Ayeni-Aarons v. Best Buy Credit Services/CBNA ( 2019 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 OSBERT AYENI-AARONS, No. 2:18-cv-01625-MCE-KJN 12 Plaintiff, 13 v. MEMORANDUM AND ORDER 14 BEST BUY CREDIT SERVICES/CBNA, et al., 15 Defendants. 16 17 This action arises out of Plaintiff Osbert Ayeni-Aarons’s purchase of an allegedly 18 defective laptop computer from Best Buy with a credit card issued by Defendant 19 Citibank, N.A. (“Citibank”). Presently before the Court is Citibank’s Motion to Compel 20 Arbitration and Stay this Action pursuant to an agreement to arbitrate between Plaintiff 21 and Citibank. ECF No. 24. For the following reasons, Citibank’s Motion is GRANTED. 22 23 BACKGROUND1 24 25 Plaintiff opened a Best Buy credit card account issued by Citibank (the “Account”) 26 in October 2013. Citibank’s Mot., ECF No. 24, at 2. At the time of its opening, the 27 1 The following recitation of facts is taken from Plaintiff’s Second Amended Complaint (“SAC”), 28 ECF No. 23, and Citibank’s Motion to Compel Arbitration (“Citibank’s Mot.”), ECF No. 24. 1 Account was subject to an arbitration clause (the “Arbitration Agreement”), which was 2 reflected in a Card Agreement. Citibank’s Mot., ECF No. 24, at 2. On or about 3 December 15, 2015, Citibank claims to have mailed Plaintiff a “Notice of Change in 4 Terms and Right to Opt Out” (the “2015 Notice”), which included a new Card Agreement 5 with an amended arbitration clause (“Amended Arbitration Agreement”). Id. Citibank’s 6 records reflect that the 2015 Notice was not returned by the postal service as 7 undeliverable. Id. The 2015 Notice stated that Citibank is “changing your card 8 agreement by replacing it with a new one,” and that the effective date for the changes, to 9 include changes to the Arbitration Agreement, was February 4, 2016. Id. 10 The fundamental dispute between these parties arises out of a transaction 11 involving a laptop computer that Plaintiff purchased from Best Buy in Elk Grove, 12 California on July 9, 2016. SAC ¶ 12. Plaintiff used the Account to purchase the laptop. 13 SAC ¶ 12. Plaintiff alleges that after purchasing the laptop, he discovered that it was 14 defective and attempted to exchange it on August 28, 2016 at Best Buy’s retail store in 15 Chico, California. SAC ¶ 16. During the exchange attempt at the Chico Best Buy, a 16 dispute ensued between Plaintiff and the Best Buy retail employees, which resulted in 17 the defective laptop being turned into Best Buy without Plaintiff receiving an operational 18 laptop in return. SAC ¶¶ 14, 15. After this incident, Plaintiff claims he sought assistance 19 from Best Buy’s customer service to no avail. SAC ¶ 16. Best Buy allegedly did not 20 return the defective laptop to Plaintiff or otherwise cancel the sale, but instead kept the 21 laptop and continued to charge Plaintiff for the purchase. SAC ¶ 17. 22 When Plaintiff stopped making payments on the laptop that was no longer in his 23 possession, negative reports regarding his credit worthiness were sent to the consumer 24 credit reporting agencies, which caused damage to Plaintiff’s credit score. SAC ¶ 17. 25 Plaintiff thereafter filed this action on June 5, 2018. ECF No. 1. By its instant Motion, 26 Citibank seeks to compel arbitration of the Plaintiff’s claims against it pursuant to the 27 Arbitration Agreement. 28 /// 1 STANDARD 2 3 The Federal Arbitration Act (“FAA”) governs the enforcement of arbitration 4 agreements involving interstate commerce. 9 U.S.C. § 2. The FAA allows “a party 5 aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written 6 agreement for arbitration [to] petition any United States district court . . . for an order 7 directing that such arbitration proceed in the manner provided for in [the arbitration] 8 agreement.” 9 U.S.C. § 4. Valid arbitration agreements must be “rigorously enforced” 9 given the strong federal policy in favor of enforcing arbitration agreements. Perry v. 10 Thomas, 482 U.S. 483, 489-90 (1987) (citation omitted). To that end, the FAA “leaves 11 no place for the exercise of discretion by a district court, but instead mandates that 12 district courts shall direct the parties to proceed to arbitration on issues as to which an 13 arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 14 213, 218 (1985) (emphasis in the original). 15 The Supreme Court has repeatedly recognized the strong national policy favoring 16 arbitration. See, e.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24-25 17 (1991) (FAA’s “purpose was …. to place arbitration agreements upon the same footing 18 as other contracts,” and recognizing a “liberal federal policy favoring arbitration 19 agreements”); Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 226 (1987) (FAA 20 “establishes a ‘federal policy favoring arbitration,’ . . . requiring that we rigorously enforce 21 agreements to arbitrate.’” (citations omitted); Mitsubishi Motors Corp. v. Soler Chrysler- 22 Plymouth, Inc., 473 U.S. 614, 625 (1985) (federal policy of FAA is one which guarantees 23 the enforcement of private contractual arrangements). 24 Given this policy, it is clear that a court is obligated to liberally interpret and 25 enforce arbitration agreements and to do so “with a healthy regard for the federal policy 26 favoring arbitration.” Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 27 24 (1983). Significantly, too, any doubts concerning arbitrability should be resolved in 28 favor of arbitration. Mitsubishi Motors Corp., 473 U.S. at 624 n.13 (noting that the 1 appellate court “properly resolved any doubts of arbitrability”); see also Hodsdon v. 2 Bright House Networks, LLC, 2013 WL 1499486 at *2 (E.D. Cal. Apr. 11, 2013) 3 (“Because there is a presumption in favor of arbitration, the Court is required to resolve 4 any doubts concerning the scope of arbitrable issues in favor of arbitration.”). 5 To determine the validity of an agreement to arbitrate, the district court looks to 6 “general state-law principles of contract interpretation, while giving due regard to the 7 federal policy in favor of arbitration.” Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 8 1049 (9th Cir. 1996). In assessing whether to compel arbitration, the Court may not 9 review the merits of the dispute. Instead, the Court must limit its inquiry to three steps: 10 (1) whether the contract containing the arbitration agreement evidences a transaction 11 involving interstate commerce; (2) whether there exists a valid agreement to arbitrate; 12 and (3) whether the dispute(s) fall within the scope of the agreement to arbitrate. 13 Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 476-78 (9th Cir. 1991) 14 15 ANALYSIS 16 17 A. Transaction Involving Interstate Commerce 18 The FAA provides that “[a] written provision in any . . . contract evidencing a 19 transaction involving commerce to settle by arbitration a controversy thereafter arising 20 out of such contract or transaction . . . shall be valid, irrevocable, and enforceable . . . .” 21 9 U.S.C. § 2. Section 1 defines “commerce” to mean, among other things, “commerce 22 among the several States or with foreign nations . . . .” Id. § 1. “The ‘interstate 23 commerce’ provision has been interpreted broadly, embracing any agreement that in its 24 operation directly or indirectly affects commerce between states in any fashion.” 25 Affholter v. Franklin Cnty. Water Dist., No. 1:07-CV-0388-OWW-DLB, 2008 WL 26 5385810, at *2 (E.D. Cal. Dec. 23, 2008) (citing Allied-Bruce Terminix Cos., Inc. v. 27 Dobson, 513 U.S. 265, 277-282 (1995)). 28 /// 1 In this case, the parties do not dispute that the Card Agreement evidences a 2 transaction involving interstate commerce. Indeed, the contract containing the arbitration 3 agreements at issue is a contract for a consumer credit card between citizens of two 4 different states—California and South Dakota. Accordingly, the transaction “involve[s] 5 interstate commerce.” See Ackerberg v. Citicorp USA, Inc., 898 F. Supp. 2d 1172, 1175, 6 1177 (N.D. Cal. 2012) (compelling arbitration under the FAA based on arbitration clause 7 contained in credit card agreement between citizens of different states); see generally 8 Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 274-75 (1995) (interstate- 9 commerce requirement should be construed broadly to include all activities that merely 10 affect interstate commerce). 11 B. Existence of a Valid Agreement to Arbitrate 12 The Court’s second task is to determine whether there exists a valid agreement to 13 arbitrate. Standard Fruit, 937 F.2d at 476-78; see also Sanford v. MemberWorks, Inc., 14 483 F.3d 956, 962 (9th Cir. 2007). While the FAA expresses a strong public policy in 15 favor of enforcing arbitration agreements, the Court must first establish that there is an 16 agreement to be enforced. Baker v. Osborne Dev. Corp., 159 Cal. App. 4th 884, 892 17 (2008). “[T]he question of whether a party is bound by an agreement containing an 18 arbitration provision is a ‘threshold question’ for the court to decide.” Microchip Tech. 19 Inc. v. U.S. Philips Corp., 367 F.3d 1350, 1357 (Fed. Cir. 2004) (citing John Wiley & 20 Sons, Inc. v. Livingston, 376 U.S. 543 (1964)) (applying Ninth Circuit law). In 21 determining whether an agreement to arbitrate exists, the district court “appl[ies] general 22 state-law principles of contract interpretation, while giving due regard to the federal 23 policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in 24 favor of arbitration.” Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th Cir. 25 1996); see also Pokorny v. Quixtar, Inc., 601 F.3d 987, 994 (9th Cir. 2010). 26 Here, the Arbitration Agreement in effect at the time that Plaintiff opened the 27 Account contains the following language: 28 /// 1 ARBITRATION 2 PLEASE READ THIS PROVISION OF THE AGREEMENT CAREFULLY. IT PROVIDES THAT ANY DISPUTE MAY BE 3 RESOLVED BY BINDING ARBITRATION, ARBITRATION REPLACES THE RIGHT TO GO TO COURT, INCLUDING 4 THE RIGHT TO A JURY AND THE RIGHT TO INITIATE OR PARTICIPATE IN A CLASS ACTION OR SIMILAR 5 PROCEEDING. IN ARBITRATION, A DISPUTE IS RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE 6 OR JURY. ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN COURT PROCEDURES. 7 Agreement to Arbitrate: Either you or we may, without the 8 other’s consent, elect mandatory, binding arbitration for any claim, dispute, or controversy between you and us (called 9 “Claims”). 10 ECF No. 24-2, at 9 (bolding in original). The Amended Arbitration Agreement, as 11 allegedly provided via the 2015 Notice, contains the following language: 12 ARBITRATION 13 PLEASE READ THIS PROVISION OF THE AGREEMENT CAREFULLY. THIS SECTION PROVIDES THAT DISPUTES 14 MAY BE RESOLVED BY BINDING ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO TO COURT, 15 HAVE A JURY TRIAL OR INITIATE OR PARTICIPATE IN A CLASS ACTION. IN ARBITRATION, DISPUTES ARE 16 RESOLVED BY AN ARBITRATOR, NOT A JUDGE OR JURY. ARBITRATION PROCEDURES ARE SIMPLER AND 17 MORE LIMITED THAN IN COURT. THIS ARBITRATION PROVISION IS GOVERNED BY THE FEDERAL 18 ARBITRATION ACT (FAA), AND SHALL BE INTERPRETED IN THE BROADEST WAY THE LAW WILL ALLOW. 19 Covered Claims 20 • You or we may arbitrate any claim, dispute or 21 controversy between you and us arising out of or related to your account, a previous related account, or our 22 relationship (called “Claims”). 23 • If arbitration is chosen by any party, neither you nor we will have the right to litigate that Claim in court 24 or have a jury trial on that Claim. 25 26 ECF No. 24-4, at 6-7 (bolding in original). While Plaintiff contests Citibank’s contention 27 that the Amended Arbitration Agreement is applicable and enforceable as to Plaintiff, he 28 concedes that Citibank may nevertheless compel arbitration via the initial Arbitration 1 Agreement. Pl.’s Opp. to Citibank Mot., ECF No. 27, 1. Accordingly, the Court finds that 2 a valid agreement to arbitrate exists between the parties. 3 C. Plaintiff’s Dispute with Citibank Falls Within the Scope of the Arbitration Agreement 4 5 “In considering the scope of an arbitration clause’s application, U.S. courts have 6 recognized a distinction between ‘broad’ and ‘narrow’ language.” Concat LP v. Unilever, 7 PLC, 350 F. Supp. 2d 796, 807 (N.D. Cal. 2004) (quoting Mediterranean Enterprises, 8 Inc. v. Ssangyong Corp., 708 F.2d 1458, 1463-64 (9th Cir. 1983)). The rule is that, 9 where an arbitration clause applies to matters “arising under” the agreement, its scope is 10 narrowly defined, but where it applies to matters “arising out of or relating to” the 11 agreement, its application should be broadly construed. Id. “[W]hen an arbitration 12 clause refers to disputes or controversies ‘under’ or ‘arising out of’ the contract, 13 arbitration is restricted to ‘disputes and controversies relating to the interpretation of the 14 contract and matters of performance.’” Mediterranean Enterprises, Inc., 708 F.2d at 15 1465. 16 There is no dispute that the initial Arbitration Agreement extends to the bulk of 17 Plaintiff’s instant claims against Citibank. Instead, Plaintiff argues that the Amended 18 Arbitration Agreement should not be enforced against him during arbitration on account 19 that this amendment was made unilaterally and without his knowledge or consent. Pl.’s 20 Opp. to Citibank Mot., ECF No. 27, at 1. Citibank, for its part, argues that the Amended 21 Arbitration Agreement is valid and enforceable against Plaintiff under South Dakota Law, 22 which applies here pursuant to the choice-of-law provision in the underlying Card 23 Agreement. Citibank’s Mot., ECF No. 24, at 1. 24 Despite the parties’ contentions concerning the applicable arbitration agreement, 25 the Court need not reach this dispute here. Since the Court has found the existence of 26 an enforceable arbitration agreement that encompasses parties’ dispute, determining if 27 the amendment is enforceable against Plaintiff is a matter for the arbitrator to determine. 28 See Chiron Corp. v. Ortho Diagnostic Sys., 207 F.3d 1126, 1130 (9th Cir. 2000) 1 | (explaining that the Court’s role is “limited to determining (1) whether a valid agreement 2 | to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at 3 | issue.”); see also Cuadras v. MetroPCS Wireless, Inc., No. CV 09-7897 CAS (AJWx), 4 | 2011 WL 11077125, at *7 (C.D. Cal. Aug. 8, 2011) (“[T]he Court finds that plaintiff's 5 || arguments regarding the sufficiency of notice of anendments to the [arbitration 6 || agreement] implicate the separability doctrine, which requires certain challenges to 7 || contracts containing arbitration clauses to be heard by the arbitrator rather than by the 8 |} court.”). 9 Accordingly, while the Court orders that Plaintiff and Citibank engage in arbitration 10 | pursuant to their agreement, it makes no determination on whether the provisions of the 11 || Amended Arbitration Agreement apply to Plaintiff. 12 13 CONCLUSION 14 15 Citibank’s Motion to Compel Arbitration and Stay the Case is GRANTED. ECF 16 | No. 24. The litigation is STAYED only as to Plaintiff's claims against Citibank, pending 17 || completion of the arbitration. The parties shall submit a joint status report within sixty 18 | (60) days of the date this Order is filed, and additional joint status reports each sixty (60) 19 || days thereafter. The parties are further directed to notify the Court, in writing, within ten 20 | (10) days after an arbitration decision has been rendered. 21 IT |S SO ORDERED. 22 || Dated: August 20, 2019 23 UNITED STATES DISTRI 25 26 27 28