Gipson v. Cross Country Bank

Decision Date28 January 2005
Docket NumberNo. CIV.A. 2:03CV269-A.,CIV.A. 2:03CV269-A.
Citation354 F.Supp.2d 1278
PartiesGia S. GIPSON, Plaintiff, v. CROSS COUNTRY BANK, Defendant.
CourtU.S. District Court — Middle District of Alabama

Christopher W. Weller, Capell Howard PC, Montgomery, AL, George C. Douglas, Jr., Birmingham, AL, James N. Walter, Jr., Capell Howard PC, Montgomery, AL, Jerry L. Thornton, Law Office of Jerry L. Thornton, Hayneville, AL, Wyndall A. Ivey, Capell Howard PC, Montgomery, AL, for Gla S. Gipson individually and on behalf of all other personal credit card holders of the Defendant who are similarly situated, Plaintiff.

Alan S. Kaplinsky, Ballard, Spahr, Andrews & Ingersoll, Arleigh P. Helfer, III, Ballard, Spahr, Andrews & Ingersoll, Mark J. Levin, Ballard, Spahr, Andrews & Ingersoll, Martin C. Bryce, Jr., Ballard, Spahr, Andrews & Ingersoll, Philadelphia, PA, Robert Howard Rutherford, Burr & Forman LLP, Birmingham, AL, for Cross Country Bank, Defendant.


ALBRITTON, Senior District Judge.


This cause is before the court on Defendant Cross Country Bank's ("Cross Country") Renewed Emergency Motion to Enforce Compliance with the Court's November 26, 2003 Order (Doc. # 47), Motion to Enjoin (Doc. # 51), and Revised Motion to Enjoin Plaintiff from Pursuing a Class Action Claim in Arbitration (Doc. # 56). The court held oral argument on the motions on January 6, 2005.

For the reasons to be discussed, Defendant's motions are due to be GRANTED.


On February 10, 2003, Plaintiff Gia S. Gipson commenced this action by filing a class action complaint in the Circuit Court of Lowndes County, Alabama, alleging that Cross Country violated a section of the Fair Credit Billing Act ("FCBA"), 15 U.S.C. § 1666(c), and regulations issued thereunder.1 Defendant removed this action to this court on March 11, 2003 and filed a Motion to Compel Arbitration, to Stay Discovery, and to Dismiss Class Allegations as Moot. In opposition, Plaintiff asked the court to deny the motion because (1) the entire Cardholder Agreement was void ab initio because of the provision which allowed Cross Country to unilaterally change provisions, (2) the arbitration agreement itself was unenforceable because the waiver of class action claims limited statutory remedies and (3) the arbitration agreement itself was unenforceable because it was unconscionable.

In addressing these issues raised by the Plaintiff, this court issued a Memorandum Opinion and Order (Doc. # 34-35) on November 26, 2003. See Gipson v. Cross Country Bank, 294 F.Supp.2d 1251 (M.D.Ala.2003). This court held that the first issue should be determined by the arbitrator. As to the other two issues brought before this court by the Plaintiff, the court found that they were matters to be resolved by the court and held, as a matter of law, that the arbitration agreement was not unconscionable and did not limit statutory remedies by its prohibition of class claims. Therefore, the court found that the arbitration agreement was enforceable and, since the agreement prohibits class claims, this court dismissed the class allegations and ordered Plaintiff "to submit her individual claims against Cross Country to binding arbitration in accordance with the arbitration clause in the Cross Country Bank Credit Card Agreement."2

Plaintiff gave Notice of Appeal to the United States Court of Appeals for the Eleventh Circuit, but on May 25, 2004, the Court of Appeals dismissed the appeal for lack of appellate jurisdiction, pointing out that no interlocutory appeal had been certified. Arbitration proceedings were then begun.

On August 11, 2004, Defendant filed a Motion to Enforce Plaintiff's Compliance with the Court's November 26, 2003 Order and Memorandum Opinion Regarding Arbitration (Doc. # 42), alleging that the Plaintiff had violated the court's order by commencing an arbitration against the Defendant seeking class relief, rather than submitting only her individual claim as ordered. This court denied Defendant's motion without prejudice, finding the motion premature. This court explained that it had "no reason to speculate that the arbitrator would ignore the court's decision" and "must assume that the arbitrator would enforce the class claim prohibition which the court has held to be enforceable." This court went on to state that "[i]f, for some reason, the arbitrator should fail to enforce the class action prohibition contained in the arbitration agreement, and should further make a class award, the Defendant will be free to then challenge that in this court as exceeding the arbitrator's powers, pursuant to 9 U.S.C. § 10."

On October 5, 2004, the arbitrator issued an order that concluded that "[s]ince the question of enforceability of the class prohibition, as well as any other questions which do not go to the issue of the validity of the arbitration clause, are mine to determine, the prior determination of those issues by the District Court is of no moment." Pl. Resp. Br., Exh. B. While the arbitrator acknowledged the principle that the authority of the arbitrator is limited by a referral order, the arbitrator went on to point out that the cases make clear that courts may not circumscribe the subject matter of the arbitration unless there is some question that is presumptively for the court to decide. Id. The arbitrator saw "no legal distinction between a clause limiting remedies and one limiting available procedural tools [that is, one limiting class-wide arbitration], for purposes of deciding whether a gateway matter is involved." Id. In concluding that this court misapplied the law, the arbitrator "assume[d] that, had the District Court been cited Anders [v. Hometown Mortgage Services, Incorporated, 346 F.3d 1024 (11th Cir.2003)], it would have reached the same conclusion I have." Id.

On December 8, 2004, Cross Country filed a Renewed Emergency Motion to Enforce Compliance with the Court's November 26, 2003 Order. The Defendant requested relief because the Plaintiff not only submitted her individual claim to arbitration, as directed by this court, but also requested class action treatment, and the arbitrator's October 5, 2004 Order held that the determination of whether the express "no-class action" provision is valid and enforceable was a matter to be decided by the arbitrator. Furthermore, JAMS, which governs the actions of its arbitrators, one of whom is the arbitrator with this case, publicly announced that its arbitrators will not enforce class action preclusion clauses. See Def. Br. Exh. J.

On December 16, 2004, this court ordered the case restored to the court's active docket, directed the parties to file with the court copies of all briefs filed by them with the arbitrator, and set a hearing in this case for January 6, 2005. The court found, tentatively, subject to briefing and oral argument, that both as a matter of law and as a matter of judicial economy, the question as to whether this arbitration should proceed on an individual basis as ordered by the court, or whether the arbitrator was free to allow Plaintiff to proceed on a class-wide basis, should be determined at this time in a manner reviewable by the Eleventh Circuit Court of Appeals.3

On December 20 and 23, 2004, respectively, Defendant filed a Motion to Enjoin and a Revised Motion to Enjoin Plaintiff from Pursuing a Class Action Claim in Arbitration. These motions sought an injunction under section 4 of the Federal Arbitration Act ("FAA") to specifically compel arbitration in accordance with the express terms of the arbitration agreement, prohibiting class arbitration.


Defendant's motions present the question as to whether the validity and enforceability under the FAA of an express `no-class action' clause in an arbitration agreement is an issue to be determined by the courts or by individual arbitrators. Before discussing the merits of this issue, this court must first address Defendant's preclusion arguments.

A. Preclusion

Defendant disputes Plaintiff's contention that the arbitrator, not this court, should have decided the validity and enforceability of the class action waiver. Defendant contends that Plaintiff is not only wrong, but also that the theories of waiver and judicial estoppel preclude her from making that argument. Specifically, Defendant argues that Plaintiff asked this court to rule on the validity of the class action waiver on two separate occasions. Defendant contends that in Plaintiff's earlier briefings, Gipson did not argue that an arbitrator should have determined the validity of the class action waiver clause; rather, it was only after this court's adverse ruling on the conscionability of the class action waiver clause that Plaintiff then argued that it was improper for the court to rule on the issue.

1. Waiver

A party may waive the right to arbitrate by its conduct, such as invoking "litigation machinery" prior to seeking arbitration and acting inconsistently with a right to arbitrate. S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir.1990), cert. denied, 498 U.S. 1026, 111 S.Ct. 677, 112 L.Ed.2d 669 (1991). "Waiver occurs when a party seeking arbitration substantially participates in litigation to a point inconsistent with an intent to arbitrate and this participation results in prejudice to the opposing party.... Prejudice has been found in situations where the party seeking arbitration allows the opposing party to undergo the types of litigation expenses that arbitration was designed to alleviate." Morewitz v. West of Eng. Ship Owners Mut. Protection & Indem. Ass'n, 62 F.3d 1356, 1366 (11th Cir.1995), cert. denied, 516 U.S. 1114, 116 S.Ct. 915, 133 L.Ed.2d 845 (1996).

This court finds that Plaintiff did not participate in litigation "to a point inconsistent with an intent to arbitrate." Id. In Anders, the Eleventh Circuit Court of Appeals alludes to the fact that cases where "parties are litigating...

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