Reichert v. Keefe Commissary Network LLC, et al

Filing 53

ORDER denying 36 Defendants Rapid Investments and Cache Valley Bank's Motion to Compel Arbitration; denying 40 Defendant Keefe Commissary Network's Motion to Compel Arbitration; signed by Judge Ronald B. Leighton.(DN)

HONORABLE RONALD B. LEIGHTON

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

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JEFFREY REICHERT, individually and
on behalf of all other similarly situated,

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Plaintiff,
v.

CASE NO. C17-5848RBL
ORDER DENYING MOTIONS TO
COMPEL ARBITRATION

KEEFE COMMISSARY NETWORK,
L.L.C. d/b/a Access Corrections; Rapid
Investments, Inc., d/b/a Rapid Financial
Solutions, d/b/a Access Freedom; and
Cache Valley Bank,
Defendant.

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THIS MATTER is before the Court on Defendants Rapid Investments, Inc. and Cache
Valley Bank’s Motion to Compel Arbitration [Dkt. #36] and Defendant Keefe Commissary
Network, LLC’s Motion to Compel Arbitration and to Stay or Dismiss Plaintiff’s Claims [Dkt.
#40]. Oral argument is unnecessary.
The front and center issue in these two motions is whether a binding contract, including a
mandatory arbitration clause, was formed under the circumstances of this case. The Court is
persuaded by the evidence that one was not.

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ORDER DENYING MOTIONS TO COMPEL
ARBITRATION - 1

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I. FACTS

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Plaintiff Reichert was arrested on October 21, 2016 by a Kitsap County Sheriff’s Deputy.

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Upon arrest, the deputy confiscated $176.77 in cash from him. Reichert was released at 5:00 a.m.

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the next day. Instead of receiving cash, Reichert was handed an “AccessFreedom Card”—a debit

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card issued by Defendants Cache Valley and Rapid, pursuant to a contract between Kitsap

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County and Keefe. Reichert was not provided with any paperwork explaining the Card, or given

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any oral explanation of its terms. When Reichert asked the jail officer for his cash, he was told

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“oh, you don’t get your cash back, you get a debit card.” Declaration of Jeffrey Reichert [Dkt.

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#47 at ¶12].

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Reichert did not request or apply for the Card. He never agreed to receive the Card. He

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was not given any documentation showing how much had been taken from him during his arrest,

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or how much was loaded onto the Card. No one explained how to access his money, that

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additional fees applied if he did not access it within 72 hours, or that he would lose nearly 10%

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of his cash to fees. He did not sign any document agreeing to the Card or its terms. Reichert had

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no opportunity to reject the Card (or even to affirmatively accept it).

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The moving defendants argue that by accepting and using the Card he received, Reichert

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agreed to the terms contained within the Cardholder Agreement. Reichert “accepted the offer” to

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use the Card (and actually used it), thus forming a contract. They argue that although Reichert

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claims he did not receive a copy of the Cardholder Agreement when he was released, the back of

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the Card provides Rapid’s website, where those terms and conditions may be found.

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Moreover, they claim the contract contains an arbitration clause, including a delegation

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clause, giving the arbitrator (rather than the court) the power to decide questions of arbitrability

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in the first instance. They claim that in the Ninth Circuit, delegation clauses are to be enforced,

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ORDER DENYING MOTIONS TO COMPEL
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unless there is a challenge specific to the delegation clause. Because Reichert asserts no such

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challenge, they claim, the delegation clause should be enforced.

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II. DISCUSSION

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The parties agree that Washington law governs the contractual provisions at issue,

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including contract formation.
A contract is a legally enforceable promise or set of promises. In order for a promise or

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set of promises to be legally enforceable, there must be mutual assent and consideration.

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Restatement (Second) of Contracts § 1 and § 3 (1981); Corbit v. J.I. Case Co., 70 Wn. 2d 522

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(1967). In order for there to be mutual assent, the parties must agree on the essential terms of the

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contract, and must express to each other their agreement to the essential terms. Yakima County

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(West Valley) Fire Protection District v. Yakima, 122 Wn. 2d 371, 388 (1993).

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Reichert argues that he did not receive the Cardholder Agreement, he could not and did

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not agree to it. Moreover, he was not given a choice to receive his confiscated money or a check

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for the full amount. He argues there is no contract; or meeting of the minds. Without a contract,

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there is no Arbitration Agreement, no Arbitrator, and no Delegation of Power to an Arbitrator to

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decide the question of arbitrability.

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Several cases around the country provide useful insight into this precise question. The

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Northern District of Georgia, interpreting Georgia contract law, held that use of a prepaid ATM

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card received from a jail was not binding consent to the terms of an arbitration agreement, even

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when the plaintiff had received a Cardholder Agreement. Regan v. Stored Value Cards, Inc., 85

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F. Supp. 3d 1357, 1364 (N.D. Ga. 2015). The Regan court reasoned:

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Unlike in [other cases finding consent], Plaintiff here did not make an application
for the Card, he was not offered a line of credit that he could choose to use or not
to use, he did not receive the Cardholder Agreement in the same envelope as the

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ORDER DENYING MOTIONS TO COMPEL
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Card, and he had not used the card for a long period of time and made payments on
the Card. Analogizing to cases containing these facts is not persuasive.

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Defendant’s cited authority is even less persuasive due to another distinguishing
factor: Plaintiff received the Card while he was being discharged from jail, i.e.
from a condition of absence of liberty of choice which Defendant reasonably could
have anticipated.

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Id. (emphasis in original). In Regan, the court denied Defendant’s motion to compel arbitration

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and proceeded to trial on the issue of whether a contract had been formed.

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In Pope v. EZ Card & Kiosk, LLC, the court addressed similar issues. 2015 WL 5308852

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(S.D. Fla. Sept. 11, 2015). Pope determined arbitration was proper despite the fact the plaintiff

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“never assented to any terms of contract with Defendants.” Pope v. EZ Card & Kiosk LLC, No.

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15-61046-CIV, 2015 WL 5308852, at *1 (S.D. Fla. Sept. 11, 2015). While the plaintiff did not

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receive any agreement, terms, or conditions, he affirmatively opted to accept a debit card, rather

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than a check, when he was released from jail. The form the plaintiff signed noted the fees

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associated with the card and his option of receiving a check, instead. Pope distinguished Regan

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because Regan was not given an opportunity to reject the card, was not given a cardholder

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agreement with the card, was not told of fees in his discharge paperwork, and did not sign the

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cardholder agreement.

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Finally, in a Ninth Circuit case, Brown v. Stored Value Cards, Inc., the plaintiff did not

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receive the paperwork explaining the terms associated with the debit card, and was unaware of

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the arbitration clause. No. 3:15-CV-01370-MO, 2016 WL 755625 (D. Or. Feb. 25, 2016). The

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court denied defendants’ motion to compel arbitration, because the plaintiff could not have

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known about the terms and, even though she used the card, her usage was not a meaningful

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choice because she was forced to interact with defendants if she wanted to access her cash.

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Courts have compelled arbitration for disputes arising from jail-issued debit cards only where the

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ORDER DENYING MOTIONS TO COMPEL
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jail offered a choice to the arrestee to receive a check or the card and the arrestee affirmatively

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chose the card. See Pope, 2015 WL 5308852 at *3.

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Defendants’ practices here are substantially similar to those at issue in Regan and Brown,

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and there is no arbitration agreement to enforce. All contracts, including those to arbitrate

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disputes, must have mutual assent, and Defendants’ “contract” to arbitrate is unenforceable and

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unconscionable under Washington law. Defendants’ motions to compel are DENIED.

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Defendant Keefe Commissary Network LLC’s Motion to Stay or Dismiss Plaintiff’s

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Claims [Dkt. #40] is DENIED. Reichert’s claims are not couched in the language of contract

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law. Rather, they emanate from the U.S. Constitution (Fifth Amendment); Federal statutory law

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(Electronic Fund Transfer Act, 15 U.S.C. § 1693; State law (Washington Consumer Protection

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Act, RCW § 19.86); and common law (Conversion and Unjust Enrichment). Nothing before this

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Court persuades it to dismiss this Complaint. It should be noted, however, that nothing before the

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Court leads it to believe a class action is the best way to deal with this dispute. The analysis of

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the three prior cases demonstrate a clear fork in the road between valid contract (not actionable)

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and no contract (actionable). This is just a cautionary tale for now. The Court remains skeptical

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on the question of class status.

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IT IS SO ORDERED.

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Dated this 1st day of May, 2018.

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A

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Ronald B. Leighton
United States District Judge

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