Regan v. Stored Value Cards, Inc.

• Decision Date: 13 January 2015
• Docket Number: Civil Action No. 1:14–CV–01187–AT.
• Parties: Robert REGAN, on behalf of himself and all others similarly situated, Plaintiff, v. STORED VALUE CARDS, INC. and Central National Bank And Trust Company, Enid, Oklahoma, Defendants.
• Court: U.S. District Court — Northern District of Georgia

85 F.Supp.3d 1357

Robert REGAN, on behalf of himself and all others similarly situated, Plaintiff

v.STORED VALUE CARDS, INC. and Central National Bank And Trust Company, Enid, Oklahoma, Defendants.

Civil Action No. 1:14–CV–01187–AT.

United States District Court, N.D. Georgia, Atlanta Division.

Signed Jan. 13, 2015.

Edward Adam Webb, Matthew C. Klase, Webb, Klase & Lemond, LLC, Atlanta, GA, Robert H. Stansfield, Greer, Stansfield & Turner, LLP, Covington, GA, for Plaintiff.

Jessica L. Nelson, Russell S. Ponessa, Hinshaw & Culbertson, LLP, Minneapolis, MN, Brenton Sewell Bean, Hawkins Parnell Thackston & Young, LLP, Atlanta, GA, for Defendants.

ORDER

AMY TOTENBERG, District Judge.

This matter is before the Court on Defendants' Motion to Compel Arbitration and Stay or Dismiss Proceedings [Doc. 7] pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 –16. Defendants contend that Plaintiff is bound by a contractual arbitration agreement arising from Plaintiff's use of a prepaid debit card. As material factual disputes exist regarding the formation of the contract containing the arbitration agreement, Defendants' Motion is DENIED.

I. Legal Standard

Defendant has asked the Court to compel arbitration under Sections 3 and 4 of the FAA. (Doc. 7–1 at 1.) As a starting place, the Court is “mindful of the Supreme Court's instruction that ‘arbitration is simply a matter of contract.’ ” Dasher v. RBC Bank (USA), 745 F.3d 1111, 1116 (11th Cir.2014), cert. denied, ––– U.S. ––––, 135 S.Ct. 144, 190 L.Ed.2d 231 (2014) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ). Due to the contractual nature of arbitration, “the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute.” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ; see also Chastain v. Robinson–Humphrey Co., Inc., 957 F.2d 851, 854 (11th Cir.1992). A court must first consider “any formation challenge to the contract containing the arbitration clause,” Solymar Invs., Ltd. v. Banco Santander S.A., 672 F.3d 981, 990 (11th Cir.2012), because “a party plainly cannot be bound by an arbitration clause to which it does not consent.” BG Grp., PLC v. Republic of Argentina, ––– U.S. ––––, 134 S.Ct. 1198, 1213, 188 L.Ed.2d 220 (2014) (citing Granite Rock Co. v. Teamsters, 561 U.S. 287, 299, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) ). Section 4 of the FAA is clear on this point: “If the making of the arbitration agreement [is] in issue, the court shall proceed summarily to the trial thereof”—as opposed to ordering arbitration pursuant to that agreement. 9 U.S.C. § 4.¹

Unless there is clear and unambiguous evidence that the parties agreed to have an arbitrator decide disputes over contract formation, Martinez v. Carnival Corp., 744 F.3d 1240, 1246 (11th Cir.2014) (quoting and citing Rent–A–Center, W., Inc. v. Jackson, 561 U.S. 63, 68–69, 79, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) ), such “gateway” issues of “arbitrability” are “for a court to decide.” BG Grp., 134 S.Ct. at 1213 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ). And while “the validity of an arbitration agreement is generally governed by the Federal Arbitration Act,” “state law generally governs whether an enforceable contract or agreement to arbitrate exists” at all. Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367–68 (11th Cir.2005).² A genuine dispute of fact concerning contract formation precludes a court from deciding as a matter of law that the parties did or did not enter into an agreement to arbitrate. See Granite Rock Co. v. Teamsters, 561 U.S. at 297–99, 130 S.Ct. 2847 (holding that the district court must first “resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce”); Solymar Investments, Ltd. v. Banco Santander S.A., 672 F.3d 981, 989–90 (11th Cir.2012) ; Magnolia Capital Advisors, Inc. v. Bear Stearns & Co., 272 Fed.Appx. 782, 785–86 (11th Cir.2008). Finally, “a district court considering the making of an agreement to arbitrate should give to the party denying the agreement the benefit of all reasonable doubts and inferences that may arise.” Id. at 786 (internal quotation marks omitted).

II. Factual Background

On January 15, 2014, Plaintiff, a 67 year old man, was arrested based on a warrant sworn out by a local merchant,³ jailed overnight at the Rockdale County Jail (“Rockdale”), and then released the next day. (Compl. ¶¶ 38, 40.) When he was booked, the officers at Rockdale took the $764.00 in cash he had on his person. (Id. ¶ 39.) When he was released, the officers did not give him cash, but rather “assigned” him a Numi Prestige Prepaid Mastercard (the “Card”) loaded with the same amount of money. (Pl.'s Resp. Ex. A ¶ 11, Decl. of Robert Regan, Doc. 12–1.) Plaintiff did not want the Card, but he “was not given any option of receiving [his] $764.00 in cash or by check.” (Id. ¶¶ 15–16.)

After the officers—who are not parties to this suit—handed Plaintiff the Card, they handed him “numerous” documents pertaining to his arrest, booking, and release. (Id. ¶¶ 12–13.) Among these numerous documents was a very fine print “Cardholder Agreement Terms & Conditions” (the “Cardholder Agreement”) for the Card containing a binding arbitration provision and detailing the fees applicable to various Card uses.⁴ (Def.'s Mot. Ex. A, Decl. of Brad D. Golden Ex. 2, Doc. 7–2 at 9–10.) At the time, Plaintiff did not realize the Cardholder Agreement was a part of the packet of documents he received, at least partially because the officers “did not comment on the purpose or importance of the [Cardholder Agreement] or make any effort to distinguish [it] from the numerous other documents they gave [him].” (Regan Decl. ¶ 13.) In fine print, the back of the Card also states, “Use of this card constitutes acceptance of all terms and conditions as set forth in the Cardholder Agreement.” (Golden Decl. Ex. 1, Doc. 7–2 at 7.)

Plaintiff, who “had seldom ever used an ATM card in past,” (Compl. ¶ 44), then attempted to retrieve his money off of the Card. First, he went directly to his bank to obtain a release of his cash. (Regan Decl. ¶ 18.) He asked the teller if he could simply exchange the Card for cash. (Regan Decl. ¶ 20.) He was told he could not because his name was not imprinted on the Card. (Id. ) The bank teller advised him he could only retrieve his money by using the Card in various other ways, which Plaintiff then proceeded to do: namely, ATM withdrawals in the daily-maximum amount and point-of-sale purchases, with each transaction triggering a use fee. (Id. ¶¶ 20–30.) In doing so, Plaintiff incurred some $16.00 in fees in accordance with the terms of the Cardholder Agreement. (Id. ) Plaintiff likely also was charged an account maintenance fee for the two or so weeks the card had money on it. (Id. ¶ 29–30.) The company that supplies the cards to the jail would have charged this maintenance fee in accordance with the terms of the Cardholder Agreement. Plaintiff's Complaint alleges that the costs of this prepaid debit card program are passed on to the released inmates in the form of these and other high fees, even though Plaintiff and other ex-inmate “customers” have not voluntarily enrolled in the program or entered into a contract for such services and fees. (Compl. ¶¶ 23–30.)

Defendant Stored Value Cards, Inc. (“SVC”) is a company that acts as an intermediary between the banks that issue these prepaid cards and jails that have chosen to use these cards as a replacement for the tried and true practice of refunding inmates' their personal cash upon release to inmates.⁵ (Id. ¶¶ 2, 13–15) Defendant Central National Bank and Trust Company (“CNB”) is one such issuing bank. (Id. ¶ 3.) In this particular case, SVC contracted with a third-party, which then contracted with the Rockdale County Sheriff's Department. (Golden Decl. ¶ 6.) As a result, SVC supplied Rockdale County Jail with a CNB-issued card—the Card at issue here—which was then assigned to Plaintiff upon his release from jail.

On March 17, 2014, Plaintiff filed a putative class action against Defendants in the Superior Court of Rockdale County, Georgia.

(See Compl.) Plaintiff claims he, and not Defendants, is entitled to the fees charged to him for his use of the Card. Plaintiff seeks declaratory and injunctive relief, as well as damages for unjust enrichment, conversion, and unconstitutional deprivation of property without due process of law in violation of 42 U.S.C. § 1983. (Id. ¶¶ 64–96.) On April 22, 2014, the action was removed to federal court on the basis of federal question jurisdiction and pursuant to the Class Action Fairness Act. (See Doc. 1.) Five days after removal, Defendants filed the Motion to Compel [Doc. 7] currently before the Court.

III. Discussion

Defendants urge the Court to compel arbitration for multiple reasons. First, Defendants allege that Plaintiff is a party to the binding arbitration clause within the Cardholder Agreement. (Mot. to Compel at 16–17.) Defendants argue that the Cardholder Agreement is valid under both Oklahoma and Georgia law, (id. at 17–20), and that Plaintiff agreed to the terms of the Cardholder Agreement by accepting and using the card. (Id. at 17–23.) Defendants also contend that Plaintiff failed to opt out of arbitration, as allowed in theory under the Cardholder Agreement. (Id. at 11–12.)

In addition, Defendants argue that, though the arbitration agreement is not unconscionable, even if it were, “alleged unconscionability does not preclude enforcement of the Arbitration Provision....” (Id. at 20–23.) Defendants urge the Court to require the question of the enforceability of the entire cardholder agreement to be submitted to an arbitrator. (Id. at 23–24.)

Defendants'...