Chirag Patel v. Regions Bank ( 2020 )

Case: 19-30582 Document: 00515389480 Page: 1 Date Filed: 04/21/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-30582 April 21, 2020
Summary Calendar
Lyle W. Cayce
Clerk
CHIRAG PATEL,
Plaintiff - Appellant
v.
REGIONS BANK, an Alabama corporation; TRANS UNION, L.L.C., a
Delaware limited liability company; EXPERIAN INFORMATION
SOLUTIONS, INCORPORATED, an Ohio corporation,
Defendants - Appellees
Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:18-CV-796
Before STEWART, HIGGINSON, and COSTA, Circuit Judges.
PER CURIAM:*
Chirag Patel (“Patel”) is a customer of defendant Regions Bank
(“Regions”) and holds a credit card with Regions that was purportedly stolen
and used to make around $18,000 USD in unauthorized purchases. According
to the credit card agreement (“the agreement”), any and all claims arising from
activities related to the card are subject to Alabama law and must be resolved
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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by arbitration. After Patel filed this suit, Regions filed a motion to compel
arbitration in order to give effect to the arbitration clause of the agreement.
Patel opposed the motion to compel arbitration and, alternatively, filed a
motion to compel arbitration against two of the three major credit reporting
bureaus that remain party to this suit, defendant TransUnion, LLC
(“TransUnion”) and defendant Experian Information Solutions, Inc.
(“Experian”). In doing so, Patel asserted that if his claims against Regions are
subject to arbitration, that TransUnion and Experian are also subject to
arbitration because of their contractual relationships with Regions. The
district court disagreed and granted Regions’ motion to compel arbitration and
denied Patel’s motion to compel arbitration. Patel timely appealed. For the
reasons set forth herein, we AFFIRM the district court’s denial of Patel’s
motion to compel arbitration against TransUnion and Experian.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Facts
On November 22, 2016, Patel applied for a consumer credit card with
Regions. The credit card application indicated that, if approved, Patel’s account
would be governed by the credit card agreement sent with the credit card. The
application also indicates that the agreement provides that “all disputes
regarding an Account or the Agreement are subject to binding arbitration
which impacts your rights to participate in a class action or similar judicial
proceeding.” Page six of the agreement states that Regions “may get and
review [the consumer’s] credit history from credit reporting agencies and
others. [Regions] also may provide information about [the consumer] and [the
consumer’s] account to credit reporting agencies and others.” Regions then
provides its address for consumer debtors to send letters if the consumer
believes that Regions has “furnished inaccurate or incomplete information”
about the consumer to the credit reporting agency. The agreement
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unequivocally provides that it is governed by Alabama law and any applicable
federal laws. Regions approved Patel’s application on November 23, 2016 and
sent a copy of the agreement thereafter. In December 2017, Patel was made
aware of unfamiliar charges on his Regions Bank Visa credit card that maxed
out his credit line of $18,000. After contesting these charges via phone and in
writing, Regions investigated the charges and ultimately determined that the
charges were not fraudulent and required Patel to pay the balance on the
account. Patel maintained that the charges were indeed fraudulent and
refused to pay the balance. In turn, Regions reported the delinquency to the
three major credit reporting agencies (“CRAs”) Equifax, TransUnion, and
Experian. Patel formally disputed the charges with each agency—he claims
that they all “failed to reasonably investigate” the charges. He says that his
credit has been severely damaged, resulting in the closing of other accounts
and his inability to lease an apartment in his name.
B. Procedural History
Patel filed suit on August 24, 2018 against Regions and the CRAs. He
filed a claim under the Fair Credit Reporting Act (15 U.S.C. § 1681) against
the CRAs and Regions along with additional claims against Regions under the
Telephone Consumer Protection Act (47 U.S.C. § 227) and the Fair Credit
Billing Act (15 U.S.C. § 1666(a)). Patel settled his claims with Equifax which
left only the claims against TransUnion, Experian, and Regions. Regions
moved to compel arbitration pursuant to the arbitration provision in the
agreement. Several days later, TransUnion and Experian moved to stay the
claims against them pending the outcome of the arbitration between Patel and
Regions. Patel opposed Regions’ motion to compel arbitration but,
simultaneously, moved to compel TransUnion and Experian to arbitration in
the event that Regions’ motion to compel was granted. TransUnion and
Experian jointly opposed Patel’s motion to compel arbitration, but, Regions did
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not oppose the arbitration of all of the claims against all of the defendants in a
single arbitration proceeding.
The district court granted Regions’ motion to compel arbitration and
denied Patel’s motion to compel the remaining CRAs to arbitration. It
reasoned, “there is a rebuttable presumption that non-signatories to a contract
cannot be bound by arbitration agreements. (citations omitted). There is no
provision setting forth that TransUnion or Experian were to directly benefit
from the terms of the Application or the Credit Card Agreement.” Patel timely
appeals the denial of his motion to compel arbitration.
II. STANDARD OF REVIEW
We review a district court’s denial of a motion to compel arbitration de
novo. Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 2012).
III. DISCUSSION
The parties agree that this dispute is governed by Alabama law. The sole
issue before us is whether the non-signatory defendants-appellees TransUnion
and Experian can be compelled to arbitration pursuant to an agreement to
which they were neither expressly nor implicitly a party. We hold that the
district court properly denied Patel’s motion to compel TransUnion and
Experian to arbitration.
Generally, Patel argues that the district court erred as a matter of law
“by injecting an inapplicable rule of Texas state contract law governing third-
party beneficiaries.” Indeed, the district court applied Fifth Circuit law with
respect to the federal doctrine of direct benefits estoppel; however, Patel
concedes that the federal doctrine is consistent with Alabama’s versions of the
doctrine. In any event, the outcome is the same under comparable Alabama
doctrines. The district court’s application of Fifth Circuit precedent yields the
same outcome as if it applied Alabama’s equitable estoppel theory.
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“Assent to arbitrate is usually to be manifested through a party’s
signature on the contract containing the arbitration provision.” Ex parte
Stamey, 776 So. 2d 85, 88–89 (Ala. 2000). But, “both Federal courts and
Alabama courts have enforced exceptions to this rule,” one of those exceptions
being equitable estoppel and the other “a third-party beneficiary theory that
affords the third party all the rights and benefits, as well as the burdens, of
that contract, including those associated with arbitration.” Id. at 89 (collecting
cases). Twenty years ago, Alabama’s equitable estoppel theory was as follows:
In order for a party to be equitably estopped from asserting that
an arbitration agreement cannot be enforced by a nonparty, the
arbitration provision itself must indicate that the party resisting
arbitration has assented to the submission of claims against
nonparties—claims that would otherwise fall within the scope of
the arbitration provision—to arbitration. See Ex parte Napier, [723
So. 2d 49, 53 (Ala. 1998)]. All that is required is (1) that the scope
of the arbitration agreement signed by the party resisting
arbitration be broad enough to encompass those claims made by
that party against non-signatories [sic], or that those claims be
“intimately founded in and intertwined with” the claims made by
the party resisting arbitration against an entity that is a party to
the contract, and (2) that the description of the parties subject to
the arbitration agreement not be so restrictive as to preclude
arbitration by the party seeking it. See Id. In other words, the
language of the arbitration agreement must be so broad that the
nonparty could assert that in reliance on that language he believed
he had the right to have the claims against him submitted to
arbitration, and, therefore, that he saw no need to enter into a
second arbitration agreement.
Id.
Now, Alabama’s equitable estoppel theory appears to be a fraternal twin
of Alabama’s third-party beneficiary status theory. Under the third-party
beneficiary status theory, a non-signatory can be subject to an arbitration
agreement “if the contracting parties intended . . . to bestow a direct benefit,
as opposed to incidental benefit, [sic] upon the third party” when the contract
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was executed. Custom Performance, Inc. v. Dawson, 57 So.3d.90, 97 (Ala. 2010).
Alabama’s equitable estoppel theory says that “[r]egardless of whether a non-
signatory [sic] is in fact a third-party beneficiary, the non-signatory [sic] is
treated as a third-party beneficiary—and is equitably estopped from avoiding
arbitration—when he or she asserts legal claims to enforce rights or obtain
benefits that depend on the existence of the contract that contains the
arbitration agreement.” Id. at 97–98 (emphasis in original).
Indeed, the arbitration provision provides that “either party may elect to
resolve by BINDING ARBITRATION any . . . claim . . . between you and us . .
. .” But, it is clear that neither TransUnion nor Experian are parties to the
agreement because they did not sign it; as nonparties/non-signatories to the
agreement, TransUnion and Experian also never asserted any claims against
Patel in order to enforce the arbitration agreement against him. Patel argues
that the CRAs obtained a direct benefit because they could not conduct
business with Regions—or anyone else—but for Patel’s authorization to obtain
and provide his credit reports. He argues that these authorizations conferred
a direct benefit to the CRAs that “enable the credit reporting agencies to legally
render services in compliance with the FCRA” and “avoid civil liability
exposure for noncompliance.”
The bottom line here is that TransUnion and Experian have no claims
against Regions or Patel that they seek to resolve by arbitration. Patel wants
to enforce the agreement’s arbitration provision against TransUnion and
Experian to resolve the claims he has against them. The agreement does
contemplate the consolidation of claims against third parties, but in a limited
fashion. It says that the “agreement to arbitrate shall include any Claim
involving our current and former officers, directors, employees . . . any third
party that assigned any agreements to us . . . and any such Claim against any
of those parties may be joined or consolidated with any related Claim against
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us in a single arbitration proceeding.” Patel has not shown us how TransUnion
or Experian qualifies as a third party that has “assigned any agreements” to
Regions. In turn, it does not seem like Regions, or Patel for that matter,
“intended to bestow a direct benefit” on them. Accordingly, we hold that neither
Alabama’s equitable estoppel theory nor its third-party beneficiary status
theory are applicable to compel TransUnion and Experian to arbitration.
IV. CONCLUSION
For the aforementioned reasons, we AFFIRM the district court’s denial
of Patel’s motion to compel arbitration.
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