Harding v. MidSouth Bank N A

Filing 18

MEMORANDUM RULING granting 4 Motion to Compel Arbitration; granting 4 Motion to Stay. Signed by Magistrate Judge Patrick J Hanna on 10/3/2012. (crt,Dauterive, C)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
UMEKI HARDING

CIVIL ACTION 12-cv-1562

VERSUS

JUDGE DOHERTY

MIDSOUTH BANK N A

MAGISTRATE JUDGE HANNA
MEMORANDUM RULING

The defendant’s Motion to Compel Arbitration and Stay Proceedings[Rec. Doc. 4] has
been referred to the undersigned for disposition.1 After considering the memoranda of the
parties and the oral arguments presented on September 25, 2012, the court finds that the
motions should be GRANTED.
Facts, Procedural History, and Positions of the Parties:
On December 9, 2004, Plaintiff Umeki Harding opened a checking account at Midsouth
Bank.2 At that time, she signed an Account Agreement, which provided in pertinent part that she
“personally and as, or on behalf of, the account owner(s) agree to the terms of, and acknowledge
receipt of copy(ies) of, this document and the following: Terms and Conditions, Electronic Fund
Transfers, Substitute Checks, Privacy, Truth in Savings, Funds Availability.” [Rec. Doc. 4, Ex. A-1]
Ms. Harding proceeded to use her checking account and/or the ATM and debit cards issued by the
bank for the account. Over the years since 2004, she was charged numerous overdraft fees on the
account.

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Rec. Doc. 5.

2
The account was opened as a joint account by Umeki Danielle Jackson and/or Rogernick D. Harding.
[Rec. Doc. 4-2, Ex. A-1] The Court presumes the two have since married. Rogernick D. Harding is not a party to
this litigation.

On June 8, 2012, Umeki Harding filed this action seeking monetary damages, restitution, and
injunctive/declaratory relief from Midsouth Bank NA arising from the bank’s alleged unfair,
deceptive and unconscionable assessment and collection of overdraft fees. [Rec. Doc. 1] Plaintiff
alleges, among other things, that Midsouth would not decline debit card transactions when its
customers had insufficient funds, but would instead process the transaction and then charge an
overdraft fee, which was often more than the transaction amount, and the bank acted to maximize
its profits by reordering electronic debit transactions-processing debits before credits-to deplete
available funds and increase overdraft exposure. [Rec. Doc. 1, Para. 4-5]. Plaintiff alleges the
defendant bank’s practices disproportionately affect low-income customers who maintain low
balances. [Rec. Doc. 1, Para. 7]. Plaintiff sues on her own behalf and for all similarly-situated
individuals. [Rec. Doc.1, Para. 8,15]. The claims are based on provisions of the Electronic Funds
Transfer Act at 15 U.S.C. §1693 et seq, and the Class Action Fairness Act at 28 U.S.C. §1332(d),
with Plaintiff asserting that the court has jurisdiction over this action, because “there is the requisite
diversity of citizenship between members of the purported class and defendant and because the
aggregate amount in controversy exceeds $5 million.” [Rec. Doc. 1, Para. 13] The proposed class
is described by Plaintiff to include
all MidSouth customers who, within the applicable statute of limitations through the
date of class certification, initiated an electronic funds transfer with an ATM or debit
card issued by MidSouth and were assessed one or more overdraft fees or charges for
an ATM or one-time debit card transaction as a result of Midsouth’s improper
practices as alleged herein.[Rec. Doc. 1, Para. 16]
She alleges the class includes thousands of customers in Louisiana and Texas. [Rec. Doc. 1, Para.
19] She urges that the Court should determine Defendant’s liability for all Class members in a single
action, and that her claims and those of each Class member are based on the same legal theories and
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arise from the same unlawful conduct. [Rec. Doc. 1, Para. 22-23]
On August 15, 2012, Defendant filed the instant Motion to Compel Arbitration and Stay
Proceedings[Rec. Doc. 4], urging that Plaintiff executed an Account Agreement and Deposit
Agreement with Midsouth Bank at the time she opened her checking account in December, 2004.
The agreement, acknowledged by the plaintiff’s signature, contains an arbitration provision under
the bolded heading “Arbitration and Judicial Reference,” which states in pertinent part:
Upon request by you or us, any controversy or claim involving more than $25,000
that arises out of, or relates to, this agreement, or your deposit relationship with us,
shall be settled by arbitration in accordance with Title 9 of the United States
Code(Federal Arbitration Act) and the Commercial Arbitration Rules of the
American Arbitration Association....
BY ENTERING INTO THIS AGREEMENT, YOU AND WE WAIVE OUR RIGHT
TO TRIAL BY JURY.... [Agreement, Rec. Doc. 4-2, p. 13]

Defendant argues that the arbitration provision, made part of the Agreement signed by the
plaintiff, applies to the claims made in this litigation, since the plaintiff has alleged that Midsouth
violated/breached the Account Agreement and has placed in controversy more than $25,000 in actual
and statutory damages; as representative of a proposed class, she has alleged an amount in
controversy which exceeds $5 million. [Rec. Doc. 1, Para. 13] On that basis, Defendant seeks an
order from the court compelling arbitration and a stay of the instant proceedings pending exhaustion
of the arbitration process.
In opposition to the motion, Plaintiff argues that her claims do not meet the financial
threshold for triggering the arbitration provision. She further urges that the provision itself is part
of an unenforceable adhesion contract. Finally, Plaintiff asserts that the parties should be permitted
to conduct limited arbitration-related discovery on the issues presented, in advance of a ruling by the

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court. [Rec. Doc. 9]
Applicable Legal Standards:
Arbitration is a matter of contract. United Steelworkers of Am. v. Warrior & Gulf Navigation
Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960). As such, a party will not be
required to submit a dispute to arbitration unless the party has agreed to do so. Id. Accordingly, when
deciding a motion to compel arbitration, courts are to conduct a two-step inquiry—the first step of
which is to determine whether the parties agreed to arbitrate the dispute in question. Mitsubishi
Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 3353, 87
L.Ed.2d 444 (1985); Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir.1996). This “first step”
involves two considerations: (a) whether there is a valid agreement to arbitrate between the parties;
and (b) whether the dispute in question falls within the scope of that agreement. Webb, 89 F.3d at
258. When deciding whether the parties have agreed to arbitrate the dispute in question, courts
generally apply ordinary state-law principals governing contract formation. Id. State law must be
applied, however, with due regard to the federal policy favoring arbitration, and ambiguities as to
the scope of the arbitration clause itself must be resolved in favor of arbitration. Id. The second step
of the two-step inquiry is to determine whether legal constraints external to the parties’ agreement
foreclosed the arbitration of those claims. Mitsubishi Motors Corp., 473 U.S. at 628, 105 S.Ct. at
3355; Webb, 89 F.3d at 258..
The Federal Arbitration Act (FAA) applies to contracts involving interstate commerce that
contain or are subject to a written agreement to arbitrate. 9 U.S.C. §§ 1–2. The statute provides for
“the enforcement of arbitration agreements within the full reach of the Commerce Clause”, and
reaches more transactions than those actually “within the flow of interstate commerce”. Citizens
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Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003) (internal quotation
marks omitted). The Agreement at issue in this matter specifically references the FAA as the
intended standard for dispute resolution between/among the parties.
The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1, et seq., creates “a body of federal
substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the
Act.” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 103 S.Ct. 927, 941 (1983).
When deciding whether parties should be compelled to arbitrate, courts conduct a two-step inquiry.
Will-Drill Resources, Inc. v. Samson Resources Co., 352 F.3d 211, 214 (5th Cir.2003). First, the
court must decide whether the parties agreed to arbitrate their dispute and, if so, whether this dispute
falls within the scope of the arbitration agreement. Id. Second, the court must consider whether any
federal statute or policy renders the claims nonarbitrable. Id.
Is there a valid agreement to arbitrate?
Plaintiff argues that the arbitration clause at issue is an unconscionable adhesion contract.
She urges that the clause “is contained within a lengthy document and is provided to customers when
they open their accounts on a take-it-or-leave-it basis.” [Rec. Doc. 9, p. 7 of 19] She argues that the
clause is “written in legalese” and is “buried deep” within the Agreement, and is “barely
distinguishable from the remainder of the Deposit Agreement.” This Court disagrees. The clause
at issue is easy to find within the Agreement document, below a bolded heading. It includes lines
which are capitalized for emphasis, and its language appears clear enough to be reasonably
understood by a reader. Plaintiff has not claimed she did not see the agreement; she has not denied
that her signature appears on bank documents submitted into the record. Moreover, the history of
the plaintiff’s relationship with the defendant bank over years and through multiple admitted
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applications of the bank’s overdraft procedures warrants the inference that Plaintiff, who could have
ended the relationship at any time, chose to continue the ‘agreement’ in place. On these facts, and
making the appropriate case-by-case consideration3, the undersigned finds no support for the
argument that the agreement set out in the arbitration clause is not a valid agreement.
Does this dispute fall within the scope of the arbitration agreement?
The real issue between the parties, as presented at the recent oral argument, is whether the
dispute before the Court falls within the scope of the arbitration clause, with the plaintiff arguing that
her individual claim does not meet or exceed the $25,000 threshold factor set out in the clause. In
considering the question, this Court examines whether the specific dispute at issue falls within the
scope of the arbitration provision. That “inquiry is not guided by the legal labels attached to the
plaintiff’s claims; rather it is guided by the factual allegations underlying those claims.” Harvey v.
Joyce, 199 F.3d 790, 795(5th Cir. 2000).
Determining whether a dispute falls within the scope of an arbitration clause requires the
court to characterize the arbitration clauses as “broad” or “narrow.” Pennzoil Exploration &
Production Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1067 (5th Cir.1998). “Broad arbitration
clauses ... embrace all disputes between the parties having a significant relationship to the contract,
regardless of the label attached to the dispute.” Id. Narrow arbitration clauses require arbitration only
of disputes “arising out of” the contract, while broad clauses are those that cover all disputes that
“relate to” or “are connected with” the contract. Id. See also Prima Paint, 388 U.S. 395, 404, 87
S.Ct. 1801, 1802-03, 18 L.Ed.2d 1270 (1967) (labeling as “broad” a clause requiring arbitration of

3

See Green Tree Financial Corp.-Alabama, v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373

(2000).

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“[a]ny controversy or claim arising out of or relating to this Agreement”).
The arbitration clause at issue in this case applies to “any controversy or claim” that “arises
out of, or relates to, this agreement, or your deposit relationship with us.” Such language, especially
when linked by the disjunctive ‘or,’ demonstrates the intent to expand the scope of application of
the clause and is consistent with arbitration clauses interpreted to be ‘broad’ by the courts of this
Circuit. In this case, however, the clause includes additional language which sets a monetary value
threshold for application of the arbitration clause. Therein lies the dispute between the parties.
Defendants urge that the amount placed in controversy by the plaintiff on the face of the pleadings
exceeds the threshold of $25,000, as set out in the clause, especially when considered in the context
of the plaintiff’s declaration that the class claims she seeks to present are valued in excess of $5
million. The plaintiff seeks to confine consideration of the ‘amount in controversy’ to her individual
claims, which she declares fall far short of the threshold referenced in the arbitration clause, a
provision which the plaintiff argues is “exceedingly narrow.”
Should the class action damage claims advanced by the plaintiff be considered in determining
the ‘amount in controversy’ question? According to the allegations in the Complaint, the class
action claims sought to be presented by the plaintiff are based upon the alleged similar circumstances
of the class members as account holders with Midsouth Bank, bound by similar bank procedures and
practices, including the agreement at issue. On those allegations, it can be reasonably inferred that
the claims of all class members will involve application of Midsouth’s Agreement. That forms the
basis of the plaintiff’s representative claims. Considered in that way, there is no question that the
‘controversy’ arising out of, or relating to the Midsouth Agreement is purported to be shared by all
similarly-situated claimants, represented herein by the plaintiff, based on her own relationship with
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the bank. That ‘controversy’ is declared by the plaintiff to exceed $5 million. In the plaintiff’s effort
to limit the application of the arbitration clause to her individual claims, she offers no legal authority
for that conclusion, and this Court finds no legal basis for disregarding the class action claims sought
to be advanced by this plaintiff.
The question of arbitrability is determined on the basis of the existence of an arbitration
clause that on its face appears broad enough to encompass the parties' claims. Commerce Park at
DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 338 (5th Cir.1984). A presumption of
arbitrability exists requiring that whenever the scope of an arbitration clause is fairly debatable or
reasonably in doubt, the court should decide the question of construction in favor of arbitration.
United Steelworkers of America v. Warrior & Gulf Navigational Co., 363 U.S. 574, 583, 80 S.Ct.
1347, 1353, 4 L.Ed.2d 1409 (1960). The presumption favoring arbitrability is based in large part on
policy considerations. A primary consideration recognized by the courts has been the desirability of
relative speed and economy of arbitration “not subject to delay and obstruction in the courts.” Prima
Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 404, 87 S.Ct. 1801, 1806, 18
L.Ed.2d 1270 (1967). A second consideration which has influenced courts to embrace the resolution
of disputes by arbitration is the desirability of “eas[ing] the congestion of the Court dockets.”
Southwest Industrial Import and Export, Inc. v. Wilmod Co., Inc., 524 F.2d 468, 470 (5th Cir.1975).
Furtherance of these objectives requires broad construction of arbitration agreements. Mar-Len of
Louisiana, Inc. v. Parsons-Gilbane 773 F.2d 633, 635 -636 (C.A.5 (La.)1985). “questions of
arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration ... The
Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Hospital v. Mercury
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Construction Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). See also Rojas v. TK
Communications, Inc., 87 F.3d 745, 747 (5th Cir.1996) (whenever the scope of an arbitration clause
is in question, the court should construe the clause in favor of arbitration). Even if, however, the
Court was to acknowledge that the arbitration provisions at issue were ambiguous, “to acknowledge
the ambiguity is to resolve the issue, because all ambiguities must be resolved in favor of
arbitrability.”Armijo v. Prudential Insurance Co. of America at 798. Mouton v. Metropolitan Life
Ins. Co., 147 F.3d 453(5th Cir. 1998).
Arbitration should not be denied “unless it can be said with positive assurance that an
arbitration clause is not susceptible of an interpretation that could cover the dispute at issue.” Wick
v. Atlantic Marine, Inc., 605 F.2d 166, 168 (5th Cir.1979). On review of the facts, the allegations
of the pleadings and the arguments of the parties, the undersigned cannot make that statement with
the requisite positive assurance.
Finally, the court must consider whether any federal statute or policy renders the claims
nonarbitrable. Plaintiff has not presented, and the undersigned has not found any binding legal
authority which would require excluding the representative class claims from consideration as “a
controversy,”and on application of the presumption of arbitrability, this Court concludes that the
dispute at issue falls within the scope of the arbitration agreement.
Conclusion
Based on the foregoing, the undersigned finds no support for Plaintiff’s assertion that the
agreement set out in the arbitration clause is not a valid agreement and concludes that there was a
valid agreement to arbitrate. On application of the appropriate legal standards discussed at length
above, construing the arbitration clause in favor of arbitrability, the undersigned cannot state “with
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positive assurance” that the clause at issue is not susceptible of an interpretation that could cover the
dispute between the parties herein. On that basis, the court concludes that the dispute at issue falls
within the scope of the arbitration agreement, and the defense motions to compel arbitration and to
stay proceedings should be GRANTED.

Signed this 3rd day of October, 2012 at Lafayette, Louisiana.

___________________________________
PATRICK J. HANNA
UNITED STATES MAGISTRATE JUDGE

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