Cavlovic v. J.C. Penney Corporation, Inc.

Filing 47

MEMORANDUM AND ORDER denying 31 Defendant J.C. Penney Corporation, Inc.'s Motion to Stay Proceedings and Compel Arbitration. Signed by Magistrate Judge Teresa J. James on 7/14/2017. (byk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

ANN CAVLOVIC,
individually and on behalf of
those similarly situated,
Plaintiff,
v.
J.C. PENNEY CORPORATION, INC.,
Defendant.

)
)
)
)
)
)
)
)
)
)
)

Case No. 17-cv-2042-JAR-TJJ

MEMORANDUM AND ORDER
Plaintiff Ann Cavlovic brings this putative class action against Defendant J.C. Penney
Corporation,1 asserting claims for violations of the Kansas Consumer Protection Act (“KCPA”)2
and unjust enrichment. Plaintiff alleges Defendant’s advertisements of its “original,” “regular,”
“former,” and “sale” prices and their corresponding price discounts are fraudulent and deceptive.
This matter is before the Court on Defendant’s Motion to Stay Proceedings and Compel
Arbitration (ECF No. 31). Defendant requests that the Court stay these proceedings and compel
Plaintiff to arbitrate her individual, non-class claims pursuant to arbitration provisions in her
JCPenney credit card agreement and JCPenney rewards program agreement. For the reasons
discussed below, the motion to compel arbitration is denied.3

1

Plaintiff filed her Class Action Petition for Damages (ECF No. 1-1) in Wyandotte County District
Court on December 16, 2016. Defendant removed the case to federal court on January 20, 2017.
2

3

K.S.A. 50-623 et seq.

This motion was referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b).
See Order Referring Motion, ECF No. 40. The undersigned Magistrate Judge will enter a memorandum and
order rather than a report and recommendation because cases from the District of Kansas have held that a
motion to stay proceedings and compel arbitration is non-dispositive and within the magistrate judge’s
authority. See Wilken Partners, L.P. v. Champps Operating Corp., No. 11-CV-1005-EFM-KGG, 2011 WL

I.

Summary of the Parties’ Arguments
Defendant argues all of Plaintiff’s claims are subject to binding, individual (non-class)

arbitration under two separate arbitration agreements: one set out in her credit card agreement and
one set out in the terms and conditions of Defendant’s rewards program. Defendant argues that,
because Plaintiff used her JCPenney credit card on September 23, 2014 to purchase the gold hoop
earrings that are the basis for her claims against Defendant for fraudulent and deceptive
advertising of prices and discounts on that jewelry, Plaintiff’s claims are subject to arbitration
pursuant to the terms of her credit card agreement. Defendant alternatively argues that, because
Plaintiff used the JCPenney rewards program and obtained rewards credit points for the jewelry
purchase, her claims are likewise subject to arbitration under the terms and conditions of the
rewards program agreement.
Plaintiff argues she never agreed to arbitrate any of the claims she presently asserts against
Defendant, and the arbitration provisions Defendant relies upon in its motion do not apply to her
claims in this case. She also argues that the 2008 credit card agreement Defendant relies upon has
been superseded by later versions containing materially different provisions regarding arbitration.

1257480, at *1 (D. Kan. Apr. 4, 2011) (noting “district courts that have considered the nature of an order to
stay proceedings pending arbitration and to compel arbitration have concluded that these are
non-dispositive orders”); Jackman v. Jackman, No. 06-1329-MLB-DWB, 2006 WL 3792109, at *2 (D.
Kan. Dec. 21, 2006) (“[B]ecause an Article III judge will ultimately be required to confirm, modify, or
vacate any arbitration award, the order to stay proceedings and compel arbitration is non-dispositive and is
within the magistrate [judge]’s authority.”). But see Walter v. Mark Travel Corp., No. 09-1019-EFM, 2013
WL 5276143, at *4 (D. Kan. Sept. 18, 2013) (noting the law in the Tenth Circuit is not settled whether an
order compelling arbitration is non-dispositive or dispositive).

2

II.

Law Regarding Arbitration Provisions
The Federal Arbitration Act (“FAA”)4 provides that “[a] written provision in any . . .

contract evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.”5 The FAA permits courts to stay litigation in favor of arbitration and to compel
arbitration.6 Under section 4 of the FAA, a party aggrieved by the alleged failure or refusal of
another party to arbitrate may move for an order compelling arbitration.7 Before entering orders
directing parties to proceed to arbitration, courts must be “satisfied that the making of the
agreement for arbitration or the failure to comply therewith is not in issue.”8 The United States
Supreme Court has interpreted these provisions to manifest a “liberal federal policy favoring
arbitration agreements.”9
But despite this liberal policy, the presumption of arbitrability “falls away,” when the
parties dispute whether a valid and enforceable arbitration agreement exists.10 “[A]rbitration is a
matter of contract,” and parties cannot be required to submit to arbitration any dispute which they
4

9 U.S.C. § 1 et seq.

5

9 U.S.C. § 2.

6

See 9 U.S.C. §§ 3 and 4.

7

9 U.S.C. § 4.

8

9 U.S.C. § 4. See also Nat’l Am. Ins. Co. v. SCOR Reinsurance Co., 362 F.3d 1288, 1290 (10th
Cir. 2004) (A court may compel arbitration “only when satisfied that the making of the agreement [to
arbitrate] is not at issue.”).
9

10

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).
Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 779 (10th Cir. 1998).

3

have not agreed so to submit.11 Nor does the FAA prevent parties who do agree to arbitrate from
excluding certain claims from the scope of their arbitration agreement.12 Courts are required to
simply enforce privately negotiated agreements to arbitrate, like other contracts, in accordance
with their terms.13 When deciding whether the parties agreed to arbitrate a certain matter
(including arbitrability), courts generally “should apply ordinary state-law principles that govern
the formation of contracts.”14
When there is a dispute between the parties regarding whether an arbitration agreement
exists, the party moving to compel arbitration bears a burden similar to the one a summary
judgment movant faces—it must make an initial showing that a valid arbitration agreement
exists.15 In other words, the party seeking to compel arbitration has the burden to “present
evidence sufficient to demonstrate an enforceable agreement to arbitrate.”16

11

AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986); Howsam v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). See also Howard v. Ferrellgas Partners, L.P., 748 F.3d 975,
977 (10th Cir. 2014) ( “Everyone knows the Federal Arbitration Act favors arbitration. But before the Act’s
heavy hand in favor of arbitration swings into play, the parties themselves must agree to have their disputes
arbitrated.”)(citing AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745 (2011)).
12

Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478

(1989).
13

Id. (citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967) (the
FAA was designed “to make arbitration agreements as enforceable as other contracts, but not more so.”)).
14

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).

15

Hancock v. Am. Tel. & Tel. Co., Inc., 701 F.3d 1248, 1261 (10th Cir. 2012).

16

SmartText Corp. v. Interland, Inc., 296 F. Supp. 2d 1257, 1263 (D. Kan. 2003).

4

III.

Arbitration Provisions at Issue
A.

Arbitration Provisions in Plaintiff’s JCPenney Credit Card Agreement
1.

The 2008 Agreement

In its motion to compel arbitration, and memorandum in support, Defendant relied upon
arbitration provisions contained in the 2006 credit card agreement17 and subsequent 2008 notice
of change in terms,18 which were mailed to Plaintiff when she opened her JCPenney credit card
account with GE Money Bank in February 2007 and with her April 28, 2008 billing statement
(hereinafter collectively, the “2008 Agreement”). Defendant attached the April 20, 2017
Declaration of Martha Koehler, Manager of Litigation Support for Synchrony Bank,19 to support
its assertion that Plaintiff’s JCPenney credit card agreement included a “broad agreement” to
arbitrate her claims. The 2008 Agreement contains the following arbitration provision:
ANY PAST, PRESENT, OR FUTURE LEGAL DISPUTE OR CLAIM OF ANY
KIND, INCLUDING STATUTORY AND COMMON LAW CLAIMS AND
CLAIMS FOR EQUITABLE RELIEF, THAT RELATES IN ANY WAY TO
YOUR ACCOUNT, CARD OR THE RELATIONSHIPS THAT ARISE FROM
YOUR ACCOUNT, THIS AGREEMENT OR ANY PRIOR AGREEMENT OR
ACCOUNT, INCLUDING THE ENFORCEABILITY OR SCOPE OF THIS
PROVISION OR DISPUTES OR CLAIMS THAT AROSE BEFORE THIS
PROVISION’S EFFECTIVE DATE, (“CLAIM”) WILL BE RESOLVED BY
BINDING ARBITRATION IF YOU, WE OR JCPENNEY ELECTS TO
17

THE JCPENNEY CARD, CREDIT CARD AGREEMENT, RETAIL INSTALLMENT
CREDIT AGREEMENT, Nonnegotiable Consumer Note (July 2006), ECF No. 32-1 at 7–8.
18

IMPORTANT NOTICE REGARDING JCPENNEY CREDIT CARD ACCOUNT, GE
MONEY BANK (April 2008), ECF No. 32-1 at 10-11.
19

Synchrony Bank is a federal savings association that has a number of credit card programs,
including a JCPenney-branded credit card program. Synchrony Bank was formerly known as GE Money
Bank before 2011, and GE Capital Retail from October 1, 2011 until June 2, 2014. Koehler’s Declaration
states she is familiar with the manner in which credit card agreements are maintained and the manner in
which mailings are sent to Synchrony Bank cardholders, and she addresses specifically the opening and
history of Plaintiff’s JCPenney credit card account. Koehler Decl., ECF No. 32. Future references to
Synchrony Bank herein will include the GE predecessor entities.

5

ARBITRATE.
***
As used in this [arbitration] provision: “We,” “Us,” and “Our” mean (1) GE Money
Bank and all of its parents, subsidiaries, affiliates, predecessors, successors,
assigns, employees, officers and directors (collectively, the “Bank”), and (2) J. C.
Penney Corporation, Inc. and all of its parents, subsidiaries, affiliates, predecessors,
successors, assigns, employees, officers and directors.20
Koehler indicated in her Declaration that subsequent notices of change in terms were
enclosed with Plaintiff’s October 28, 2008 and September 28, 2009 billing statements, but those
changes did not relate to arbitration. Koehler’s Declaration was silent on whether additional
subsequent change in terms notices were enclosed in any of Plaintiff’s billing statements after
September 28, 2009.
Relying on the 2008 Agreement language, Defendant argued in its memorandum in
support of its motion that the parties agreed to “arbitrate any dispute or claim relating to
[Plaintiff’s] account, or the relationships that arise from the use of that account.”21 Defendant
argued the basis for Plaintiff’s claims is a dispute over a charge on her JCPenney credit card
account, and necessarily involves Plaintiff’s account and relationship with JCPenney arising from
use of that account. In short, Defendant argued but for Plaintiff’s $171.66 charge on her JCPenney
credit card account and obligation to pay that charge, Plaintiff suffered no injury and could not
state a claim against Defendant.
2.

The 2016 Agreement

Plaintiff disputes that the 2008 Agreement is the applicable version of the credit card
agreement that would govern a dispute relating to Plaintiff’s JCPenney credit card account.
20

2008 Agreement, ECF No. 32-1 (the first paragraph quoted above appeared in the 2008
Agreement in all caps, as is reflected here).
21

ECF No. 32, at 4 (citing Koehler Decl. ¶ 20).

6

Plaintiff argues Defendant “declined to present to the Court the most recent and controlling
versions of the two arbitration clauses,” and attempts to “enforce an outdated, 10-year old version
of the Synchrony Bank arbitration clause.”22 Plaintiff attached to her response a September 2016
version of Synchrony Bank’s JCPenney Credit Card Agreement (the “2016 Agreement”), which
Plaintiff’s counsel obtained from Synchrony Bank’s website.23 Plaintiff argues this 2016
Agreement made at least three significant changes subsequent to the 2008 Agreement that
Defendant presented to the Court. With regard to the scope of the arbitration provision, Plaintiff
points out that significant language upon which Defendant relied from the 2008 Agreement no
longer exists in the 2016 Agreement. Specifically, Plaintiff argues language in the 2008
Agreement mandating arbitration of legal claims and disputes regarding “relationships that arise
from the use of the [JCPenney credit card]” has been removed from the 2016 Agreement. Plaintiff
argues the scope of the controlling credit card agreement has been significantly narrowed and the
omission of this language reveals a clear intent of Plaintiff and Synchrony Bank not to arbitrate
anything other than credit card account disputes. Plaintiff maintains her claims are based on
Defendant’s false advertising practices and exist regardless of whether Plaintiff paid for her
purchase with cash or her JCPenney credit card.
In its reply, Defendant argued that Plaintiff did not contest she agreed to the binding
arbitration provisions in the 2008 Agreement, and that Plaintiff has provided no evidence she
received the 2016 Agreement, or that the 2016 Agreement applies to the claims in this case.
22

Pl.’s Mem. in Opp’n at 3–4, ECF No. 41.

23

SYNCHRONY BANK JCPENNEY CREDIT CARD AGREEMENT (Sept. 2016), ECF No.
41-1 at 4–7. Plaintiff also identified and attached a March 2017 version of Synchrony Bank’s JCPenney
credit card agreement that her counsel obtained from Synchrony Bank’s website. See ECF No. 41-1 at 9–
16. The 2017 version is identical to the 2016 Agreement in all material respects, therefore throughout this
Memorandum and Order the Court will refer simply to the 2016 Agreement.

7

Defendant asserted it had “offered unrefuted testimony establishing that the agreements attached
to its motion [i.e., the 2006 and 2008 Agreements] are the agreements that were sent to Plaintiff
and govern the relationship at issue.”24 Defendant noted that Plaintiff was given two opportunities
to opt out of arbitration but did not do so.25 Defendant argued even if the 2016 Agreement
identified by Plaintiff governs the relationship between Plaintiff and Defendant, that would not
change the outcome—Plaintiff would still be required to arbitrate her claims. Defendant contended
this is so because every agreement in the record includes a binding arbitration provision and all of
those agreements give Defendant express arbitration rights. Defendant characterized the
differences in these agreements as “slight.” Defendant stressed the provisions of the 2016
Agreement include the language in bold capitalized letters alerting Plaintiff that most disputes will
be subject to individual arbitration and the limited exceptions to which arbitration will not apply
(neither of which are applicable to Plaintiff’s claims here). Finally, Defendant argued at most the
2016 Agreement revisions would mean only that there was silence as to class arbitration with
regard to Defendant; they would not mean the arbitration provision is to be ignored altogether.
On June 21, 2017, after consulting with the parties’ counsel regarding availability, the
Court entered a Notice of Hearing setting an evidentiary hearing on Defendant’s motion on July 6,
2017. The Court specifically indicated what issue the parties should address at the hearing:
The purpose of the hearing will be to hear testimony from Martha Koehler re the
business records of Synchrony Bank (as broadly defined in Ms. Koehler's
4/20/2017 Affidavit) regarding Plaintiff's JCPenney credit card. Specifically, the
Court will hear testimony concerning whether any Change in Terms notices and/or
amended credit card agreements were sent to Plaintiff other than those referenced

24

ECF No. 42 at 4.

25

Id. Plaintiff does not contest this point and the Court need not address it.

8

in the 4/20/2017 Affidavit.26
The Court set the July 6 hearing because Koehler’s Declaration, although identifying the
2008 Agreement, failed to indicate whether Koehler had thoroughly searched Synchrony Bank’s
records to determine if subsequent notices regarding changes to her credit card terms were sent to
Plaintiff between 2009 and 2014, and whether the 2008 Agreement was the last (and most recent)
sent to Plaintiff at the time she purchased the jewelry in September 2014. This, along with
Plaintiff’s identification of the 2016 Agreement, which included materially different arbitration
provisions, and the failure of Defendant to verify in its reply the most recent applicable version of
Plaintiff’s JCPenney credit card agreement, put this issue squarely in play.
3.

The 2012 Agreement

On June 30, 2017, Defendant filed a Notice with the Supplemental Declaration of Koehler,
dated June 29, 2017, attached.27 Koehler states in her Supplemental Declaration that out of an
abundance of caution and in preparation for the July 6, 2017 hearing, she reconfirmed her findings
with Synchrony Bank’s marketing, IT, and compliance groups in order to confirm that no
additional change in terms notices were sent to Plaintiff. Through that process, Kohler identified
two additional change in terms notices that were sent to Plaintiff after 2009. In 2012, due to a
“unique circumstance,” GE Capital Retail Bank (Synchrony Bank’s predecessor) sent a “global”
change in terms to all eligible accounts, including Plaintiff. This “global” change included sending
the entire card holder agreement incorporating the applicable change in terms to the eligible

26

June 21, 2017 Notice of Hearing, ECF No. 43.

27

Notice of Koehler Suppl. Decl., ECF 45.

9

account holder (the “2012 Agreement”).28 Another change in terms notice was sent to Plaintiff in
October 2015, but it did not alter the arbitration provisions of the 2012 Agreement. Koehler also
indicates that the 2016 Agreement obtained by Plaintiff’s counsel from Synchrony Bank’s website
does not relate to Plaintiff’s JCPenney credit card account and was not provided to Plaintiff.
The 2012 Agreement contains the following provisions regarding arbitration:
RESOLVING A DISPUTE WITH ARBITRATION
PLEASE READ THIS SECTION CAREFULLY. IF YOU DO NOT REJECT
IT, THIS SECTION WILL APPLY TO YOUR ACCOUNT, AND MOST
DISPUTES BETWEEN YOU AND US WILL BE SUBJECT TO
INDIVIDUAL ARBITRATION. THIS MEANS THAT: (1) NEITHER A
COURT NOR A JURY WILL RESOLVE ANY SUCH DISPUTE; (2) YOU
WILL NOT BE ABLE TO PARTICIPATE IN A CLASS ACTION OR
SIMILAR PROCEEDING; (3) LESS INFORMATION WILL BE
AVAILABLE; AND (4) APPEAL RIGHTS WILL BE LIMITED.


What claims are subject to arbitration

1. If either you or we make a demand for arbitration, you and we must arbitrate any
dispute or claim between you or any other user of your account, and us, our
affiliates, agents and/or J. C. Penney Corporation, Inc. if it relates to your account,
except as noted below.
2. We will not require you to arbitrate: (1) any individual case in small claims court
or your state’s equivalent court, so long as it remains an individual case in that
court; or (2) a case we file to collect money you owe us. However, if you respond to
the collection lawsuit by claiming any wrongdoing, we may require you to
arbitrate.
3. Notwithstanding any other language in this section, only a court, not an
arbitrator, will decide disputes about the validity, enforceability, coverage or scope
of this section or any part thereof (including, without limitation, the next paragraph
of this section and/or this sentence). However, any dispute or argument that
concerns the validity or enforceability of the Agreement as a whole is for the
arbitrator, not a court, to decide.29
28

GE CAPITAL RETAIL BANK, JCPENNEY CREDIT CARD ACCOUNT AGREEMENT,
ECF No. 45-1 at 5–10.
29

2012 Agreement, ECF No. 45-1 at 10.

10

Defendant finally concedes in its Notice of Koehler’s Supplemental Declaration that the
2012 Agreement includes an “updated” arbitration provision “similar” to the 2016 Agreement
identified by Plaintiff in her response.30 Thus, it now appears undisputed that the 2012 Agreement
is applicable and governs the claims at issue in this case, and the Court so finds. Based upon its
review and comparison of the 2012 Agreement with the 2016 Agreement, the Court further finds
that the two agreements are not merely similar, rather they are identical in all respects relevant and
material to the dispute in this case.31
4.

The Court Must Decide Whether the Parties Agreed to Arbitrate

Before addressing the specific arbitrability of the claims raised in this case, the Court must
address the threshold issue of who decides arbitrability in the first place—the Court or an
arbitrator.32 “Unless the parties clearly and unmistakably provide otherwise, the question of
whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.”33 Here, the
2012 Agreement expressly provides that “only a court, not an arbitrator, will decide disputes about
30

In its motion to stay this case and compel arbitration, and memorandum in support, Defendant
relied upon the 2008 Agreement. According to Koehler’s Supplemental Declaration, she only went back to
review Defendant’s records for any more recent change in terms or agreements applicable to Plaintiff’s
account, in preparation for the court hearing scheduled for July 6, 2017. Even after Plaintiff attached the
2016 and 2017 Synchrony Bank Agreements to its response and asserted there were more recent versions of
Plaintiff’s agreement than the 2008 Agreement, Defendant persisted in its position that the 2008 Agreement
governed Plaintiff’s claims (See Reply, ECF No. 42 at 4). Defendant claimed it had “offered unrefuted
testimony establishing that the agreements attached to its motion [i.e. the 2006 and 2008 Agreements] are
the agreements that were sent to Plaintiff and govern the relationship at issue.” However, Defendant now
concedes that the 2012 Agreement governs Plaintiff’s claims. Had the Court not set the July 6 hearing and
pressed the issue, it does not appear that Defendant would have ever performed the necessary due diligence
and come forward to correct the record. This is not the level of due diligence, professionalism and candor
expected of litigants and counsel who appear in this Court.
31

Compare 2012 Agreement (ECF No. 45-1 at 10) with 2016 Agreement (ECF No. 41-1 at 6).

32

Belnap v. Iasis Healthcare, 844 F.3d 1272, 1281 (10th Cir. 2017).

33

James v. Client Servs., Inc., No. 14-2480-JAR, 2015 WL 3649473, at *2 (D. Kan. June 11, 2015)
(quoting AT & T Techs., 475 U.S. at 649).

11

the validity, enforceability, coverage or scope of this section or any part thereof.” Based upon this
language, the Court finds that it, rather than an arbitrator, must decide the issue of whether Plaintiff
agreed to arbitrate the claims asserted against Defendant in this case.
5.

Under the Applicable 2012 Agreement, Plaintiff’s Claims are Not
Subject to Arbitration

The provision for “Resolving a Dispute with Arbitration” in the 2012 Agreement is
significantly narrower than the “Arbitration Provision” in the 2008 Agreement, upon which
Defendant relied in its motion.34 The “Arbitration Provision” in the 2008 Agreement that required
arbitration of “any past, present or future legal dispute or claim of any kind, including statutory and
common law claims . . . that relates in any way to your account, card or the relationships that arise
from your account, this agreement or any prior agreement or account”35 was removed from the
2012 Agreement. In lieu of this broad arbitration scope provision, the 2012 Agreement provides
that the only dispute or claim subject to arbitration is one between Plaintiff and Synchrony Bank,
its affiliates, agents and/or J. C. Penney Corporation, Inc. “if it relates to your account, except as
noted below.”36
The Court rejects Defendant’s assertion that these are “slight” changes. It is significant that
the 2012 Agreement deleted the express reference to “statutory” claims from those subject to
arbitration, especially in this case involving Plaintiff’s claim that Defendant violated statutory
provisions of the KCPA. It is also significant that the 2012 Agreement limits the claims subject to

34

Compare 2012 Agreement (ECF No. 45-1 at 10) with 2008 Agreement (ECF No. 32-1 at 10).

35

2008 Agreement, ECF No. 32-1 at 10.

36

2012 Agreement, ECF No. 45-1 at 10 (emphasis added). The two noted exceptions for small
claims or collection cases do not apply here.

12

arbitration to any dispute or claim related to Plaintiff’s JCPenney credit card account, to the
exclusion of claims subject to arbitration under the 2008 arbitration provision also relating to
Plaintiff’s card or the relationships that arise from the account. The omission of this latter
provision is especially significant in that it materially changed the scope of the arbitration
provision and clearly indicates an intent to do so. Notably, Defendant relied upon this language of
the 2008 Agreement arbitration provision in support of its motion to compel arbitration, but this
provision was omitted and superseded by the 2012 Agreement. And in its reply, although it made
arguments that it is entitled to arbitrate even if the 2016 Agreement (and hence the identified 2012
Agreement language) applies, Defendant did not address the effect of the deletion of this material
language upon which it had previously relied.
The Court finds that the terms of the 2012 Agreement superseded the arbitration provisions
of the 2008 Agreement. The Court also finds the arbitration provisions in the 2012 Agreement are
limited in scope to disputes and claims related to Plaintiff’s JCPenney credit card account with
Synchrony Bank (formerly GE Capital Retail Bank). Plaintiff’s statutory claims under the KCPA
against Defendant for deceptive and unconscionable acts and practices relate to Defendant’s
allegedly false or fraudulent advertising and pricing of items it sells to consumers. Plaintiff does
not seek to hold Defendant liable for false or deceptive advertising with respect to her credit card
account or any violation or interference with any term or provision of her credit card account. The
Court therefore finds that Defendant has not met its burden to show that the arbitration provisions
in the 2012 Agreement require arbitration of Plaintiff’s claims against Defendant.
Nor has Defendant shown that it has a right to make a demand for arbitration under the
2012 Agreement. Defendant is not a signatory party to either the 2008 Agreement or 2012

13

Agreement. Both agreements are between Plaintiff and Synchrony Bank or its predecessor entities
GE Money Bank or GE Capital Retail, the company that extended credit to Plaintiff by issuing her
a JCPenney-branded credit card. The 2012 Agreement expressly provides it “is an Agreement
between you and GE Capital Retail Bank, [address], for your credit card account shown above.”37
In its provision for what claims are subject to arbitration, it specifically states that “[i]f either you
or we make a demand for arbitration, you and we must arbitrate . . . .”38 The 2012 Agreement
defines “you” as the accountholder and “we” as “GE Capital Retail Bank.”39 Because Defendant
is not included within “we,” it does not have a contractual right under the 2012 Agreement to make
a demand for arbitration. The Court recognizes that in some cases a nonsignatory party to an
arbitration agreement may enforce the agreement if it is a third-party beneficiary.40 The Court
need not decide whether Defendant is a third-party beneficiary because the Court has already
found that Plaintiff’s claims in this case do not fall within the scope of the claims required to be
resolved by arbitration under the 2012 Agreement.
B.

Arbitration Provision in JCPenney Rewards Agreement

Defendant alternatively seeks to compel arbitration of Plaintiff’s claims as a condition of
her participation and membership in the J.C. Penney rewards program. Defendant claims Plaintiff
utilized her rewards account for the transaction and received 158 reward points credit for the
transaction under the J.C. Penney rewards program, which she later redeemed in subsequent

37

2012 Agreement, ECF No. 45-1 at 10.

38

Id. (emphasis added).

39

Id.

40

O’Connor v. R.F. Lafferty & Co., 965 F.2d 893, 901 (10th Cir. 1992).

14

transactions. Defendant argues Plaintiff’s lawsuit broadly challenges Defendant’s product
discounts and incentives as allegedly fraudulent and deceptive, and therefore necessarily
implicates the discounts and incentives Plaintiff received, including the rewards incentives and
credits she received, for the transaction at issue.
Plaintiff argues that the rewards program arbitration provision does not apply to her claims
alleging Defendant’s pricing and discounts are deceptive and fraudulent, because they do not arise
from or relate to the rewards program agreement or her rewards. Plaintiff contends that she did not
use her JCP Rewards benefits to purchase the earrings, nor was her ability to purchase the earrings
conditioned on her membership in the rewards program. Plaintiff did not receive a discount on her
purchase for being a rewards member and she is not claiming she was given insufficient rewards
“points” for her purchase. Therefore, Plaintiff argues there is no connection between her
membership or the terms and conditions of the rewards program and Plaintiff’s claims against
Defendant for its advertising practices.
The JCPenney Rewards Program Terms and Conditions (effective September 1, 2014)
include the following arbitration provision:
This Agreement will be governed by and construed under the substantive laws of
the State of Texas, without reference to conflict-of-laws considerations. JCPenney
and Member each agree that any dispute, claim, or controversy ("Claim") arising
from or relating to this Agreement or Member's JCPenney Rewards Membership
will be resolved by binding arbitration conducted in the State of Texas (Collin
County).41
The Rewards Program Terms and Conditions provide that the agreement is governed and
construed under the law of the State of Texas, therefore Texas law guides the Court’s inquiry
whether Plaintiff’s claims fall within the scope of the arbitration agreement. In determining
41

JCPenney Rewards Program Terms and Conditions §VII, ECF No. 32-2.

15

whether a party’s cla
aims fall with an arbitration agreem
hin
ment’s scope the Court f
e,
focuses on th
he
complain factual allegations ra
nt’s
a
ather than the legal cause of action asserted.42 A doubts a
es
Any
about
the scope of the arbit
e
tration agree
ement are to be resolved in favor of c
coverage.43
Reviewing th factual alle
R
he
egations of Plaintiff’s pe
P
etition, the C
Court finds n mention o
no
of
Defendan rewards agreement, program, or Plaintiff’s m
nt’s
r
membership in the rewar program
p
rds
m.
Plaintiff includes det
tailed allegat
tions about her purchase of the earrin and Def
h
e
ngs
fendant’s
advertise discounts and pricing with respect to the earri ngs,44 but P
ed
t
Plaintiff makes no allegat
tions
regarding the reward program. As Plaintiff contends, he claims are based upon Defendant’s
g
ds
A
c
er
e
n
allegedly deceptive and fraudulen pricing an discounts , not upon b
y
a
nt
nd
breach of the terms of the
e
rewards program or upon Plaintif member
p
u
ff’s
rship in the p
program. The Court ther
refore finds t
that
Plaintiff’s claims alle
eging Defend “falsely advertised former price and discou
dant
y
es
unts” do not arise
t
r
r
mbership agr
reement or th rewards m
he
membership. Thus, Plain
ntiff’s
from or relate to the rewards mem
claims ar not within the scope of the reward program a
re
n
o
ds
arbitration pr
rovision.
IT IS THER
T
REFORE OR
RDERED THAT Defen
T
ndant’s Moti to Stay P
ion
Proceedings and
Compel Arbitration (ECF No. 31 is DENIED
A
(
1)
D.
IT IS SO OR
T
RDERED.
Dated July 14 2017, at Kansas City, Kansas.
D
4,
K

Teresa J James
J.
U. S. Ma
agistrate Jud
dge
42
2

In re FirstM
Merit Bank, N.A., 52 S.W.3d 749, 754 (T 2001).
Tex.

43
3

Id.

44
4

Pl.’s Class Action Pet. fo Damages ¶¶ 30–46, ECF No. 1-1.
A
or
¶
F

16