LAUDANO v. CREDIT ONE BANK
Filing
11
OPINION. Signed by Judge Noel L. Hillman on 6/22/2016. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
LINDA LAUDANO,
Plaintiff,
CIVIL NO. 15-7668(NLH/KMW)
v.
OPINION
CREDIT ONE BANK
Defendant.
Appearances:
AMY LYNN BENNECOFF GINSBURG
KIMMEL AND SILVERMAN P.C.
EXECUTIVE QUARTERS
1930 E. MARLTON PIKE,
SUITE Q 29
CHERRY HILL, NJ 08003
On behalf of Plaintiff Linda Laudano
ROSS STEVEN ENDERS
SESSIONS FISHMAN NATHAN & ISRAEL LLC
2302 OXFORDSHIRE ROAD
FURLONG, PA 18925
On behalf of Defendant Credit One Bank
HILLMAN, District Judge
In this matter, Plaintiff Linda Laudano filed a complaint
alleging that Credit One Bank, N.A. (“Credit One”) violated the
Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227,
using an automatic telephone dialing system and automatic or
pre-recorded messages without her consent.
Defendant Credit One
filed a motion to compel arbitration and to dismiss Laudano’s
complaint, pending arbitration of her claims against Credit One.
For the reasons set forth below, this Court will deny Credit
One’s motion to dismiss without prejudice and direct the parties
to conduct discovery, limited in scope as to whether the parties
have entered into a valid agreement to arbitrate.
I.
JURISDICTION
District courts have original jurisdiction of all civil
actions arising under the Constitution, laws or treaties of the
United States. 28 U.S.C. § 1331.
In this action, our
jurisdiction is founded upon the TCPA, 47 U.S.C. § 227.
II.
BACKGROUND
Credit One filed a motion for an order to dismiss the
complaint without prejudice and to compel arbitration pursuant
to Federal Rules of Civil Procedure 12(b)(1) (lack of subject
matter jurisdiction) and 12(b)(6) (failure to state a claim upon
which relief can be granted) and the Federal Arbitration Act, 9
U.S.C. §§ 1 et seq. (“FAA”).
In the alternative, if the Court
determines “arbitrability is not apparent of the face of the
complaint, or if plaintiff responds to the motion with
additional facts sufficient to place the agreement to arbitrate
in issue . . . Credit One requests the Court stay resolution of
its Motion to allow limited discovery relating to
arbitrability.” (Docket 5-1 at 9 n.1.)
Defendant’s motion.
2
Laudano opposes
According to Laudano’s complaint,1 Credit One Bank called
her cellular telephone from September 2015 through October 2015
using an automatic telephone dialing system and pre-recorded
messages.
On September 30, 2015, Laudano revoked any consent
previously given to Defendant to call her cell phone and
demanded the calls stop.
A collector told her that a note
regarding her request to cease the calls would be put into her
file.
Laudano contends Credit One continued to telephone her
for several weeks.
Laudano alleges that Credit One’s actions
violated the TCPA and she demands damages, injunctive relief,
other relief and demands a jury trial.
Although it appears from Defendant’s submissions that
Laudano’s commercial relationship with the Defendant revolves
around a credit card, the complaint is notably silent as to
those underlying facts.
In her complaint, Laudano neither
admits nor denies receiving a solicitation from Credit One to
open a credit card account, opening a Credit One account,
receiving a Credit One credit card, making charges on a Credit
One card, having an agreement with Credit One, or having an
arbitration agreement with Credit One.
As set forth below, this case presents the issue of what legal
standard applies to Defendant’s motion. For present purposes,
we will accept all facts as alleged by Plaintiff in the
complaint as true as if we were deciding the motion pursuant to
Fed. R. Civ. P. 12.
1
3
In support of its motion, Credit One argues that Laudano is
bound by an agreement to arbitrate.
Credit One references two
discrete documents with arbitration agreement language.
The
first is an arbitration provision that it contends was on the
back of the credit card solicitation sent to Laudano, a “sample
copy” (Docket 5-1 at 2.) attached as Exhibit A-1. (“Solicitation
Agreement,” Exhibit A-1, Docket 5-3.)
Second, is the full
arbitration agreement that it states it sent to her with the
credit card. (“Disclosure Statement and Arbitration Agreement,”
hereinafter “Arbitration Agreement,” Ex. A-2, Docket 5-4.)
Credit One submits with its motion an affidavit of the Vice
President of Portfolio Services, Gary Harwood. (Harwood Aff.,
Ex. A, Docket 5-2.)
Harwood oversees accounts in collections.
He said he has access to records maintained in the course of
“regularly conducted activity of Credit One” and is “fully
familiar with the manner in which they are created and
maintained.” (Docket 5-2 at 2.)
He asserts that Credit One
mailed “Plaintiff a written solicitation for a pre-approved
credit card” bearing a unique reservation number on or about
November 13, 2012. (Id.)
He further avers: “In response to Plaintiff’s application,
Credit One issued a credit card to Plaintiff and mailed
Plaintiff the card, along with a copy of the [Arbitration
Agreement], which governs the account and relationship between
4
Plaintiff and Credit One.” (Id. at 2.)
He further contends
that: “A true and correct copy of the [Arbitration Agreement] is
attached hereto as Exhibit A-2.”
(Id.)
In short, Credit One contends that the agreement to
arbitrate is found in the terms of the Solicitation Agreement
and Arbitration Agreement which it supplied to Plaintiff when
she was first solicited and later approved for a credit card.
More specifically, it notes that the back pages of the
Solicitation Agreement include terms and conditions that apply
to the “credit card offer and application and require
arbitration of claims between the parties.” (Docket 5-1 at 2.)
Credit One adds that the Solicitation Agreement provides in
part, “If this application is accepted and one or more credit
cards are issued . . . I understand that once my credit card
Account is opened, it will be subject to the terms and
conditions of the [Arbitration Agreement] sent with my card[.]”
(Docket 5-1 at 2.)
Credit One says Laudano responded to the
solicitation by completing a credit card application online on
Credit One’s website. (Docket 5-1 at 2.)
As for the Arbitration Agreement, Credit One contends it
issued and mailed Laudano a VISA card which “Per Credit One’s
policy and ordinary business practice, [] included a copy of the
[Arbitration Agreement] . . . in the same envelope as the credit
card.” (Docket 5-1 at 3.)
According to Credit One, the
5
Arbitration Agreement says in part: “PLEASE READ THIS PROVISION
OF YOUR CARD AGREEMENT CAREFULLY.
IT PROVIDES THAT EITHER YOU
OR WE CAN REQUIRE THAT ANY CONTROVERSY OR DISPUTE BE RESOLVED BY
BINDING ARBITRATION.
ARBITRATION REPLACES THE RIGHT TO GO TO
COURT, INCLUDING THE RIGHT TO A JURY . . . .” (Docket 5-1 at 3.)
Credit One says Plaintiff activated the credit card by telephone
via its Interactive Voice Response system and used it for years
before she stopped making payments. (Docket 5-1 at 5.)
Harwood’s statement that Laudano received a copy of the
Arbitration Agreement appears to be based on the assumption that
Credit One followed its standard practice. (Id.)
His title,
description of duties, and other information in the Affidavit
could be construed as an indication that he lacks personal
information related to the solicitation and opening of accounts.
He says, for example, “It is Credit One’s policy to include a
copy of the [Arbitration Agreement] when mailing the customer
her credit card.” (Id.)
Importantly, Credit One admits that: “While Credit One does
not retain actual copies of the solicitation it sends potential
customers, a sample copy of the solicitation [including a sample
confirmation and approval number] is attached hereto as Exhibit
A-1.” (Docket 5-1 at 2.)
III.
STANDARD OF REVIEW
6
The Third Circuit concluded, “It is well established that
the Federal Arbitration Act (FAA), reflects a strong federal
policy in favor of the resolution of disputes through
arbitration.
But this presumption in favor of arbitration does
not apply to the determination of whether there is a valid
agreement to arbitrate between the parties.” Kirleis v. Dickie,
McCamey & Chilcote, 560 F.3d 156, 160 (3d Cir. 2009) (internal
quotations and citations omitted).
The court more recently
held, “When the very existence of . . . an [arbitration]
agreement is disputed, a district court is correct to refuse to
compel arbitration until it resolves the threshold question of
whether the arbitration agreement exists.” Guidotti v. Legal
Helpers Debt Resolution, L.L.C., 716 F.3d 764, 775 n.5 (3d Cir.
2013).
The Third Circuit rule is clear: “Before a party can be
ordered to arbitrate and thus be deprived of a day in court,
there should be an express, unequivocal agreement to that
effect.” Par-Knit Mills v. Stockbridge Fabrics, 636 F.2d 51, 54
(3d Cir. 1980).
In Kirleis, the court said, “To determine whether the
parties agreed to arbitrate, we turn to ordinary state-law
principles that govern the formation of contracts.” 560 F.3d at
160 (internal quotation and citation omitted).
The court held,
“Because arbitration is a matter of contract, before compelling
arbitration pursuant to the Federal Arbitration Act, a court
7
must determine that (1) a valid agreement to arbitrate exists,
and (2) the particular dispute falls within the scope of that
agreement.” Kirleis, 560 F.3d at 160 (internal citation
omitted).
A. Choice of Law
Laudano contends and Credit One appears to concede by
silence that New Jersey law applies to this issue.
In
determining whether a valid agreement to arbitrate exists in
this matter, we apply New Jersey law including its choice of law
rules.2
New Jersey's choice of law rules is a two-step analysis:
“First, we must determine whether there is an actual
conflict.
If there is not an actual conflict, the inquiry is
over[.]” Lebegern v. Forman, 471 F.3d 424, 428 (3d Cir. 2006)
(internal citations and quotations omitted).
2
If there is an
Credit One’s affirmative defense of arbitrability derives from
the FAA. According to the Third Circuit, “notwithstanding the
supremacy of federal law, courts repeatedly have held that in
interpreting [arbitration] agreements, federal courts may apply
state law, pursuant to section two of the FAA.” Gay v.
Creditinform, 511 F.3d 369, at 388 (3d Cir. 2007) (quotations
and citation omitted). To determine whether Laudano and Credit
One agreed to arbitrate, this Court looks to state law for the
law of contract formation. See Kirleis v. Dickie, McCamey &
Chilcote, 560 F.3d 156, 160 (3d Cir. 2009). Moreover, we apply
the law including the conflicts rules of the forum state even
though the jurisdiction is premised on federal law. Gay, 511
F.3d at 389 (if District Court jurisdiction in federal question
case had been based on diversity court would apply
Pennsylvania’s choice-of-law principles as the court was in the
Eastern District of Pennsylvania) (citing Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S 487 (1941)).
8
actual conflict between the two states' laws, the Court
determines which jurisdiction has “the most significant
relationship to the parties and the event.” Id.
Under New Jersey law, consumers can choose to pursue
arbitration and waive their right to sue in court, but should
know that they are making that choice. Atalese v. U.S. Legal
Serv. Group, L.P., 99 A.3d 306, 309 (N.J. 2014).3
Under Nevada
law, arbitration is favored by public policy because it avoids
the higher costs and waiting time of litigation. D.R. Horton,
Inc. v. Green, 96 P.3d 1159, 1162 (Nev. 2004).
However,
arbitration provisions that are inconspicuous, one sided and
3
In 2014, the Supreme Court of New Jersey said:
Because arbitration involves a waiver of the right to
pursue a case in a judicial forum, courts take
particular care in assuring the knowing assent of both
parties to arbitrate, and a clear mutual understanding
of the ramifications of that assent. The requirement
that a contractual provision be sufficiently clear to
place a consumer on notice that he or she is waiving a
constitutional or statutory right is not specific to
arbitration provisions. Rather, under New Jersey law,
any contractual waiver-of-rights provision must
reflect that the party has agreed clearly and
unambiguously to its terms.
Atalese, 99 A.3d 306, 313 (N.J. 2014) (internal quotations and
citations omitted); Morgan v. Sanford Brown Inst., -- A.3d --,
2016 WL 3248016 (N.J. June 14, 2016). In Atalese, the court
found the arbitration agreement was unenforceable because the
language of the agreement “did not clearly and unambiguously”
inform plaintiff that she was waiving her right to pursue claims
in court. 99 A.3d at 315, 316.
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fail to advise one side that they are agreeing to waive
significant rights under Nevada law, might be procedurally and
substantively unconscionable, and might be invalidated under
Nevada law. Id.
As both states appear to apply similar
principles in determining whether an agreement to arbitrate in a
consumer context has been reached, no conflict exists and we
will apply New Jersey law.
B. Rule 12(b)(1) Standard
A motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(1) challenges the existence of a federal court's
subject matter jurisdiction.
but not uniformly,
4
In this Circuit, courts generally,
have accepted and embraced Rule 12(b)(1) as
a proper vehicle for deciding whether to dismiss a suit by
In Holdbrook, this Court noted courts have been inconsistent in
entertaining the use of Rule 12(b)(1) to move to compel
arbitration. Holdbrook Pediatric Dental, LLC v. Pro Computer
Service, LLC, 2015 WL 4476017 at *2 (D.N.J. July 21, 2015). We
quoted Masoner which stated “Rule 12(b)(1) . . . is not the
correct rule of law under which to assert a contract-based
defense requiring arbitration.” See Masoner v. Educ. Mgmt.
Corp., 18 F. Supp. 3d 652, 656 (W.D. Pa. 2014). Although our
Court of Appeals has suggested in an unpublished decision that
Rule 12(b)(1) is not the proper vehicle because a motion to
compel arbitration raises a defense to the merits and not
jurisdiction, see Liberty Mut. Fire Ins. Co. v. Yoder, 112 F.
App’x 826, 828 (3d. Cir. 2004) (unpublished), absent clear and
binding precedent from our Circuit we have, and will allow such
motion, especially in those cases, as here, where it is coupled
with a motion under Rule 12(b)(6). Cf., Thompson v. Nienaber,
239 F. Supp. 2d 478 (D.N.J. 2002) (noting district courts should
be flexible in applying procedural rules to motions to compel
arbitration).
4
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virtue of an arbitration agreement between the parties. See,
e.g., Wells v. Merit Life Ins. Co., 671 F. Supp. 2d 570, 573 (D.
Del. 2009) (stating that “[a] motion to dismiss on the basis
that the dispute must be arbitrated is a factual challenge” to a
court's subject matter jurisdiction); Thompson v. Nienaber, 239
F. Supp. 2d 478, 483 (D.N.J. 2002) (approving Rule 12(b)(1)
motion to join issue of arbitrability).
“When considering a motion to dismiss for lack of subject
matter jurisdiction under Fed. R. Civ. P. 12(b)(1), the court
must accept as true all material allegations of the complaint
and construe that complaint in favor of the non-moving
party.” Nienaber, 239 F. Supp. 2d at 481.
The court should
focus upon the issue of whether it has jurisdiction to bar the
claim and grant relief. Id.
C. Rule 12(b)(6) Standard
To survive dismissal for failure to state a claim upon
which relief may be granted under Federal Rule of Civil
Procedure Rule 12(b)(6), “a complaint must contain sufficient
factual matter, accepted as true, to state a claim for relief
that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (internal citation and quotation omitted).
The court
must accept all well-pleaded allegations in the claim as true
and view them in the light most favorable to the claimant.
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Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005).
A
complaint must have “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2).
“Although the Federal Rules of Civil Procedure do not
require a claimant to set forth an intricately detailed
description of the asserted basis for relief, they do require
that the pleadings give defendant fair notice of what the
plaintiff's claim is and the grounds upon which it
rests.”
Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S. 147, 149-
50 n.3 (1984) (quotation and citation omitted).
A district
court, in weighing a motion to dismiss, asks “not whether a
plaintiff will ultimately prevail but whether the claimant is
entitled to offer evidence to support the claims.” Bell
Atlantic v. Twombly, 550 U.S. 544, 563 n.8 (2007).
IV. ANALYSIS
Although styled as a Rule 12(b)(6) motion, we are unable,
in the circumstances of the case, to dismiss on that basis.5
We
turn for guidance to the Third Circuit’s decision in Guidotti:
5
As we have noted, there is a strong federal policy in favor of
using arbitration to resolve disputes as set forth in the FAA.
Kirleis, 560 F.3d at 160. This does not mean, as Defendant
suggests, that this Court presently lacks subject matter
jurisdiction. The Court retains jurisdiction to determine the
threshold question of whether there is a valid arbitration
agreement between the parties. The FAA provides, “upon being
satisfied that the making of the agreement for arbitration or
the failure to comply therewith is not in issue, the court shall
make an order directing the parties to proceed to arbitration.”
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[A] Rule 12(b)(6) standard is inappropriate when
either the motion to compel arbitration does not have
as its predicate a complaint with the requisite
clarity to establish on its face that the parties
agreed to arbitrate, or the opposing party has come
forth with reliable evidence that is more than a naked
assertion . . . that it did not intend to be bound by
the arbitration agreement, even though on the face of
the pleadings it appears that it did. Under the first
scenario, arbitrability not being apparent on the face
of the complaint, the motion to compel arbitration
must be denied pending further development of the
actual record. The second scenario will come into
play when the complaint and incorporated documents
facially establish arbitrability but the non-movant
has come forward with enough evidence in response to
the motion to compel arbitration to place the question
in issue. At that point, the Rule 12(b)(6) standard
is no longer appropriate, and the issue should be
judged under the Rule 56 standard.
Guidotti 716 F. 3d at 774 (internal quotations and citations
omitted).
In Guidotti, the non-movant came forward with enough
evidence showing she had not intended to be bound by an
arbitration agreement and therefore she fell within the second
scenario.
In this motion, Laudano’s complaint is not only
9 U.S.C. § 4. Thus, this Court retains jurisdiction until it
decides the making of the agreement is not in issue. As the
Third Circuit said, “This presumption in favor of arbitration
does not apply to the determination of whether there is a valid
agreement to arbitrate between the parties.” Kirleis, 560 F.3d
at 160. Therefore, to the extent Defendant’s motion pursuant to
Fed. R. Civ. P. 12(b)(1) is premised on an argument this Court
lacks jurisdiction to determine whether the parties entered into
an agreement to arbitrate the motion will be denied. To the
extent it merely provides an alternative basis to argue the
matter should be dismissed because of such an agreement to
arbitrate exists, the motion is denied as moot in light of our
decision to allow limited discovery. Guidotti v. Legal Helpers
Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013).
13
silent as to an agreement to arbitrate, but also does not
mention a credit card agreement at all.
apparent on the face of the complaint.
within the first scenario.
Arbitrability is not
Her complaint falls
Pursuant to Guidotti, the parties
must be given the opportunity to conduct discovery on the
limited issue of the validity of the arbitration agreement.
In determining that Guidotti resolves the pending motion,
we need not address Laudano’s arguments challenging the Harwood
affidavit such as her argument that Harwood lacks personal
knowledge of the relevant facts, that the agreements are
unsigned, that Defendant has only produced “samples” of the
alleged agreements, and that Laudano never assented to such
terms either by word or conduct.6
The resolution of such matters
will await limited discovery and a properly supported motion for
summary judgment.
6
Credit One relies upon Bibb which states, “It has long been
recognized in New Jersey that in the context of traditional
credit cards, the cardholder’s decision to use the card provides
the requisite assent to the terms of the offer extended by the
card’s issuance, such that a contract is formed.” MBNA Am. Bank,
N.A. v. Bibb, 2009 WL 1750220, at *3 (N.J. Super. Ct. App. Div.
2009) (citing Novack v. Cities Serv. Oil Co., 149 N.J.
Super. 542, 548 (Law Div. 1977) and City Stores Co. v.
Henderson, 156 S.E.2d 818, 823 (App. Ct. 1967)). We do not view
Bibb as controlling on the record now before us as we construe
Bibb as holding that use can constitute acceptance where the
terms are conveyed and known, and therefore accepted, at the
time of use. In any event, Defendant may reassert Bibb and any
other relevant precedent in the context of any future motion of
summary judgment.
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For now, we simply apply the principle articulated in
Guidotti that, “[t]he district court, when considering a motion
to compel arbitration which is opposed on the ground that no
agreement to arbitrate had been made between the parties, should
give to the opposing party the benefit of all reasonable doubts
and inferences that may arise.” Par-Knit Mills, 636 F.2d at 54.
Therefore, we grant to Laudano, as the non-moving party, the
benefit of all reasonable doubts and inferences.
Credit One
must show in a procedurally correct manner, after a limited
discovery on the issue, that a valid agreement to arbitrate
exists between the parties.7
V. CONCLUSION
For the reasons set forth above, Credit One’s motion to
dismiss the complaint and compel arbitration will be denied as
well as its alternate motion to stay.
The parties will be
ordered to conduct discovery, limited in scope, on the issue of
whether the parties have entered into a valid agreement to
arbitrate.
Following the discovery, this Court will consider
7
We reject Credit One’s argument, relying on Quilloin, 673 F.3d
221 (3d Cir. 2012), that where a valid delegation clause exists,
questions of arbitrability must go to the arbitrator, not the
court. In Quilloin, in contrast to this case, the non-movant
admitted in a supplemental submission to signing a form
acknowledging receipt of a brochure that described the
arbitration agreement. Id. at 225. Thus, Quilloin did not deal
with the threshold question here of whether the parties ever
formed an agreement to arbitrate.
15
any procedurally appropriate motions consistent with Guidotti.8
An appropriate Order accompanies this Opinion.
Dated: June 22, 2016
At Camden, New Jersey
__s/ Noel L. Hillman______
Noel L. Hillman, U.S.D.J.
8
Laudano argues that any agreement to arbitrate is
unconscionable and therefore unenforceable. As the issue of
arbitrability has not been resolved, the Court need not consider
that issue at this time.
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