Monfared v. St. Luke's University Health Network, 182 F. Supp. 2d 188, 190-191(E.D. Pa.2016).

Discussion

"There is a strong federal policy in favor of arbitration, and a 'party to a valid and enforceable arbitration agreement is entitled to a stay of federal court proceedings pending arbitration as well as an order compelling such arbitration.'"In re: Pharmacy Benefit Managers Antitrust Litigation, 700 F.3d 109, 116(3d Cir.2012)(quotingAlexander v. Anthony International, L.P., 341 F.3d 256, 263(3d Cir.2003)).To be sure, "[a]rbitration is a matter of contract between the parties and a judicial mandate to arbitrate must be predicated upon an agreement to that effect."James, supra,(quotingPar-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54(3d Cir.1980)).Seealso, AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648-649, 106 S. Ct. 1415, 1418, 89 L. Ed.2d 648(1986)("arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit").Hence, before a federal district court entertaining a motion to compel arbitration may order a reluctant party to arbitrate, the FAA requires the court"toengage in a limited review to ensure that the dispute is arbitrable - i.e. that a valid agreement to arbitrate exists and that the specific dispute falls within the substantive scope of that agreement."Cuie v. Nordstrom, Civ. A.No. 05-4771, 2005 U.S. Dist. LEXIS 26698 at *6(E.D. Pa.Nov. 4, 2005)(quotingPaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511(3d Cir.1990)).And, in determining whether a valid arbitration agreement exists, federal courts are to "apply ordinary state-law principles that govern the formation of contracts."James, supra,(quotingFirst Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S. Ct. 1920, 1924, 131 L. Ed.2d 985(1995)).See also, Cuie, 2005 U.S. Dist. 26698 at *7(quotingSpinetti v. Service Corporation, International, 324 F.3d 212, 214(3d Cir.2004)).Similarly, in "applying the relevant state contract law, a court may also hold that an agreement to arbitrate is 'unenforceable based on a generally applicable contractual defense, such as unconscionability.'"Id, at *7(quotingParilla v. IAP Worldwide Services, VI, Inc., 368 F.3d 269, 276(3d Cir.2004)).

In Pennsylvania, it is black letter law that in order to form an enforceable contract, there must be an offer, acceptance, consideration, or mutual meeting of the minds.Walton v. Johnson, 2013 PA Super 108, 66 A.3d 782(Pa. Super.2013);Neyvas v. Morgan, 2007 PA Super 66, 921 A.2d 8(Pa. Super.2007);Jenkins v. County of Schuylkill, 441 Pa. Super. 642, 648, 658A.2d 380, 383(Pa. Super.1995).To determine whether an agreement is enforceable then, it is incumbent upon the courts to examine: (1) whether both parties manifested an intention to be bound by the agreement; (2) whether the terms of the agreement are sufficiently definite to be enforced, and (3) whether there was consideration.Jenkins, 441 Pa. Super. at 650, 658 A.2d at 384.

Here, Credit One alleges¹ in the motion which is now before us that on January 5, 2010, Plaintiff accepted a written solicitation for a pre-approved credit card which Credit One had sent to her on December 28, 2009 by completing an online application.The written solicitation contained the notation: "SEE REVERSE FOR IMPORTANT INFORMATION ON RATES, FEES, COSTS, AND AVAILABLE CREDIT."Included among the headings on the reverse side of the solicitation was the following verbiage:

ARBITRATION AGREEMENT: You and we agree that either you or we may, without the other's consent require that any dispute between you and us be submitted to mandatory, binding arbitration.A more detailed description of the Arbitration Agreement will be sent with your card.

In response to Plaintiff's online application, Credit One issueda credit card to Plaintiff by mail.Included in the mailing was a copy of the Visa/MasterCard Cardholder Agreement, Disclosure Statement and Arbitration Agreement, which covers more than two pages and which begins:

PLEASE READ THIS PROVISION OF YOUR CARD AGREEMENT CAREFULLY.IT PROVIDES THAT EITHER YOU OR WE CAN REQUIRE THAT ANY CONTROVERSY OR DISPUTE BE RESOLVED BY BINDING ARBITRATION.ARBITRATION REPLACES THE RIGHT TO GO TO COURT, INCLUDING THE RIGHT TO A JURY AND THE RIGHT TO PARTICIPATE IN A CLASS ACTION OR SIMILAR PROCEEDING.IN ARBITRATION, A DISPUTE IS RESOLVED BY A NEUTRAL ARBITRATOR INSTEAD OF A JUDGE OR JURY.ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN RULES APPLICABLE IN COURT.IN ARBITRATION, YOU MAY CHOOSE TO HAVE A HEARING AND BE REPRESENTED BY COUNSEL.

The Arbitration Agreement is extraordinarily broad in its definitions of covered claims² and provides in relevant part:

Claims subject to arbitration include, but are not limited to, disputes relating to the establishment, terms, treatment, operation, handling, limitations on or termination of your account; any disclosures or other documents or communications relating to your account; any transactions or attempted transactions involving your account, whether authorized or not; billing, billing errors, credit reporting, the posting of transactions, payment or credits, or collections matters relating to your account;

...

Plaintiff does not dispute the formation of a valid agreement to arbitrate...