Parm v. Bluestem Brands, Inc.
| Decision Date | 30 March 2017 |
| Docket Number | Civil No. 16-624 (JRT/BRT),Civil No. 15-3437 (JRT/BRT) |
| Parties | JESSICA PARM, Plaintiff, v. BLUESTEM BRANDS, INC., Defendant. SARA ARCE, ANNE BOWERS, and NENA OSORIO, Plaintiffs, v. BLUESTEM BRANDS, INC., Defendant. |
| Court | U.S. District Court — District of Minnesota |
Charles D. Moore and Melissa W. Wolchansky, HALUNEN LAW, 1650 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402, and Jeffrey D. Kaliel, TYCKO & ZAVAREEI LLP, 1828 L Street N.W., Suite 1000, Washington, D.C. 20036, for plaintiffs.
Aaron D. Van Oort, Erin L. Hoffman, and Aaron Knoll, FAEGRE BAKER DANIELS LLP, 90 South Seventh Street, Suite 2200, Minneapolis, MN 55402, for defendant.
Plaintiffs Jessica Parm, Sarah Arce, Anne Bowers, and Nena Osorio (collectively, "Plaintiffs") are consumers who purchased goods from Defendant Bluestem Brands, Inc. ("Bluestem") through a catalog and online retailer Bluestem operates that goes by the name of "Fingerhut." Plaintiffs challenge the legality of a number of Bluestem's practices related to pricing of goods and the interest rates and disclosures regarding private-label revolving credit accounts. Arguing that arbitration provisions found in the terms and conditions governing the private-label revolving credit accounts are applicable to all of Plaintiffs' claims, Bluestem moves to compel arbitration and to dismiss Plaintiffs' claims without prejudice, or in the alternative, to stay Plaintiffs' claims pending arbitration.
The Court will grant Bluestem's motion in part because the Court finds that some of Plaintiffs' claims arise out of or relate to the applicable credit agreements and/or Plaintiffs' relationship with the banks providing the credit. However, the Court will deny Bluestem's motion as to Plaintiffs' claims alleging that Bluestem's pricing scheme is unlawful, since Bluestem sets the prices for goods it sells wholly unrelated to the credit agreements - between Plaintiffs and the banks providing the credit - that contain the arbitration provisions.
Bluestem, which does business under a number of names - including "Fingerhut" - is a consumer retail business incorporated in Delaware with its principal place of business in Minnesota. (Parm Decl. of Erik Svensen in Supp. of Def.'s Consol. Mot.("Svensen Decl.") ¶ 4, June 17, 2016, Docket No. 76.)1 Fingerhut "provide[s] a mix of retail and payment options to customers across the United States through direct mail and Internet shopping channels." (Id.)
Financing is available through a partnership between Fingerhut and a third-party bank, which allows customers to pay for their purchases from Fingerhut with private-label revolving credit accounts.2 (Id. ¶¶ 5-6.) The offers for credit are made available on Fingerhut's website and in Fingerhut catalogs; customers may apply for a revolving credit account on Fingerhut's website or over the phone. (Id. ¶ 5; Parm App. to Def.'s Mem. of Law in Supp. of Consol. Mot. ("App.") at 112-13, 270, 324-31, 462-63, June 17, 2016, Docket No. 75.) Prior to mid-2012, Bluestem partnered with MetaBank, an FDIC-insured bank headquartered in South Dakota, to offer credit to Fingerhut customers. (Svensen Decl. ¶ 6.) Bluestem subsequently switched its financing partner from MetaBank to WebBank,3 an FDIC-insured bank headquartered in Utah, and on July 1, 2012, WebBank purchased all Fingerhut credit accounts from MetaBank. (Id.¶¶ 5-6.) At all relevant times, the Banks lent money to consumers and collected interest on credit balances from consumers. (Id. ; App. at 504-11; Parm Decl. of Melissa W. Wolchansky ("Wolchansky Decl."), Ex. 5 at BLUESTEM000820-27, July 15, 2016, Docket No. 83.)Bluestem, through a contract with the Banks, "serviced" the revolving credit accounts, meaning that Bluestem communicated with consumers, advertised and made the offers of credit to consumers, accepted consumers' credit applications, reviewed those applications to determine whether the consumers met the underwriting criteria, sent out bills to consumers, accepted payment from consumers, and dealt with all disputes with consumers. (Svensen Decl. ¶¶ 5-6; App. at 105-06, 504-11, 545-51; Wolchansky Decl., Ex. 5 at BLUESTEM000820-27.) Bluestem retained control of selecting merchandise sold on Fingerhut's website and in its catalogs, setting prices, and selling that merchandise. (App. at 106-07.)
As part of Bluestem's agreement with the Banks, at all relevant times Bluestem agreed to offer and promote a "debt waiver product," known as SafeLine Account Protection ("SafeLine"), on the Banks' behalf. (Id. at 510-11, 586-92, 596-99; Wolchansky Decl., Ex. 5 at BLUESTEM000821-22.) For a monthly fee charged to an account-holder's revolving credit account, an account-holder enrolled in SafeLine becomes eligible for suppression of the credit account in the event of unemployment or disability and waiver of the entire outstanding balance in the event of death. (Id. at 586-87.)
Fingerhut's catalogs and website list prices for goods in two ways: (1) a total price, and (2) a monthly payment. A sample Fingerhut catalog from July 2013 states that any given advertised monthly price "includesinterest and assumes you have a Fingerhut Credit Account issued by [the Banks] and will vary depending on your account balance and other factors." (App. at 274.)
At all relevant times, the Banks' revolving credit accounts have been governed by credit agreements between the applicable Bank (MetaBank before 2012, WebBank after 2012) and the account-holder. (Id. at 1-8.) Each credit agreement provided that it would go into effect at the time the account-holder's first transaction was posted to their account. (Id. at 1, 3, 5, 7.)
The terms of the credit agreements have evolved over time. The earliest relevant agreement is the MetaBank Fingerhut Credit Account Agreement (the "2010 Agreement"), which became effective in August 2010. (Id. at 7-8.) The credit agreement was updated first in 2012, when MetaBank sold all of its accounts to WebBank; the new agreement, titled the WebBank Fingerhut Credit Account Agreement (the "2012 Agreement"), became generally effective July 1, 2012. (Id. at 3-4.) The agreement was updated again on March 7, 2013 (the "2013 Agreement") and June 25, 2014 (the "2014 Agreement").4 (Id. at 1-2, 5-6.) Each of the credit agreements contains an arbitration provision as well as a provision permitting the Banks to unilaterally change terms at any time. (Id. at 1-8.)
Separate from the credit agreements, Fingerhut's website has Terms of Use, which are "the terms on which [a consumer] may purchase products and services through [the Fingerhut website]." (Wolchansky Decl., Ex. 1 at 56:5-15.) The Terms of Use state:
(Id., Ex. 2 at 12-13.) The Terms of Use do not mention arbitration. (Id.)
Plaintiffs Parm, Arce, Bower, and Osorio are citizens of Georgia, California, Texas, and Florida, respectively. Each Plaintiff was at one time a Fingerhut customer who utilized a revolving credit account from WebBank and/or MetaBank to pay for their Fingerhut purchases.
On August 23, 2010, Parm applied for and was approved for a credit account from MetaBank on Fingerhut's website. (App. at 22, 27-28, 38-39.) On January 23, 2011, Bowers also applied for a credit account on Fingerhut's website. (Svensen Decl. ¶ 7.)Parm's and Bowers's applications were approved based on MetaBank's criteria. (Id. ¶¶ 7-8.) As part of the application process, Parm and Bowers selected a box indicating that they accepted the applicable terms. (App. at 112-13.) Subsequently, Bluestem sent Parm and Bowers a Welcome Packet in the mail, including a paper copy of the 2010 Agreement. (Id. at 181-92.)
MetaBank sold Parm's and Bowers's credit accounts to WebBank in 2012. To notify Parm and Bowers of the change, Bluestem sent a letter in the mail. (Id. at 69-70, 233-35.) The letter did not mention any new terms and conditions nor did it mention arbitration.5 (Id. at 233.) While Bluestem posted a link in the footer of the Fingerhut website to the "Revolving Fingerhut Credit Account Terms and Conditions" on October 24, 2012, (Svensen Decl. ¶ 11), Bluestem did not send a hard copy of the 2012 Agreement to Parm or Bowers.
In December 2012, before the 2013 Agreement went into effect, Bluestem sent Bowers a document titled "Important Changes to Your Account Terms," as a second page to her monthly billing statement. (App. at 236-37.) This document discussed only changes in the interest rate and late fees and contained no mention of arbitration. (Id.) Bluestem did not send a similar notice to Parm.
Before the 2014 Agreement went into effect, Bluestem sent Parm a written notice with her monthly billing statement in April 2014 that highlighted "Important Changes to Your Account Terms." (Id. at 477.) This document listed only changes in late fees, returned payment fees, and minimum monthly payments, and it stated: "You do not have the right to reject these changes to your Account." (Id.) In May 2014, Bluestem sent Bowers a letter informing her of "changes and updates related to [her] account." (Id. at 478.) The letter provided...
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