Scott F Savage v. Citibank N.A. et al

Filing 49

ORDER DENYING 23 MOTION TO COMPEL ARBITRATION. Signed by Hon. Beth Labson Freeman on 5/12/2015. (blflc2, COURT STAFF) (Filed on 5/12/2015)

1
2
3

UNITED STATES DISTRICT COURT

4

NORTHERN DISTRICT OF CALIFORNIA

5

SAN JOSE DIVISION

6
7

SCOTT F SAVAGE,

Case No. 14-cv-03633-BLF

Plaintiff,
8
v.

ORDER DENYING MOTION TO
COMPEL ARBITRATION

9
10

CITIBANK N.A., et al.,

[Re: ECF 23]

Defendants.

United States District Court
Northern District of California

11
12
13

This lawsuit involves claims under the federal Telephone Consumer Protection Act of

14

1991 (“TCPA”), 47 U.S.C. § 227, as well as various state law claims, in connection with calls

15

made to collect on a debt owed on a Macy’s store credit card. Plaintiff Scott Savage alleges that

16

defendants Department Store National Bank (“DSNB”), FDS Bank (“FDS”), and Citibank N.A.

17

(“Citi,” collectively, with DSNB and FDS, “Defendants”) repeatedly called him on his cellular

18

phone in connection with the debt owed on the Macy’s card despite two written requests that they

19

stop. Before the Court is Defendants’ Motion to Compel Arbitration. Def.’s Mot. 23. The Court

20

heard oral argument on February 5, 2015 and then stayed its ruling for 90 days so that the parties

21

could attempt to settle the case through mediation. On May 8, 2015, the parties informed the

22

Court that they were unable to reach a settlement. After careful consideration of the parties’

23

respective written submissions and the oral argument of counsel, for the reasons stated herein,

24

Defendants’ Motion to Compel Arbitration is DENIED.

25
26

I.

BACKGROUND
The underlying claims in this action involve debt collection activities concerning a Macy’s

27

store credit card issued to Plaintiff by defendant DSNB. Compl. ¶ 1, ECF 1. Plaintiff alleges on

28

information and belief that “the department store Macy’s, Inc. is a foreign business corporation

1

doing business in California, which issues lines of credit through its financing arm [DSNB], which

2

are then collected by its agents [FDS] and [Citibank].” Id. ¶ 29. DSNB is also alleged to be a

3

subsidiary of Citibank, N.A. Id. Plaintiff moreover alleges that “[a]t all times mentioned herein,

4

each defendant and employee of defendant named [in the Complaint] was the agent or employee

5

of each of the other defendants.” Id. ¶ 36.
In July 2013, Plaintiff stopped paying the Macy’s credit card account. Id. ¶ 9. On July 10,

6
7

2013, he sent a letter to DSNB indicating that he could no longer pay the account and “requesting

8

that it not telephone him anymore.”1 Id. ¶¶ 2, 11. DSNB and its agents, defendants FDS and Citi,

9

did not cease their collection calls and continued to call him nearly every day, “sometimes three
(3) to six (6) times a day.” Id. ¶ 12. Plaintiff sent DSNB a second letter in September 3, 2013

11
United States District Court
Northern District of California

10

requesting that it stop calling him. Id. ¶ 14. The calls continued unabated. Id. ¶ 15. Defendants

12

also mailed letters to Plaintiff from August 2013 to January 2014 in an effort to collect on the

13

“delinquent DSNB account.” Id. ¶ 16. Plaintiff alleges that this course of conduct violated federal

14

and state law and asserts claims under the California Fair Debt Collection Practices Act, Cal. Civ.

15

Code §§ 1788 et seq., the federal TCPA, as well as state common law claims for inclusion upon

16

seclusion, and negligent training and supervision.
On November 14, 2014, Defendants moved to compel arbitration pursuant to arbitration

17
18

provisions in cardholder agreements concerning not the Macy’s card issued by DSNB, but rather

19

two Sears cards issued to Plaintiff by Citi. It is undisputed that Citi did not issue the Macy’s card.

20

Def.’s Mot. 1.

21

II.

LEGAL STANDARD
The Federal Arbitration Act (“FAA”) governs the enforceability and scope of an arbitration

22
23

agreement. 9 U.S.C. §§ 1 et seq. Under the FAA, a party seeking to invoke an arbitration

24

agreement may petition the district court “which, save for such agreement, would have jurisdiction

25

[to hear the case], for an order directing that such arbitration proceed in the manner provided for in

26
27
28

1

Elsewhere in the Complaint, Plaintiff alleges that he “informed” DSNB as well as its agents,
FDS and Citi that he could no longer pay and wished the phone calls would stop. Id. ¶ 2. It is not
clear whether Plaintiff sent separate letters to FDS and Citi.
2

1

such agreement.” 9 U.S.C. § 4; see also Trompeter v. Ally Financial, Inc., 914 F. Supp. 2d 1067,

2

1071 (N.D. Cal. 2012).
A district court faced with a petition to enforce an arbitration clause engages in a limited

3
4

two-part inquiry: first, it determines whether the arbitration agreement is valid, and second, it

5

determines whether the agreement encompasses the claims at issue. See, e.g., Mitsubishi Motors

6

Co. v. Soler Chrysler–Plymouth, 473 U.S. 614, 627-28 (1985); see also Trompeter, 914 F. Supp.

7

2d at 1071. The FAA dictates that arbitration agreements are “a matter of contract,” and “shall be

8

valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the

9

revocation of any contract.” 9. U.S.C. § 2. Here, there is no dispute that the arbitration clause is

10

valid, only whether it pertains to the claims at issue in this lawsuit.
When determining whether the arbitration clause encompasses the claims at issue, “all

United States District Court
Northern District of California

11
12

doubts are to be resolved in favor of arbitrability.” Simula v. Autoliv, 175 F.3d 716, 721 (9th Cir.

13

1999) (interpreting the language “arising in connection with” in an arbitration clause to “reach[]

14

every dispute between the parties having a significant relationship to the contract and all disputes

15

having their origin or genesis in the contract.”). Consistent with the text of the FAA, “courts must

16

‘rigorously enforce’ arbitration agreements according to their terms.” Am. Exp. Co. v. Italian

17

Colors Rest., 133 S. Ct. 2304, 2309 (2013) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S.

18

213, 221 (1985)).

19

III.

DISCUSSION
Defendants do not assert that Plaintiff’s Macy’s credit card agreement contained an

20
21

arbitration clause.2 Instead, Defendants contend that Plaintiff’s claims are subject to arbitration

22

because they fall within identical arbitration provisions in cardholder agreements governing two

23

Sears credit cards issued by Citi. The provision is bilateral and provides for binding arbitration

24

concerning: “All claims relating to your account, a prior related account, or our relationship . . .

25

including Claims regarding the application, enforceability, or interpretation of this Agreement and

26
27
28

2

Defendants did not produce a copy of the card agreement that governs Plaintiff’s Macy’s card
issued by DSNB. The Court can only presume that the Macy’s card agreement does not contain
an arbitration provision.
3

1

this arbitration provision.” Def.’s Mot. 4; Decl. of Elizabeth S. Barnette, ECF 25 Exhs. 1, 3, 6, 9.

2

The provision explains whose claims are subject to arbitration: “Not only ours and yours, but also

3

Claims made by or against anyone connected with us or you or claiming through us or you, such

4

as a co-applicant, authorized user of your account, an employee, agent, representative, affiliated

5

company, predecessor or successor, heir assignee, or trustee in bankruptcy.” Id. Moreover, the

6

arbitration provision is to be interpreted “in the broadest way the law will allow it to be enforced.”

7

Id. These Sears card agreements are governed by South Dakota law. Def.’s Mot. 8-9; Barnette

8

Decl. Exhs. 1, 3, 6, 9.

9

Defendants contend that Plaintiff’s claims in this lawsuit—premised upon collection
activity in connection with a Macy’s card issued by DSNB—fall within the scope of the

11
United States District Court
Northern District of California

10

arbitration provision set forth in the Sears card agreements. Def.’s Mot. 10-11. As to the claims

12

against Citi, Defendants argue that the arbitration provision from the Sears card agreements

13

extends to all claims relating to “our relationship,” meaning the relationship between Plaintiff and

14

the issuer of the Sears cards—Citi. Because Plaintiff’s claims concern unauthorized calls to his

15

cell phone number, and Plaintiff provided the same cell phone number to Citi in connection with

16

his Sears cards, Citi contends that Plaintiff’s claims are based upon their “relationship” and

17

accordingly subject to arbitration. Def.’s Mot. 10; see also Barnette Decl. ¶ 5. Defendants

18

moreover contend that Plaintiff’s claims against FDS and DSNB must be sent to arbitration

19

because Plaintiff has alleged that they are Citi’s agents, and the Sears card agreements provide that

20

a cardholder’s claims against the issuer’s agents is also subject to arbitration. Def.’s Mot. 11.

21

Because Plaintiff does not dispute the validity of the Sears card agreements, the Court’s

22

task is limited to contract interpretation. See Pl.’s Opp. 12-15, ECF 28. Plaintiff moreover does

23

not appear to challenge Defendants’ contention that South Dakota law governs the interpretation

24

of the Sears card agreements, though he has briefed his arguments under California law. See id.

25

In any event, the Court agrees with Defendants that South Dakota has a substantial relation to the

26

parties and that the chosen state’s principles of contract interpretation do not appear to be contrary

27

to any fundamental policy of California. Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459,

28

466 (1992). Even under South Dakota law, however, Defendants’ interpretation of the Sears card
4

1

arbitration provision is untenably broad.
It is axiomatic that arbitration agreements are matters of contract subject to ordinary

2
3

contract interpretation. The South Dakota Supreme Court has summarized contract interpretation

4

thusly:

5
6
7
8

The goal of contract interpretation is to see to it that the mutual
intent of the parties is carried into effect. The contract is to be read
as a whole, making every effort to give effect to all provisions.
When the words of a contract are clear and explicit and lead to no
absurd consequences, the search for the parties’ common intent is at
an end.
Nelson v. Schellpfeffer, 2003 S.D. 7, ¶ 8 (2003) (emphasis added). Likewise, “[a]rbitration under

10

the [FAA] is a matter of consent,” Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford

11
United States District Court
Northern District of California

9

Junior Univ., 489 U.S. 468, 479 (1989), and “the FAA’s proarbitration policy does not operate

12

without regard to the wishes of the contracting parties,” Mastrobuono v. Shearson Lehman Hutton,

13

Inc., 514 U.S. 52, 57 (1995). See also AT & T Technologies, Inc. v. Commc’ns Workers of Am.,

14

475 U.S. 643, 648 (1986).

15

Here, there is no basis for concluding that in accepting the Sears card agreements, Plaintiff

16

consented to arbitrate all claims that could ever arise between him and Citi. Accepting

17

Defendants’ interpretation that the “our relationship” language extends to any interaction between

18

Plaintiff and Citi would mean that one credit card agreement could be used to dictate the parties’

19

“relationship” ad infinitum, regardless of the subject matter of their future interactions. That is an

20

absurd consequence. For one, in collecting on the Macy’s card account, Citi identifies itself as the

21

servicer on that card. See Decl. of Scott F. Savage, ECF 28 Exh. 1. There is no reason for a

22

consumer in Plaintiff’s position to believe that he had a direct “relationship” with Citi regarding

23

the Macy’s card issued by DSNB when Citi identified itself merely as a servicer of the account.

24

Moreover, there is no evidence that the Macy’s card account and the Sears card accounts are in

25

any way related, other than that they were respectively issued to Plaintiff by DSNB and its alleged

26

parent Citi. Finally, there is no evidence that when Plaintiff entered into an agreement with DSNB

27

regarding the Macy’s card, he was aware or provided notice that such account might one day be

28

serviced by Citi. Similarly, when entering into agreements on the Sears cards, Plaintiff had no
5

1

notice that Citi might one day call him to collect on a different credit card issued by a different

2

entity. It thus stretches the bounds of reason to interpret the “our relationship” language so

3

broadly to encompass all other interactions with Citi, whether anticipated or not.

4

Defendants have not identified any cases in which the “our relationship” language has been

5

interpreted so broadly. In all of the cases cited by Defendants where Citi successfully compelled

6

arbitration, the applicable agreement was entered between the plaintiff and Citi as the card issuer.

7

Def.’s Mot. 2-3, 7 (collecting cases). Defendants’ arguments in this case are analogous to those

8

advanced—and rejected—in In re Jiffy Lube Int’l, Inc., Text Spam Litig., 847 F. Supp. 2d 1253

9

(S.D. Cal. 2012). There, the court denied an effort to compel arbitration of TCPA claims based
upon an arbitration agreement purporting to extend to “any and all disputes” between the plaintiff

11
United States District Court
Northern District of California

10

and Jiffy Lube. Plaintiff allegedly signed that agreement when he visited a Jiffy Lube location to

12

get an oil change. The court reasoned that the “incredibly broad” provision could not possibly

13

pertain to a “tort action arising from a completely separate” transaction. Id. at 1262-63. Indeed,

14

the court noted the absurd result, as observed by the Seventh Circuit, if the scope of arbitration

15

provisions is interpreted too broadly:

16
17
18
19

[I]n Smith v. Steinkamp, 318 F.3d 775, 777 (7th Cir. 2003), Judge
Posner noted that if there were no limiting clause in the arbitration
agreement at issue in that case, “absurd results [would] ensue,” such
that if a defendant murdered the plaintiff in order to discourage
default on a loan, the wrongful death claim would have to be
arbitrated.

20

Id. at 1263. The court ultimately concluded that the arbitration clause at issue must be interpreted

21

to extend to claims that “arise out of or relate to” the contract that the plaintiff signed. Id.;

22

compare Coppock v. Citigroup, Inc., No. C11-1984-JCC, 2013 WL 1192632, at *5 (W.D. Wash.

23

Mar. 22, 2013) (distinguishing Jiffy Lube and Smith because Citi, as card issuer, moved to compel

24

arbitration of claims “relating to your account, a prior related account, or our relationship”).

25

Likewise here, the Court concludes that the “our relationship” language in the Sears card

26

agreements must be limited to the relationship created by those agreements—a relationship

27

between Plaintiff and Citi as the card issuer, and not as the servicer or debt collector on any other

28

unrelated card agreement.
6

1

Plaintiff has clearly limited this lawsuit to allegations regarding telephone calls to collect
on his Macy’s card account. To be sure, this might have been a closer question had Plaintiff

3

broadly alleged that Defendants called him on his cell phone without authorization. Because

4

Plaintiff provided the same cell phone number to Citi in connection with the Sears card accounts,

5

there could be some ambiguity as to whether his claims arise in connection with those credit cards.

6

However, it is clear from the Complaint that the gravamen of Plaintiff’s claims concern calls made

7

in connection with the Macy’s card issued by DSNB. Plaintiff’s declaration indicates that he

8

received no further calls from Citi regarding the Sears cards. Savage Decl. ¶ 4. To the extent

9

discovery may demonstrate that some of alleged calls were in fact made regarding the Sears cards,

10

those calls are not the subject of Plaintiff’s lawsuit here. See Pl.’s Opp. 4 (“Savage brought claims

11
United States District Court
Northern District of California

2

solely regarding collection harassment relating to the Macy’s account.” (emphasis added)); see

12

also id. (“Savage has not brought any claims relating to any conduct arising from the Citibank

13

Sears account.”). As such, “it may be said with positive assurance that the arbitration clause is not

14

susceptible of an interpretation that covers the asserted dispute.” AT & T, 475 U.S. at 650 (citation

15

and quotation marks omitted).

16

Because the Court has determined that the arbitration provision in the Sears card

17

agreements do not extend to Plaintiff’s claims in this lawsuit, the Court need not reach

18

Defendants’ argument that DSNB and FDS are also entitled to compel arbitration as Citi’s alleged

19

agents. The Court notes only that Defendants’ reliance on San Diego Gas & Electric Company v.

20

Mitsubishi Heavy Industries, Ltd., No. 13-cv-1726-BEN(KSC), 2014 WL 1245842 (S.D. Cal.

21

Mar. 14, 2014), for that argument is unpersuasive. See Def.’s Reply 4, ECF 29. San Diego Gas

22

concerned a party’s allegation concerning its own agency relationship with other entities that were

23

party to an agreement with a binding arbitration clause. The court reasoned that “SDG &E cannot

24

avoid this result by asking Defendants to prove SDG & E’s own allegations. Defendants are

25

entitled to treat SDG & E’s allegations in its Complaint as a judicial admission.” 2014 WL

26

1245842, at *6. Defendants here are attempting to use the converse of San Diego Gas to bind

27

Plaintiff to his allegations about Defendants’ relationship. This does not work because Defendants

28

are in the best position to prove their own relationship to one another and cannot simultaneously
7

1

deny agency and rely on Plaintiff’s inartful allegation that they are each other’s agents. See

2

Murphy v. DirecTV, Inc., 724 F.3d 1218, 1233 (9th Cir. 2013) (record evidence that defendants

3

had disavowed agency relationship with retailer meant that retailer could not be bound by

4

arbitration clause).

5

In any case, the Court has determined that the arbitration provision in the Citi-issued Sears

6

card agreements do not extend to Plaintiff’s claims concerning collection on a Macy’s card issued

7

by DSNB. Defendant’s Motion to Compel Arbitration must therefore be DENIED.

8
9
10

United States District Court
Northern District of California

11

IV.

ORDER
For the foregoing reasons, IT IS HEREBY ORDERED that Defendants’ Motion to Compel

Arbitration is DENIED.
The parties are hereby ordered to appear for an Initial Case Management Conference on

12

June 18, 2015 at 1:30 p.m. The parties shall submit a joint case management statement by June

13

11, 2015.

14
15
16
17

IT IS SO ORDERED.
Dated: May 12, 2015
______________________________________
BETH LABSON FREEMAN
United States District Judge

18
19
20
21
22
23
24
25
26
27
28
8