Chavez v. Bank of America
| Decision Date | 07 October 2011 |
| Docket Number | Case No. C 10-653 JCS |
| Court | U.S. District Court — Northern District of California |
| Parties | STEVEN CHAVEZ, Plaintiff(s), v. BANK OF AMERICA, Defendant(s). |
Plaintiffs Patricia Vanhorn, Richard Albaugh and Patrick Mulcahy have filed this action alleging state and federal claims arising out of their enrollment in an identity theft protection program called "Privacy Assist." They have claim to have been enrolled and charged for this service without their consent. Defendant Intersections Inc. ("Intersections"), brings the present motion to stay litigation pending arbitration, arguing that the Plaintiffs are bound by agreements with Defendants Bank of America, N.A. ("BANA") and FIA Card Services, N.A. (FIA") and that Intersections, as a third party beneficiary to those agreements, may enforce an arbitration agreement in this case. Plaintiffs oppose motion. The parties have consented to the jurisdiction of this court. A hearing was held on September 30, 2011 at 9:30 a.m., at which the parties appeared.
The Court has reviewed the papers submitted and the arguments of counsel at the hearing. For the reasons explained below, the Motion is GRANTED IN PART with respect to Plaintiffs Patricia VanHorn and Patrick Mulcahy. With respect to Plaintiff Richard Albaugh, the Court concludes that there is a material factual dispute on the issue of consent to enter into a contract containing an arbitration provision. Accordingly, the Court will hold a one day bench trial on this issue, which is scheduled for January 17, 2012 at 8:30 a.m.
On April 18, 2011, Plaintiffs Patricia VanHorn, Richard Albaugh and Patrick Mulcahy became lead Plaintiffs by filing a Third Amended Complaint ("TAC") (see Docket No. 85) in this matter. See Docket No. 77. With the TAC, these above-named Plaintiffs made their first appearance in the case; Plaintiff Steven Chavez is no longer a Plaintiff in the case.
The TAC alleges that the Defendants signed up Plaintiffs and Class Members for an identity theft program offered by Bank of America called "Privacy Assist" without their knowledge or permission. As a result, Plaintiffs allege that Defendants have violated California's Unfair Competition Law and the California Legal Remedies Act, the federal Electronic Funds Transfer Act, and the common-law rules against unjust enrichment and conversion. ¶¶ 66-105.
Soon after the filing of the TAC, Intersections informed Plaintiffs' counsel that based on the existence of arbitration agreements with each of the named parties, Intersections would move to enforce those agreements. On May 6, 2011, at a case management conference, the Court vacated all scheduled dates in the lawsuit and ordered the parties to meet and confer and submit a proposed briefing schedule for the proposed arbitration motion. See Dkt. No. 92. This motion followed.
Pursuant to Section 3 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § § 1-16, Intersections moves to stay the present litigation pursuant to a written arbitration agreement.
Intersections argues that each Plaintiff in this case agreed to enroll in Privacy Assist with Intersections - the service provider - as intended beneficiary in agreements between Plaintiffs and Defendants BANA and FIA. Intersections argues that the Terms of Use governing this service were mailed to each Plaintiff, including a notice that enrollment in the program would be construed as acceptance of the contract and that this notice further contained a notice that any disputes would be settled by an arbitrator through individual proceedings. Based upon this "enforceable contract" Intersections argues, the Court should stay the current litigation in favor of the parties' arbitration. Intersections further argues that if this Court itself decides the validity of the arbitration clause in this case, the controlling authority is AT&T Mobility LLC v. Concepcion, __ U.S. __, 131 S.Ct.1740, 1750, L.Ed.2d 742 (2011), in which the Supreme Court overturned California's class-action waiver bar.
Intersections first argues that the arbitration clause is enforceable and that it, as intended third party beneficiary, may enforce the arbitration agreement in this case. Intersections next argues that any question as to the scope or validity of the arbitration in this case must be decided by the arbitrator, not this Court. If this Court decides validity, the agreement is valid and enforceable under any applicable state law, whether the Court decides to apply California law, Delaware law (as Intersections argues it should) or Florida law.
Plaintiffs oppose the motion. Plaintiffs respond that they cannot be compelled to arbitrate when their claims are predicated on a lack of consent to the underlying contract that contains the arbitration provision. Plaintiffs next argue that the agreements between Privacy Assist customers and Bank of America are unenforceable under a settlement agreement entered into between BANA and its customers in unrelated litigation, Ross et al., v. Bank of America N.A., et. al., 05-CV-07116 (WHP) (S.D.N.Y). See Docket No. 99-2 (Ross Settlement Agreement). Plaintiffs further argue that nothing in the Supreme Court's recent Concepcion decision compels a contrary result, for Plaintiffs do not seek to invalidate the arbitration clause under the now disapproved California policy regarding the unconscionability of class action waivers, but rather, seek to void it under general unconscionability standards. Plaintiffs argue that under any state standard that may be applied here - California, Delaware or Florida - the arbitration clause is unconscionable. Plaintiffs further argue that Intersections is not a party to the contracts at issue, and as such, cannot enforce its terms. Finally, Plaintiffs argue that Intersections has waived its right to compel arbitration due to the fact that it has litigated this case for over a year.
Section 4 of the Federal Arbitration Act permits "a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States District Court ... for an order directing that ... arbitration proceed in the manner provided for in [the arbitration] agreement." 9 U.S.C. § 4. Upon a showing that a party has failed tocomply with a valid arbitration agreement, the district court must issue an order compelling arbitration. See Cohen v. Wedbush, Noble Cooke, Inc., 841 F.2d 282, 285 (9th Cir.1988).
The FAA espouses a general policy favoring arbitration agreements. See Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). In determining whether to issue an order compelling arbitration, the Court may not review the merits of the dispute, but must limit its inquiry to: (1) whether the arbitration agreement is governed by Chapter One of the Federal Arbitration Act (rather than Chapter Two or Chapter Three); (2) whether the contract containing the arbitration agreement evidences a transaction involving interstate commerce, (3) whether there exists a valid agreement to arbitrate, and (4) whether the dispute falls within the scope of the agreement to arbitrate. 9 U.S.C. §§ 2, 202, and 302; see Nicaragua v. Standard Fruit Co., 937 F.2d 469, 477-78 (9th Cir. 1991), cert denied, 503 U.S. 919, 112 S.Ct. 1294, 117 L.Ed.2d 516 (1992) (); Ecuador v. Chevron Texaco Corp., 376 F. Supp. 2d 334, 347 (S.D.N.Y. 2005) (). If the answer to each of these questions is affirmative, then the Court must order the parties to arbitrate in accordance with the terms of their agreement. 9 U.S.C. § 4.
Although the FAA provides that arbitration agreements generally "shall be valid, irrevocable, and enforceable," courts may decline to enforce them when grounds "exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. "Thus, generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening" federal law. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). In interpreting the validity and scope of an arbitration agreement, the courts apply state law principles of contract formation and interpretation. See Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1210 (9th Cir.1998). Accordingly, the Court reviews the arbitration agreement here in light of the "liberal federal policy favoring arbitration agreements," Moses H. Cone, 460 U.S. at 24, and considers its enforceability according to California's laws ofcontract formation. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920 (1995).
When evaluating a motion to compel arbitration, courts treat the facts as they would when ruling on a motion for summary judgment, construing all facts and reasonable inferences that can be drawn from those facts in a light most favorable to the non-moving party. See Perez v. Maid Brigade, Inc., 2007 WL 2990368 at *3 (N.D. Cal. Oct. 7, 2007) (Illston, J.).
It is well settled that "[a]rbitration is a matter of contract and a party cannot be required to submit any dispute which he has not agreed so to submit." AT&T Tech., Inc. v. Commc'n....
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