Jones v. NetSpend Card Company et al

Filing 36

REPORT AND RECOMMENDATIONS re 22 Motion to Amend/Correct filed by Lovell Javhon Jones, 29 Motion to Compel, filed by NetSpend Card Company. Signed by Judge Andrew W. Austin. (dm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
LOVELL JAHVON JONES
v.
NETSPEND CARD CO.

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NO. 1:17-CV-304-RP

REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
TO:

THE HONORABLE ROBERT PITMAN
UNITED STATES DISTRICT JUDGE
Before the Court are Defendant NetSpend Corporation’s Amended Motion to Compel

Arbitration and Stay Case (Dkt. No. 29), Plaintiff’s Response (Dkt. No. 23), and Plaintiff’s Motion
to Amend Statement (Dkt. No. 22). The District Court referred the above motion to the undersigned
Magistrate Judge for report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(A), FED. R. CIV.
P. 72, and Rule 1(c) of Appendix C of the Local Rules.
I. BACKGROUND
Lovell Jahvon Jones brought this suit against NetSpend Card Company for violations of 15
U.S.C. § 1693, negligence, and breach of contract for NetSpend’s alleged failure to address
unauthorized electronic transactions on his prepaid debit card account. NetSpend now moves to
compel arbitration of Jones’ claims pursuant to the arbitration clause in the Cardholder Agreement.
The Agreement allows a party to request arbitration on
any claim, dispute or controversy between [the cardholder] and [NetSpend] arising
from or relating to the Card Account or this Agreement as well as any related or prior
agreement that you may have had with us or the relationships resulting from this
Agreement, including the validity, enforceability or scope of this Arbitration
Provision or the Agreements.

Dkt. No. 29-2 at 138. According to the Agreement, arbitration can be requested by either the
cardholder or NetSpend, and once a party has requested arbitration, no party will have the right to
litigate that claim in court. Id. at 139. NetSpend therefore moves to compel arbitration on Jones’
claims.
II. ANALYSIS
The Federal Arbitration Act requires a district court to stay judicial proceedings where a
written agreement provides for the arbitration of the dispute that is the subject of the litigation. 9
U.S.C. § 3. As the Supreme Court has observed, “[t]he preeminent concern of Congress in passing
the Act was to enforce private agreements into which parties had entered, a concern which requires
that [courts] rigorously enforce agreements to arbitrate.” Mitsubishi Motors Corp. v. Soler
Chrysler–Plymouth, Inc., 473 U.S. 614, 625-26(1985) (quoting Dean Witter Reynolds Inc. v. Byrd,
470 U.S. 213, 221(1985)) (internal citations omitted). Under the FAA, arbitration agreements are
considered “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract.” 9 U.S.C. § 2.
In deciding a motion to compel arbitration under the FAA, courts generally conduct a
two-step inquiry. Webb v. Investacorp, Inc., 89 F.3d 252, 257-58 (5th Cir. 1996). First, the court
determines “whether the parties agreed to arbitrate the dispute in question.” Id. at 258 (citations
omitted). “This determination involves two considerations: (1) whether there is a valid agreement
to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that
arbitration agreement.” Id. If the court finds at step one there is an agreement to arbitrate, then at
step two the court considers “whether legal constraints external to the parties’ agreement foreclose[ ]
the arbitration of those claims.” Id. (internal quotation marks and citations omitted). The party
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seeking to invalidate an arbitration agreement bears the burden of establishing its invalidity, and the
court must resolve all doubts concerning the arbitrability of claims in favor of arbitration. Carter
v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004); Mitsubishi Motors, 473 U.S.
at 626.
Here, the record demonstrates a valid agreement to arbitrate between the parties. Jones
contends that he never saw the Cardholder Agreement prior to this lawsuit. However, NetSpend has
attached an affidavit by James L. Lyle, the Subpoena Compliance Manager for NetSpend, which
states that “[w]hen Jones received his debit card for his Account, it was accompanied by the
‘Cardholder Agreement’ establishing the terms of the Account, which Jones accepted by maintaining
and using the MasterCard card associated with his Account.” Dkt. No. 29-1 at 1-2. This establishes
that, at the very least, Jones received the Agreement when he received his card. See Stinger v. Chase
Bank, USA, NA, 265 F. App’x 224, 227 (5th Cr. 2008) (finding that the plaintiff’s “unsupported
statement that he had not received the [agreement]” was insufficient to deny the motion to compel
arbitration). Additionally, the arbitration clause in the Agreement was clearly labeled, in ordinary
font, and with several sections bolded. See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex.
1996) (failing to read document does not excuse party from arbitration). Moreover, the Fifth Circuit
has enforced arbitration clauses contained in agreements that “become effective upon use of the
cards.” 265 F. App’x at 227. Because it is undisputed that Jones has used his NetSpend card, the
Court finds that there is a valid arbitration agreement between the parties.
Second, Jones’ claims fall within the arbitration clause. Jones brought claims for negligence,
breach of contract, and violations of 15 U.S.C. § 1693, claiming that NetSpend failed to refund
unauthorized purchases on his account. The Agreement states that any claims “arising from or
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relating to the Card Account or Agreement” are arbitrable. Dkt. No. 29-2 at 138. It further
elaborates on examples of disputes which are subject to arbitration, including “the amount of
available funds in your Card Account” and “the benefits and services related to your Card Account.”
Id. at 139. Because Jones’ claims relate to the amount of funds in his account, and more to the point,
NetSpend’s alleged failure to refund the unauthorized purchases pursuant to the Agreement, the
dispute falls within the arbitration clause. Jones does not appear to argue otherwise.
However, Jones contends that compelling arbitration is a “bullying tactic” and is unfair. Dkt.
No. 23 at 1. Interpreting this argument broadly, the Court assumes that Jones is arguing that the
arbitration clause of the Agreement is unconscionable. He asserts that he “is not familure [sic] with
such litigation and feels that [federal court is] the only appropriate way for him to have a fare [sic]
case.” Id. However, arbitration clauses with nearly identical language have been enforced. See
Wynne v. American Exp. Co., 2010 WL 3860362, at *6–8 (E.D. Tex. Sep. 30, 2010) (finding that
clauses which state that “the parties have mutually agreed to arbitration upon the election of either
party” are valid); Stinger, 265 F. App’x at 227 (same). The arbitration clause in this Agreement
provides that either party may compel arbitration, and that both are bound by this decision. Dkt. No.
29-2 at 139. “Moreover, unconscionability principles should only be applied to prevent unfair
surprise or oppression, not to negate a bargain simply because one party to the agreement may have
been in a less advantageous bargaining position.” Wynne, 2010 WL 38603622, at *8 (citing In re
Palm Harbor Homes, Inc., 195 S.W.3d 672, 679 (Tex. 2006)). As such, the arbitration clause is
enforceable.1
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Because the Court is recommending the District Court compel arbitration, Plaintiff’s Motion
to Amend Statement should be denied. See Penson Fin. Servs., Inc. v. MISR Securities Int’l, 2007
WL 4322150, at *4 (N.D. Tex. Dec. 10, 2007). In his motion, Jones does not seek to add any claims
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The Fifth Circuit has held that “the weight of authority clearly supports dismissal of a case
when all of the issues raised in the district court must be submitted to arbitration.” Alford v. Dean
Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992). Although dismissal is discretionary,
because all of the issues presented in this case are subject to arbitration, the proper exercise of that
discretion here would be to dismiss the case.
III. RECOMMENDATION
Based upon the foregoing, the undersigned RECOMMENDS that the District Judge
GRANT Defendant’s Motion to Compel Arbitration and Stay Case (Dkt. No. 29), ORDER the
Parties to proceed to arbitration, and DISMISS this case. The Court FURTHER RECOMMENDS
that the District Court DENY Plaintiff’s Motion to Amend Statement (Dkt. No. 22).

IV. WARNINGS
The parties may file objections to this Report and Recommendation. A party filing
objections must specifically identify those findings or recommendations to which objections are
being made. The District Court need not consider frivolous, conclusive, or general objections. See
Battle v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party’s failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after the party is served with a copy of the Report
shall bar that party from de novo review by the District Court of the proposed findings and
recommendations in the Report and, except upon grounds of plain error, shall bar the party from
appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the
that would not also be subject to arbitration. Moreover, Jones merely seeks to add claims that have
already been dismissed, namely claims for “privacy” and false or misleading claims.
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District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53, 106 S. Ct. 466,
472-74 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en
banc).
SIGNED this 30th day of May, 2018.

_____________________________________
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE

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