Cicle v. Chase Bank Usa

• Decision Date: 06 October 2009
• Docket Number: No. 08-1362.,08-1362.
• Parties: Virginia CICLE, Appellee, v. CHASE BANK USA, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

583 F.3d 549

Virginia CICLE, Appellee, v. CHASE BANK USA, Appellant.

No. 08-1362.

United States Court of Appeals, Eighth Circuit.

Submitted: October 15, 2008.

Filed: October 6, 2009.

Christopher Martin Hohn, argued, Roman P. Wuller and Danielle T. Uy, on the brief, St. Louis, MO, for appellant.

Timothy W. Van Ronzelen, argued, Matthew A. Clement and Kari Schulte, on the brief, Jefferson City, MO, for appellee.

Before RILEY, BOWMAN, and COLLOTON, Circuit Judges.

BOWMAN, Circuit Judge.

Chase Bank USA appeals from the order of the District Court denying its motion to stay litigation and to compel the arbitration of claims that Virginia Cicle brought in a lawsuit related to her Chase credit card. We reverse.

Cicle opened a credit card account with Chase, a national bank incorporated in and with its principal place of business in Delaware, in April 2002. At that time, she received in the mail at her residence in Missouri the credit card and a Cardmember Agreement that included a binding arbitration agreement and a class-action waiver. The Cardmember Agreement was revised, as permitted by the terms of the original Agreement and with notice to Cicle, several times over the next few years.

From January 1, 2004, through April 1, 2004, Cicle's Chase account carried a 7.99% annual percentage rate (APR) on unpaid balances. On her May 3, 2004, statement, Cicle noticed that the rate had increased dramatically, to 25.99%. She contends that she received no notice of this increase. Later in the year, in response to Cicle's inquiry, Chase advised her that a credit agency had reported her as past due on an unrelated loan or account, so Chase increased the APR from the 7.99% "Preferred Customer Pricing" rate. Cicle says she paid about $80 in higher finance charges as a result.

In November 2005, Chase sent Cicle a new arbitration agreement that replaced the one previously in effect. As with earlier amendments, Cicle was given the option of rejecting the change in writing, which would close the account to future charges. But she continued to use the card after the December 22, 2005, cutoff. By doing so, according to the terms of the agreement, Cicle accepted the amendments-whether or not she sent notice.

In 2007, Cicle filed a class-action lawsuit in Missouri state court alleging in two counts that Chase (1) imposed illegal penalties and (2) committed an unfair merchandising practice under the Missouri Merchandising Practices Act (MMPA). Chase removed the case to federal court under the Class Action Fairness Act of 2005 on the basis of diversity jurisdiction and federal question jurisdiction arising under the National Bank Act. Chase then filed a motion to stay the litigation and compel arbitration pursuant to the terms of the Cardmember Agreement:

ARBITRATION AGREEMENT: PLEASE READ THIS AGREEMENT CAREFULLY. IT PROVIDES THAT ANY DISPUTE MAY BE RESOLVED BY BINDING ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO TO COURT. YOU WILL NOT BE ABLE TO BRING A CLASS ACTION OR OTHER REPRESENTATIVE ACTION IN COURT SUCH AS THAT IN THE FORM OF A PRIVATE ATTORNEY GENERAL ACTION, NOR WILL YOU BE ABLE TO BRING ANY CLAIM IN ARBITRATION AS A CLASS ACTION OR OTHER REPRESENTATIVE ACTION. YOU WILL NOT BE ABLE TO BE PART OF ANY CLASS ACTION OR OTHER REPRESENTATIVE ACTION BROUGHT BY ANYONE ELSE, OR BE REPRESENTED IN A CLASS ACTION OR OTHER REPRESENTATIVE ACTION. IN THE ABSENCE OF THIS ARBITRATION AGREEMENT, YOU AND WE MAY OTHERWISE HAVE HAD A RIGHT

OR OPPORTUNITY TO BRING CLAIMS IN A COURT, BEFORE A JUDGE OR JURY, AND/OR TO PARTICIPATE OR BE REPRESENTED IN A CASE FILED IN COURT BY OTHERS (INCLUDING CLASS ACTIONS AND OTHER REPRESENTATIVE ACTIONS). OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO A COURT, SUCH AS DISCOVERY OR THE RIGHT TO APPEAL THE DECISION MAY BE MORE LIMITED. EXCEPT AS OTHERWISE PROVIDED BELOW, THOSE RIGHTS ARE WAIVED.

Binding Arbitration. This Arbitration Agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by and be enforceable under the Federal Arbitration Act (the "FAA"), 9 U.S.C. § 1-16 as it may be amended. This Arbitration Agreement sets forth the circumstances and procedures under which claims (as defined below) may be resolved by arbitration instead of being litigated in court.

. . . .

Claims Covered. Either you or we may, without the other's consent, elect mandatory, binding arbitration of any claim, dispute or controversy by either you or us against the other, or against the employees, parents, subsidiaries, affiliates, beneficiaries, agents or assigns of the other, arising from or relating in any way to the Cardmember Agreement, any prior Cardmember Agreement, your credit card Account or the advertising, application or approval of your Account ("Claim"). ...

. . . .

As an exception to this Arbitration Agreement, you retain the right to pursue in a small claims court any Claim that is within that court's jurisdiction and proceeds on an individual basis. If a party elects to arbitrate a Claim, the arbitration will be conducted as an individual action. Neither you nor we agree to any arbitration on a class or representative basis, and the arbitrator will have no authority to proceed on such basis. This means that even if a class action lawsuit or other representative action, such as that in the form of a private attorney general action, is filed, any Claim between us related to the issues raised in such lawsuits will be subject to an individual arbitration claim if either you or we so elect.

. . . .

Costs. We will reimburse you for the initial arbitration filing fee paid by you up to the amount of $500 upon receipt of proof of payment. Additionally, if there is a hearing, we will pay any fees of the arbitrator and arbitration administrator for the first two days of that hearing. The payment of any such hearing fees by us will be made directly to the arbitration administrator selected by you or us pursuant to this Arbitration Agreement. All other fees will be allocated in keeping with the rules of the arbitration administrator and applicable law. However, we will advance or reimburse filing fees and other fees if the arbitration administrator or arbitrator determines there is good reason for requiring us to do so or you ask us and we determine there is good cause for doing so. Each party will bear the expense of the fees and costs of that party's attorneys, experts, witnesses, documents and other expenses, regardless of which party prevails, for arbitration and any appeal (as permitted below), except that the arbitrator shall apply any applicable law in determining whether a party should recover any or all fees and costs from another party . . . .

Severability, survival. ... If any portion of this Arbitration Agreement is deemed invalid or unenforceable, the remaining portions shall nevertheless remain in force.

2005 Notice of Amendment to Cardmember Agreement at 3-6.

The District Court applied Missouri law and found the class-action waiver and the cost-sharing terms of the arbitration agreement to be unconscionable, but relied on the terms of the Cardmember Agreement to sever the class-action waiver as a nonessential term. The court conditionally granted Chase's motion to compel arbitration and stay litigation if Chase agreed to pay all costs and fees associated with the arbitration. Chase did not agree, so the District Court denied enforcement of the arbitration clause as unconscionable under Missouri law. Chase appeals and we reverse.

We review de novo both the District Court's choice-of-law determination and its ultimate decision to deny Chase's motion to compel arbitration. See St. Paul Fire & Marine Ins. Co. v. Bldg. Constr. Enters., 526 F.3d 1166, 1168 (8th Cir.2008); EEOC v. Woodmen of the World Life Ins. Soc'y, 479 F.3d 561, 565 (8th Cir.2007).

Chase first argues that the District Court erred in applying Missouri law in the face of a choice-of-law clause set forth in the Cardmember Agreement. The applicable "GOVERNING LAW" paragraph of the 2004 amendment to the Cardmember Agreement reads as follows:

THE TERMS AND ENFORCEMENT OF THIS AGREEMENT AND YOUR ACCOUNT SHALL BE GOVERNED AND INTERPRETED IN ACCORDANCE WITH FEDERAL LAW AND, TO THE EXTENT STATE LAW APPLIES, THE LAW OF DELAWARE, WITHOUT REGARD TO CONFLICT-OF-LAW PRINCIPLES. THE LAW OF DELAWARE, WHERE WE AND YOUR ACCOUNT ARE LOCATED, WILL APPLY NO MATTER WHERE YOU LIVE OR USE THE ACCOUNT.

Federal courts sitting in diversity apply the choice-of-law rules of the forum state. Prudential Ins. Co. of Am. v. Kamrath, 475 F.3d 920, 924 (8th Cir.2007). Under Missouri law, a choice-of-law clause in a contract generally is enforceable unless application of the agreed-to law is "contrary to a fundamental policy of Missouri." Kagan v. Master Home Prods., Ltd., 193 S.W.3d 401, 407 (Mo.Ct.App. 2006). The District Court held that the binding arbitration provision and the class-action waiver, if enforced under Delaware law, would be contrary to a fundamental policy of Missouri. Chase argues that the court's choice-of-law analysis was flawed and urges reversal on that ground. We find it unnecessary to resolve the choice-of-law question, however, because we would reverse the District Court whether we apply the law of Missouri or Delaware. See Kamrath, 475 F.3d at 924 (declining to decide choice-of-law issue where that decision would have no impact on the outcome of the case). The parties seem to agree that the application of Delaware law would be dispositive in favor of Chase. Because the application of Missouri law presents a closer case, we will proceed with our analysis as if Missouri law applied.

Under the Federal Arbitration Act, a written arbitration agreement such as the one at issue here "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Section 2 reflects congressional intent "to overcome judicial hostility to...