Cline v. Chase Manhattan Bank USA National Association

Filing 52

MEMORANDUM DECISION granting 46 MOTION to Strike 40 Declaration, 44 Declaration; granting 35 Defendant's MOTION to Confirm Arbitration Award; granting 34 Defendant's MOTION for Summary Judgment. For details, please see Memorandum Decision. Signed by Judge Bruce S. Jenkins on 1/29/09. (ce)

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF UTAH, CENTRAL DIVISION ********* C H R I S T IN A CLINE, P l a in tif f , vs. CHASE MANHATTAN BANK USA, N A T IO N A L ASSOCIATION, D e f e n d a n t. CHASE BANK, U.S.A., Counterclaimant, vs. C H R I S T IN A CLINE, C o u n ter c laim Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

C i v il No. 2:07-CV-00728 BSJ

M E M O R A N D U M OPINION RE: S U M M A R Y JUDGMENT & M O T IO N TO CONFIRM A R B I T R A T I O N AWARD & O R D E R STRIKING D E C L A R A T IO N S

********* T h is matter came before the court on Defendant's Motion to Strike Declarations of C h ristin a Cline, filed June 20, 2008, (dkt. no. 46), Defendant's Motion for Summary Ju d g m en t, filed May 27, 2008, (dkt. no. 34), and Defendant's Motion to Confirm A rb itra tio n Award, filed May 27, 2008, (dkt. no. 35). The court heard oral argument on th e Motions on June 25, 2008. At the hearing, Plaintiff represented herself and D e f en d a n t was represented by David Hall. Having considered the parties' briefs and a rg u m e n ts , the court granted the motions. (See Order, filed January 15, 2009 (dkt. no.

5 0 ).) Exercising its prerogative to expand upon the basis for that ruling, this court now e n te rs the following Memorandum Opinion and Order. BACKGROUND C h ris tin a Cline ("Cline") opened a credit card account with Chase Manhattan B a n k ("Chase") in August of 1999. Chase mailed Cline her credit card in August of 1 9 9 9 . Contained in the same envelope as the card, was a cardmember agreement (the " a g re e m e n t" ). The first paragraph of the agreement stated: "Any use of your Card or A c c o u n t confirms your acceptance of the terms and conditions of this Agreement." (Defendant's Motion for Summary Judgment, filed May 27, 2008, (dkt. no. 34), at Ex. A p . 3). T h e agreement contained two other sections that are pertinent to this case. First, th e agreement contained an arbitration clause, which stated in part: A r b itr a tio n : Any claim, dispute or controversy ("Claim") by either you or u s against the other. Or against the employees, agents or assigns of the o th e r, arising from or relating in any way to this Agreement or your A c c o u n t, including Claims regarding the applicability of this arbitration c la u se or the validity of the entire Agreement, shall be resolved by binding arb itratio n by the National Arbitration Forum, under the Code of Procedure in effect at the time the Claim is filed. . . . IN THE ABSENCE OF THIS ARBITRATION AGREEMENT YOU AND W E MAY OTHERWISE HAVE HAD A RIGHT OR OPPORTUNITY TO L IT IG A T E CLAIMS THROUGH A COURT, AND/OR TO P A R T IC IP A T E OR BE REPRESENTED IN LITIGATION FILED IN C O U R T BY OTHERS, BUT EXCEPT AS OTHERWISE PROVIDED A B O V E , ALL CLAIMS MUST NOW BE RESOLVED THROUGH A R B IT R A T IO N . (Id. at p. 4). Second, the agreement contained a provision that allowed Chase to amend -2-

th e Cardmember Agreement: Changes in This Agreement: We can at any time change this Agreement, in c lu d in g the ANNUAL PERCENTAGE RATE and any fees, and can d e le te provisions relating to your Account and to the nature, extent, and e n f o rc e m e n t of the rights and obligations you or we may have relating to th is Agreement. We will notify you of any change, addition, or deletion. As p e rm itte d by applicable law, any change, addition, or deletion to this A g r e e m e n t will become effective at the time stated in our notice and, unless w e state otherwise, the change, addition or deletion will apply to all o u ts ta n d in g balances in your Account as well as to new transactions. The n o tic e we send you may state that you may notify us in writing within a s p e c if ie d time period that you do not wish to accept certain of the changes, a d d itio n s, and deletions we are making. You will be deemed to accept all th e changes, additions, and deletions accompanying the notice and to ratify a n d confirm all the provisions of your Agreement and your acceptance of a ll the changes, additions, and deletions described in other notices p re v io u s ly sent to you if (1) you do not send us such a notification in a tim e ly manner, or (2) you use the Card or Account after the conclusion of th e specified time period. (Id. at p. 5). Cline first used the card on August 27, 1999. While Cline admits to receiving a c a rd m e m b e r agreement from Chase that governed her account, she contends that the a g r e e m e n t did not contain an arbitration clause, and that the agreement did not give Chase th e right to amend the agreement. However, Cline claims that she does not currently p o s s e s s the agreement that was originally mailed with her credit card. In December 2003, Chase Amended the Cardmember Agreement (the "amended a g re e m e n t" ). Chase mailed Cline the amended agreement, which was entitled " IM P O R T A N T NOTICE FOR BANK ONE CREDIT CARD CUSTOMERS ABOUT C H A N G E S TO YOUR BANK ONE CARDMEMBER AGREEMENT - PLEASE READ -3-

A N D RETAIN FOR YOUR RECORDS." The amended agreement contained the f o llo w in g provision: ARBITRATION: The following replaces the section entitled "Arbitration": PLEASE READ THIS PROVISION CAREFULLY. IT PROVIDES THAT A N Y DISPUTE MAY BE RESOLVED BY BINDING ARBITRATION. A R B IT R A T IO N REPLACES THE RIGHT TO GO TO COURT . . . . Any claim, dispute or controversy by either you or us against the other (or a g a i n s t the employees, parents, subsidiaries, affiliates, beneficiaries, agents, o r assigns of the other) arising from or relating in any way to your Account, tra n sa c tio n s on your Account, our relationship, this Agreement or any p ro v is io n s of this Agreement ("Claim"), including Claims regarding the a p p lic a b ility or validity of this arbitration clause, shall be resolved e x c lu s iv e ly and finally by binding arbitration . . . . All Claims are subject to arbitration, no matter what theory they are based o n or what remedy they seek. This includes Claims based on contract, tort (in c lu d in g intentional tort), fraud, agency, negligence, statutory or re g u la to ry provisions, or any other sources of law. Claims made and re m e d ie s sought as part of a class action, private attorney general or other r e p re s e n ta tiv e action are subject to arbitration on an individual (non-class, n o n -re p re se n tativ e ) basis. As an exception to arbitration, you and we retain th e right to pursue in a small claims court any Claim that is within that c o u rt's jurisdiction and proceeds on an individual basis. The party bringing the Claim may select any one of three national a rb itra tio n organizations to administer the arbitration of the Claim: the N a tio n a l Arbitration Forum ("NAF"), JAMS/Endispute ("JAMS"), or the A m e ric a n Arbitration Association ("AAA") . . . . (Declaration of Milissa A. Rutledge, filed May 27, 2008, (dkt. no. 37), at Ex. D p. 3). The notice stated that if Cline objected to the amendment, she must notify Chase in w ritin g by January 26, 2004. Furthermore, any use of the credit card by Cline after F e b ru a ry 1, 2004 would be deemed an acceptance of the amendment. Cline alleges that she never received this notice of amendment to the agreement. Cline never informed Chase that she did not agree to the terms of the agreement and she -4-

c o n tin u e d to use her credit card after February 1, 2004. On March 30, 2007, Cline had a b a la n c e of $4,795.98 on her credit card and had gone over 210 days without making any p a ym e n ts on her balance. At this point, Chase wrote off Cline's balance as a bad debt. O n May 22, 2007, Chase filed an arbitration claim against Cline with the National A rb itra tio n Forum ("NAF"). Cline then filed a notice of objection to arbitration, claiming th a t the agreement between her and Chase did not contain an arbitration provision. Cline re f u se d to participate in the arbitration proceeding. In August of 2007, the arbitrator d e te rm in e d that the parties had entered a valid and enforceable arbitration agreement and th a t Cline had incurred a financial obligation due and owing to Chase; the arbitrator e n te re d an award in favor of Chase for the amount of $5,865.69. On August 31, 2007, Cline filed suit in the Fourth Judicial District Court, State of U ta h alleging that Chase breached the contract it had with her. On September 28, 2007, C h a se removed the case to the United States District Court for the District of Utah p u rs u a n t to 28 U.S.C. § § 1441, 1446. (Notice of Removal (dkt. no. 1)). On May 27, 2 0 0 8 , Chase filed a Motion for Summary Judgment (dkt. no. 34) and a Motion to Confirm A rb itr a tio n Award (dkt. no. 35). ANALYSIS "The purpose of summary judgment is to assess whether a trial is necessary. White v . York Int'l Corp., 45 F.3d 357, 360 (10th Cir. 1995). In other words, there `must be e v id e n c e on which the jury could reasonably find for the plaintiff.' Panis v. Mission Hills

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B a n k , N.A., 60 F.3d 1486, 1490 (10th Cir. 1995)." Berry v. T-Mobile USA, Inc., 490 F.3d 1 2 1 1 , 1216 (10th Cir. 2007). Summary judgment is appropriate where there is no genuine is s u e of material fact and the moving party is entitled to judgment as a matter of law. F e d .R .C iv .P . 56(c). "The court must examine the record to determine whether any g e n u in e issue of material fact is in dispute, and must construe the facts and reasonable in f e re n c e s drawn therefrom in the light most favorable to the nonmoving party." Holt v. G r a n d Lake Mental Health Ctr., Inc., 443 F.3d 762, 765 (10th Cir. 2006). A . Motion to Strike Declarations Chase asked the court to strike Cline's declarations because her declarations a ttem p t to create a sham issue of fact, or in the alternative, the declarations fail to comply w ith Rule 56(e) of the Federal Rules of Civil Procedure. Cline did not file a response to C h a s e 's motions to strike her declarations. Chase argues that the majority of Cline's declarations contradict her sworn d e p o sitio n testimony and attempts to create a sham issue of fact. On March 12, 2008, c o u n se l for Chase took Ms. Cline's deposition. In her deposition, Cline repeatedly te stif ie d that she had no recollection of the terms and conditions set forth in the original c a rd m e m b e r agreement. Despite this sworn testimony, on June 10, 2008, Cline signed a n d filed a form Declaration (dkt. no. 40) in which she stated that the agreement p r e s e n te d by the Chase is not the agreement that was sent with her credit card. Cline also m a k e s additional assertions regarding the terms and conditions of the cardmember

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a g re e m e n t. Generally, a court may not disregard an affidavit because it conflicts with prior sw o rn testimony given by the affiant. However, if the court believes the affidavit is m e re ly an attempt to create a sham issue of fact, the court may disregard the affidavit. See Burns v. Bd. of County Com'rs of Jackson County, 330 F.3d 1275, 1282 (10th Cir. 2 0 0 3 ); Franks v. Nimmo, 796 F.2d 1230, 1237 (10th Cir. 1986). The Tenth Circuit has la id out the following factors to determine whether an affidavit is an attempt to create a s h a m issue of fact: "whether the affiant was cross-examined during his earlier testimony, w h e th e r the affiant had access to the pertinent evidence at the time of his earlier te stim o n y or whether the affidavit was based on newly discovered evidence, and whether th e earlier testimony reflects confusion which the affidavit attempts to explain." Franks, 7 9 6 F.2d at 1237. Applying these factors to the case at hand, the court concludes that Cline is a tte m p tin g to create a sham issue of fact. First, although Cline appeared pro se at her d e p o sitio n , she had the opportunity at the end of the deposition to add anything she d e e m e d relevant. Second, Cline's declarations are not based on any newly discovered e v id e n c e. In fact, Cline claims that she is not in possession of the original cardmember a g re e m e n t that was mailed along with her credit card. Third, Cline's declarations make n o reference to her deposition; nor do they attempt to clarify any statements she made in h e r deposition.

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M o re o v e r, Cline's declarations are nearly identical to those filed by many c u sto m e rs of North American Education Services ("NAES") that are engaged in similar litig a tio n . NAES is an internet company that promises customers it will eliminate or s u b s ta n tia lly reduce their credit card debt through the use of form dispute letters and litig a tio n . The court finds it highly implausible that each of these litigants independently c a m e up with the same factual allegations to assert in their declarations filed with the c o u rt . Based on this information, the court concludes that Cline was attempting to create a sham issue of fact by filing declarations that conflicted with her sworn deposition te stim o n y. Therefore, the court grants Chase's Motion to Strike Declarations of Christina C lin e . B. Breach of Contract C lin e alleges that Chase breached the original contract between the parties by s u b m ittin g its dispute to arbitration because their original agreement did not contain an a rb itra tio n clause. Chase moves this court for an order granting summary judgment on C lin e 's breach of contract claim. Although Cline alleges that the agreement did not c o n tain an arbitration clause, she fails to provide any evidentiary support for this a lle g a tio n aside from her own declarations, which have now been stricken from the re c o rd . The agreement submitted by Chase stated that the use of the card by Cline would

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b in d her to the terms and conditions of the agreement. Cline subsequently used the credit c a rd , binding her to the terms and conditions of the agreement, including the arbitration p ro v is io n . The arbitration provision provided that all claims by either party, including c la im s relating to the applicability of the arbitration clause, "shall be resolved by binding arb itratio n by the National Arbitration Forum." (Defendant's Motion for Summary J u d g m e n t, filed May 27, 2008, (dkt. no. 34), at Ex. A p. 3). In December 2003, Chase amended the arbitration clause of the agreement. The a m e n d e d clause allowed the parties to choose between three arbitration forums. The a m e n d m e n t also provided one exception to arbitration. The amendment stated; "As an e x c e p tio n to arbitration, you and we retain the right to pursue in a small claims court any C la im that is within that court's jurisdiction and proceeds on an individual basis." (Declaration of Milissa A. Rutledge, filed May 27, 2008, (dkt. no. 37), at Ex. D p. 3 (e m p h a s is added)). The agreement defines a claim as "[a]ny claim, dispute or c o n tro v e rs y." Because Cline ostensibly had a dispute over the amount she owed Chase, s h e may have had a right under this exception to opt out of arbitration and require Chase to resolve her "claim" in small claims court rather than by arbitration. But this court need not determine whether Cline had a right to demand that the c la im be resolved in small claims court rather than by arbitration. Even if Cline p o sses sed such a right, she waived that right by not pursuing the small claims court re m e d y. Cline never attempted to invoke this exception by requesting that the claim be

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tra n sf e rre d from arbitration to small claims court. Furthermore, Cline has never invoked the small claims court exception as a basis for vacating the arbitration award. Rather, C lin e has consistently alleged that the original cardmember agreement did not contain an a rb itra tio n provision and that the she never received an amendment to the original ag ree m en t. Therefore, any right Cline may have had under the small claims court e x c e p tio n was waived by her not invoking such an exception at any stage of the dispute. For the reasons discussed above, the court concludes that a valid arbitration p ro v is io n did exist in the agreement between Cline and Chase and that Chase did not b re a c h the agreement by seeking resolution of its dispute with Cline through arbitration. Accordingly, the court grants Chase's motion for summary judgment. C. Confirmation of the Arbitration Award Cline has petitioned the court to vacate the arbitration award, and Chase has filed a m o tio n requesting that the court confirm the arbitration award pursuant to section 9 of the F e d e ra l Arbitration Act ("FAA"). 9 U.S.C. § 9 (2006). The scope of a court's review of an arbitration award is very limited. See e.g., B r o w n v. Coleman Co., 220 F.3d 1180, 1182 (10th Cir. 2000) (stating that "we must give e x tre m e deference to the determination of the arbitration panel for the standard of review o f arbitral awards is among the narrowest known to law."). The FAA states that "the c o u rt must grant such an order unless the award is vacated, modified, or corrected as p re s c rib e d in sections 10 and 11 of this title." 9 U.S.C. § 9.

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U n d e r § 10 of the FAA, a district court is only permitted to vacate an a rb itra tio n award if it finds that: (1) the award was procured by corruption, f ra u d , or undue means; (2) there was evident partiality or corruption in the a rb itrato rs; (3) the arbitrators were guilty of misconduct in refusing to p o s tp o n e a hearing, in refusing to hear evidence, or in misbehaving in some o th e r way; or (4) the arbitrators exceeded their powers or imperfectly e x e c u te d them. Sheldon v. Vermonty, 269 F.3d 1202, 1206 (10th Cir. 2001). Under § 11 of the FAA, a d is tric t court can modify or correct an arbitration award if (1) "there was an evident m a te ria l miscalculation of figures or an evident material mistake in the description of any p e rs o n , thing, or property referred to in the award"; (2) "the arbitrators have awarded u p o n a matter not submitted to them, unless it is a matter not affecting the merits of the d e c is io n upon the matter submitted"; or (3) "the award is imperfect in matter of form not a f f e c tin g the merits of the controversy." 9 U.S.C. § 11. Cline fails to provide a basis under the FAA for vacating or modifying Chase's a rb itra tio n award. Cline alleges that the arbitration award was procured pursuant to a f ra u d u len t agreement that Cline claims she never received, and that Chase obtained its a rb itra tio n award through the NAF's partiality towards Chase. Cline suggests that the N A F is biased in favor of Chase because the NAF relies on Chase for future business. The court concludes that Cline's unsupported objections to Chase's motion are in s u f f ic ie n t to adequately contest confirmation of the arbitration award. First, as d is c u ss e d above, the court finds there was a binding arbitration provision in the a g re e m e n t between Cline and Chase. Therefore, the arbitration award was not procured

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b y fraud. Second, Cline has not provided any evidence to support her allegation that the a rb itra to r was biased in favor of Chase. "For an award to be set aside, the evidence of b ia s or interest of an arbitrator must be direct, definite and capable of demonstration ra th e r than remote, uncertain, or speculative." Ormsbee Dev. Co. v. Grace, 668 F.2d 1 1 4 0 , 1147 (10th Cir. 1982). Cline's bare allegation that the NAF was biased toward C h a se because they will likely receive future business from Chase is remote, uncertain a n d speculative, and is therefore not sufficient to set aside the arbitration award. For the reasons discussed above, the court finds Cline has not presented sufficient e v id e n c e to demonstrate that the arbitration award should be vacated or modified. Accordingly, the court grants Chase's Motion to Confirm the Arbitration Award. CONCLUSION T h e cardmember agreement between Chase and Cline contained a valid arbitration p ro v isio n . Although, Cline submitted declarations alleging the agreement did not contain a n arbitration provision, her declarations were merely an attempt to create a sham issue of f a ct. Therefore, Chase properly sought to settle its dispute with Cline through binding a rb itra tio n . There is no evidence to support allegations that the arbitrator award was p ro c u re d by fraudulent means or that the arbitrator was biased in favor of Chase. Therefore, I T IS ORDERED that Chase's Motion to Strike Declarations of Christina Cline,

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is hereby GRANTED.

DATED this

day of January, 2009.

B Y THE COURT:

BRUCE S. JENKINS U n ite d States Senior District Judge

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