G.R. Homa v. American Express Co

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 11-3600
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G.R. HOMA,
individually and on behalf of all others similarly situated,
Appellant
v.
AMERICAN EXPRESS COMPANY;
AMERICAN EXPRESS CENTURION BANK
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On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 3-06-02985)
Honorable Joel A. Pisano, District Judge
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Submitted under Third Circuit LAR 34.1(a)
June 25, 2012
BEFORE: FISHER and GREENBERG, Circuit Judges,
and OLIVER, District Judge*
(Filed: August 22, 2012)
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OPINION OF THE COURT
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____________________
*Honorable Solomon Oliver, Jr., Chief Judge of the United States District Court for the
Northern District of Ohio, sitting by designation.
GREENBERG, Circuit Judge.
I. INTRODUCTION
This matter comes on before this Court on an appeal by the plaintiff, G.R. Homa,
from an order of the District Court entered on August 30, 2011, dismissing Homa‟s
action and compelling him to submit his claim as a holder of an American Express Blue
Cash credit card against defendants American Express Company and American Express
Centurion Bank (together “American Express”) to arbitration on an individual basis. The
case involves Homa‟s assertion that American Express engaged in bait-and-switch
solicitation, marketing and advertising in promoting the Blue Cash credit card when
describing the cash rebates on purchases and card holders‟ balances on the card. The
procedural history of this case is intertwined with litigation in a district court in this
Circuit and this Court in Litman v. Cellco Partnership, 381 F. App‟x 140 (3d Cir. 2010)
(Litman I), and 655 F.3d 225 (3d Cir. 2011) (Litman II). For the reasons that follow we
will affirm the order of August 30, 2011.
II. PROCEDURAL HISTORY
Homa initiated this litigation in the District Court under the New Jersey Consumer
Fraud Act, N.J. Stat. Ann. § 56:8-1 et seq. (West 2001), seeking class action certification
on behalf of himself and similarly-situated holders of American Express Blue Cash credit
cards. After Homa filed the case, American Express moved to compel him to arbitrate
his claim on an individual as distinguished from a class-arbitration basis in accordance
with the terms of the standard Blue Cash credit card agreement that required arbitration
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of card holder claims individually and waived any right to arbitrate a claim on a class
basis. American Express‟s motion was successful as the Court rejected Homa‟s
contention that in light of the Supreme Court of New Jersey‟s decision in Muhammad v.
County Bank of Rehoboth Beach, 912 A.2d 88 (N.J. 2006), the class-arbitration waiver in
the card holder agreement was unconscionable and unenforceable. Accordingly, on May
31, 2007, the District Court dismissed Homa‟s action and required him to submit his
claim to individual arbitration. Homa v. Am. Express Co., 496 F. Supp. 2d 440, 451
(D.N.J. 2007).
Homa appealed and we reversed, Homa v. American Express Co., 558 F.3d 225
(3d Cir. 2009), because of the possible unconscionability of the class-arbitration waiver
as applied to Homa.1 In reversing we rejected American Express‟s argument that the
provision in the 1925 Federal Arbitration Act (“FAA”) providing that agreements to
arbitrate are “valid, irrevocable and enforceable,” 9 U.S.C. § 2, preempted the
applicability of Muhammad. We reached that conclusion in reliance on the saving clause
in 9 U.S.C. § 2, which provides that arbitration agreements are enforceable “save for such
grounds as exist [for their nonenforceability] at law or in equity for the revocation of any
contract” as we believed that there might be such grounds with respect to Homa‟s claim.
We, however, did not order that there be a class-arbitration proceeding. Instead,
inasmuch as the District Court had not made any findings of fact “as to the potential
1
Both the District Court opinion and our opinion in Homa dealt with a choice of law
question between Utah and New Jersey law but we will not mention that point further as
the parties refer now only to New Jersey law to the extent that this case implicates state
law.
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value of the New Jersey Consumer Fraud Act claims in this case,” 558 F.3d at 228 n.1,
we remanded the case to that Court to make the ultimate determination as to whether the
class-arbitration waiver in the card holder agreement was enforceable because we
believed that an unconscionability determination depended on whether “the claims at
issue are of such low value as effectively to preclude relief if decided individually.” Id.
at 233.
The parties, principally Homa, created an extensive record on the remand
including Homa‟s deposition, numerous attorneys‟ certifications, exhibits, and a
certification of a vice president of American Express. Homa contends that “the
uncontradicted evidentiary record in this case establishes that enforcing [American
Express‟s] arbitration clause would make it impossible for any person . . . to effectively
vindicate his substantive statutory rights.” Appellant‟s br. at 16. We accept this
characterization, for the record demonstrates that the significant cost of arbitrating
Homa‟s claim and the likelihood that there would be a limited recovery even if his
arbitration was successful makes it unlikely that an attorney would take his case.
Furthermore, in view of the complexity of the issues pertaining to the merits of Homa‟s
claim, it would be very difficult for him to prosecute the case without the aid of an
attorney whether in a judicial proceeding or in arbitration. Of course, in accepting
Homa‟s assessment of the record, we have not overlooked the obvious fact that Homa has
been represented by counsel in this case in the District Court and this Court. Rather, that
circumstance does not lead us to change our view of the record because we believe that
an attorney studying this case reasonably could conclude that if Homa is successful he
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might make a recovery far in excess of what he could hope to recover in an individual
arbitration of his claim.
This litigation became intertwined with the litigation in Litman when on May 21,
2010, we applied in Litman I our initial Homa opinion concerning the enforceability of a
class-arbitration waiver. In Litman I we reversed a district court order and opinion in
which the district court relied on our opinion in Gay v. CreditInform, 511 F.3d 369 (3d
Cir. 2007), to hold that the FAA preempted the application of Muhammad. We reached
our result in Litman I because in Homa we already had “concluded that the FAA does not
preempt Muhammad and therefore Homa governs the outcome of [Litman I].” Litman I,
381 F. App‟x at 143.
It promptly became clear, however, that our deference to Muhammad might have a
short shelf life, for on May 24, 2010, the Supreme Court granted a petition for certiorari
in AT&T Mobility LLC v. Concepcion, 130 S. Ct. 3322 (2010), a case in which the Court
of Appeals for the Ninth Circuit had concluded that the FAA did not preempt state
unconscionability law and that the class-arbitration waiver at issue in that case was
unconscionable under California law, Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th
Cir. 2009). The defendant in Litman then moved to stay our mandate in Litman I
pending its filing of a petition for certiorari. On July 7, 2010, we granted that motion and
stayed the Litman proceedings.
The proceedings in Concepcion and Litman did not go unnoticed by American
Express for in August 2010 American Express filed a motion to stay Homa‟s action on
the remand in the District Court pending the Supreme Court‟s decision in Concepcion. A
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magistrate judge issued a comprehensive opinion granting the motion, 2010 WL 4116481
(D.N.J. Oct 18, 2010), and Homa did not seek District Court review of that decision.
Accordingly, the proceedings in Homa‟s case on the remand were stayed.
On April 27, 2011, the Supreme Court decided Concepcion and reversed the court
of appeals‟ judgment. 131 S. Ct. 1740 (2011). The Supreme Court concluded that a right
to class-arbitration depends on the contractual parties‟ agreement to that procedure and
thus a state cannot impose a duty on a party to engage in class-arbitration in the absence
of that party‟s agreement. Id. at 1750-51. The Supreme Court further held that the FAA
preempted the enforcement of the state-law invalidation of a waiver of a right to class-
arbitration that existed in the Concepcion agreement. On May 2, 2011, the Supreme
Court granted the petition for a writ of certiorari in Litman I, vacated our judgment, and
summarily remanded the case to us for further consideration in light of Concepcion. 131
S. Ct. 2872 (2011).
In May 2011, American Express moved to reinstate the District Court‟s May 31,
2007 order in Homa compelling arbitration on an individual basis. Homa opposed the
motion contending that Concepcion did not impact either our decision in Homa or the
Supreme Court of New Jersey‟s decision in Muhammad. While American Express‟s
motion to reinstate the order to compel arbitration on an individual basis was pending in
the District Court, we decided Litman II on the remand from the Supreme Court on
August 24, 2011, and affirmed the District Court‟s ruling compelling arbitration of the
claim in Litman on an individual basis in accordance with the terms of the controlling
agreement. Litman II, 655 F.3d at 225. In Litman II we held “that Homa has been
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abrogated by Concepcion and that Muhammad is preempted by the FAA.” Id. at 230.
Understandably, after we decided Litman II, the District Court in Homa‟s action on
August 30, 2011, without opinion, granted American Express‟s motion to reinstate its
order compelling arbitration of Homa‟s claim on an individual basis. Homa then
appealed. The District Court had jurisdiction under 28 U.S.C. § 1332(d) and we have
jurisdiction under 9 U.S.C. § 16(a)(3). We are exercising plenary review on this appeal.
See Edwards v. Hovensa, LLC, 497 F.3d 355, 357 (3d Cir. 2007).
III. DISCUSSION
According to Homa the issues on this appeal are as follows:
1. Whether this Court should certify to the New Jersey Supreme Court the
question of whether, under New Jersey law, if a plaintiff actually proves
that he could not effectively vindicate his substantive statutory rights under
the arbitration agreement, the arbitration agreement is unenforceable.
2. Whether the District Court erred by reinstating its original order
compelling arbitration notwithstanding the factual record in this case
establishing that [Homa] could not effectively vindicate his substantive
statutory rights under [American Express‟s] arbitration agreement.
Appellant‟s br. at 2.
We discuss the certification issue first. Under Third Circuit LAR 110.1 we are
authorized to certify to a state supreme court “questions arising under the laws of that
state which will control the outcome of a case pending in federal court.” But it is clear
that a decision of the Supreme Court of New Jersey under New Jersey law could not
control the outcome of this case even if that court would hold that under New Jersey law
the arbitration provision in Homa‟s contract providing that arbitration only could be on
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an individual basis is unenforceable. Moreover, even in the unlikely circumstance that
the Supreme Court of New Jersey held that the arbitration agreement was enforceable as
a matter of state law to the end that Homa could prosecute his claim only on an individual
arbitration basis we surely would affirm the August 30, 2011 order.
Our opinion in Litman II, in which we explained our understanding of
Concepcion, makes it clear that the Supreme Court of New Jersey in an opinion
consistent with 9 U.S.C. § 2 could not hold the arbitration agreement to be unenforceable
and thus New Jersey law cannot control the outcome of this case even if that law would
invalidate the restriction of an arbitration to an individual proceeding. In this regard, we
merely need quote from Litman II:
We understand the holding of Concepcion to be both broad and
clear; a state law that seeks to impose class arbitration despite a contractual
agreement for individualized arbitration is inconsistent with, and therefore
preempted by, the FAA, irrespective of whether class arbitration „is
desirable for unrelated reasons.‟ . . . . Therefore, we must hold that
contrary to our earlier decisions in Homa and in this case, the rule
established by the New Jersey Supreme Court in Muhammad is preempted
by the FAA. It follows that the arbitration clause at issue here must be
enforced according to its terms, which requires individual arbitration and
forecloses class arbitration.
Litman II, 655 F.3d at 231 (citation omitted). Quilloin v. Tenant Healthsystem
Philadelphia, Inc., 673 F.3d 221, 232 (3d Cir. 2012), is to the same effect as Litman II as
it set forth that “[f]urthermore, even if the agreement explicitly waived Quilloin‟s right to
pursue class actions, the Pennsylvania law prohibiting class action waivers is surely
preempted by the FAA under Concepcion.”
8
Our opinions in Litman II and Quilloin are not outliers as they are consistent with
the recognition in In re American Express Merchants‟ Litigation, 667 F.3d 204, 213 (2d
Cir. 2012), that in light of Concepcion and Stolt-Nielson S.A. v. Animal Feed
International Corp., 130 S. Ct. 1758 (2010), both decided after Muhammad, “parties
cannot be forced to arbitrate disputes in a class-action arbitration unless the parties agree
to class action arbitration.”2 Of course, there was no such agreement in Homa‟s contract
with American Express and thus even if the Supreme Court of New Jersey would regard
the waiver of class-arbitration in Homa‟s agreement to be unconscionable under New
Jersey law American Express cannot be compelled to engage in class-arbitration.
We now reach Homa‟s second issue: Did the District Court err in reinstating its
May 31, 2007 order compelling arbitration even though he “could not effectively
vindicate his substantive statutory rights under [American Express‟s] arbitration
agreement[?]” Appellant‟s br. at 2. Once again we accept the premise of Homa‟s
question and thus address the issue it raises from the starting point that for his action to
proceed with a meaningful chance of success he must prosecute it on a class-arbitration
basis.
2
Homa believes that American Express Merchants‟ Litigation supports his position on
this appeal. It is true that that case held that an arbitration clause containing a waiver of
the right to a class-arbitration was unenforceable and thus allowed the plaintiffs to
proceed with a judicial action. But that case was in a context different from that before
this Court, as it was concerned with the assertion of substantive federal statutory rights
under the Sherman and Clayton Acts whereas here we are dealing with a substantive
claim under the New Jersey Consumer Fraud Act.
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We need not dwell on this second question for, in effect, we essentially have
answered it by answering the first question. Even if Homa cannot effectively prosecute
his claim in an individual arbitration that procedure is his only remedy, illusory or not.
See Cruz v. Cingular Wireless, LLC, 648 F.3d 1205, 1214-15 (11th Cir. 2011). Though
some persons might regard our result as unfair, 9 U.S.C. § 2 requires that we reach it.3 In
this regard, we point out that when Congress makes a law the court must enforce the law
as Congress has written it regardless of the court‟s view of the law. Of course, we realize
that a court need not enforce an unconstitutional law but Homa does not raise any
constitutional issues in this case and thus we do not address that possibility.
In considering this case it is important to remember that when Congress enacted
the FAA it did so “in response to widespread judicial hostility to arbitration agreements.”
Concepcion, 131 S.Ct at 1745. Thus, there is a liberal federal attitude toward arbitration.
Though Congress included the saving clause in 9 U.S.C. § 2 to save generally applicable
contract defenses to demands for arbitration, Concepcion recognized that nothing in the
saving clause “suggests an intent to preserve state-law rules that stand as an obstacle to
the accomplishment of the FAA‟s objectives [and the] saving clause cannot in reason be
construed as allowing a common law right, the continued existence of which would be
absolutely inconsistent with the provisions of the act.” In other words, “the act cannot be
held to destroy itself.” Id. at 1748 (citations and internal quotation marks omitted).
3
We are not implying that we believe that we are reaching an unfair result as we express
no opinion on that point. Rather, we merely are recognizing that other persons might
think that we are doing so.
10
In the years since Congress adopted the FAA, clauses containing class-arbitration
waivers have become ubiquitous in contracts involving products and services distributed
or supplied on a mass basis, such as contracts providing for cell phone service, credit
cards, and cable service. If we held that Homa‟s demonstration in the District Court on
the remand, which we have no doubt that tens if not hundreds of million users of
massively-distributed consumer products or massively-supplied consumer services could
replicate, precluded a ruling requiring him to prosecute his claim only through an
admittedly ineffective individual arbitration, millions of arbitration provisions in
consumer contracts would be rendered unenforceable inasmuch as the arbitration
provisions in such contracts typically preclude class-arbitration proceedings. In making
our broad statement we take into account the circumstance that if Homa is successful on
this appeal there could be only two possible remedies: Ordering a class-arbitration or
invalidating his arbitration agreement so that he could proceed in a judicial action. But
Concepcion and Stolt-Nielson preclude awarding the first remedy inasmuch as American
Express has not agreed to class-arbitration, so that the only remedy that could be left
would be an invalidation of the arbitration agreement. Accordingly, if we ruled in
Homa‟s favor we would be applying the saving clause to limit severely the FAA as it has
come to be applied. Such a result, desirable or not, in the words of Concepcion, would be
“absolutely inconsistent” with the FAA. Thus, we are reinforced in reaching our
conclusion that regardless of what some persons might regard as fair we cannot substitute
their view for the FAA‟s requirements and we must reject Homa‟s appeal.
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We realize, that unlike the plaintiffs in Litman II and Quilloin, Homa bases his
argument on his particularized factual showing with respect to the impracticability of
individual arbitration in this case and that few litigants would match his efforts.
Inasmuch as we remanded this case to allow him to create a record on which to predicate
this argument we cannot fault him for doing exactly that and then making his argument
based on the record created on the remand. Nor can we fault ourselves for having
ordered the remand as we did so prior to the Supreme Court deciding Concepcion.
Yet in light of Concepcion Homa‟s factual showing does not change our outcome.
Surely Quilloin makes this point clear for we held there that the Pennsylvania arbitration
law involved in that case was preempted even though that law provided that waivers of
the right to seek class-arbitration are only unconscionable and unenforceable where
“class action litigation is the only effective remedy such as when the high cost of
arbitration compared with the minimal potential value of individual damages denies
every plaintiff a meaningful remedy.” Qulloin, 673 F.3d at 233 (internal quotation marks
and brackets omitted). Accordingly, Homa‟s proofs are to no avail. See also Cruz, 648
F.3d at 1214-15.
IV. CONCLUSION
For the foregoing reasons, we will affirm the District Court‟s order of August 30,
2011, to the extent that it dismissed the case and compelled arbitration on an individual
basis.
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