Anderjaska v. Bank of Am., N.A.

523 F.Supp.3d 456

John ANDERJASKA, Chungyao Chen, Teena Colebrook, Joel Griffith, Art Heineman, Calvin Williams, Charles Witte, on behalf of themselves and all others similarly situated, Plaintiffs,

v.BANK OF AMERICA, N.A., Capital One, N.A., Citibank, N.A., J.P. Morgan Chase, N.A., Wells Fargo Bank, N.A., Defendants.

19 Civ. 3057 (LTS) (GWG)

United States District Court, S.D. New York.

Signed March 5, 2021

Jonathan Ellery Neuman, Law Offices of Jonathan E. Neuman, Esq., Ozone Park, NY, for Plaintiffs.

Brian Edward Pastuszenski, Gabrielle Lisa Gould, Goodwin Procter, LLP, New York, NY, for Defendant Bank of America, N.A.

Seth A. Schaeffer, McGuireWoods LLP, Richmond, VA, Jarrod D. Shaw, McGuireWoods LLP, Pittsburgh, PA, for Defendant Capital One, N.A.

Pamela Addison Miller, O'Melveny & Myers, LLP, New York, NY, for Defendant Morgan Chase, N.A., J.P.

John Curtis Lynch, Kathleen M. Knudsen, Troutman Pepper Hamilton Sanders LLP, Virginia Beach, VA, Stephen Jay Steinlight, Troutman Pepper Hamilton Sanders LLP, New York, NY, for Defendant Wells Fargo Bank, N.A.

Jennifer Marie Rosa, Mayer Brown LLP, New York, NY, Megan Webster, Lucia Nale, Mayer Brown LLP, Chicago, IL, for Defendant Citibank, N.A.

OPINION & ORDER

GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE

Plaintiffs brought this putative class action alleging that defendants, a group of banks, had caused them injury by negligently failing to take steps to prevent plaintiffs from falling victim to a fraudulent "binary options" scheme, by aiding and abetting the scheme, and by fraudulently concealing the scheme from plaintiffs. See Class Action Complaint, dated February 9, 2019, annexed as Exh. A to Notice of Removal, filed April 5, 2019 (Docket # 1) ("Complaint"). Plaintiffs Chungyao Chen and Calvin Williams allege that beginning in 2015 they used credit or debit cards held with defendant J.P. Morgan Chase Bank, N.A. ("Chase") to make payments to the operators of the scheme. Id. ¶¶ 136, 156. Chase has now brought a motion to compel arbitration of the claims of Chen and Williams and to stay the action pending arbitration.¹

For the following reasons, the motion to stay is granted and the motion to compel arbitration is denied.²

I. BACKGROUND

A. Procedural Background

Plaintiffs initially filed this action in state court on February 9, 2019. See Complaint. Chase removed the case to federal court on April 5, 2019 (see Notice of Removal), and plaintiffs then moved to remand the case back to state court, see Notice of Motion, filed May 14, 2019 (Docket # 25). The district court denied that motion. See Memorandum Order, filed March 30, 2020 (Docket # 46). Chase then filed the instant motion to compel arbitration, and the other defendants filed motions to dismiss. See Docket ## 52, 54, 60, 62, 64. No discovery has yet taken place.

B. The Underlying Agreements

The following facts are taken from the complaint and from the declarations and exhibits that Chase submitted with its motion. The plaintiffs have not disputed the facts alleged in those declarations or the authenticity of the exhibits. See Opp. Mem. at 1-3.

Chen, a resident of California, Complaint ¶ 3, and Williams, a resident of Wisconsin, id. ¶ 7, each had deposit accounts, see Garrett Decl. ¶ 3, and credit card accounts with Chase, see Singh Decl. ¶ 1. Chen had initially opened a deposit account with Washington Mutual, but this account was converted into a Chase account in October 2009. Deck Decl. ¶ 3. Williams opened his Chase checking and saving accounts in March 2014 and closed them in September 2018. Id. ¶ 6. Chen has two credit cards with Chase, which he began using in 2005 and 2012, respectively. Singh Decl. ¶¶ 6-7. Williams had a credit card with Chase beginning in March 2014 but closed the card in March 2018. Id. ¶¶ 11-12. However, he continues to receive statements, "is responsible for an ongoing balance on the account," and "has made multiple payments." Id. ¶¶ 12, 14.

In order to maintain their deposit accounts, both Chen and Williams agreed to the terms of a deposit account agreement ("DAA"). Deck Decl. ¶ 1. Since February 2012, id. ¶ 5, the DAA has had an arbitration provision that states in relevant part:

Arbitration. You and we agree that upon the election of either of us, any dispute relating in any way to your account or transactions will be resolved by binding arbitration as discussed below, and not through litigation in any court (except for matters in small claims court) .... ALL DISPUTES, EXCEPT AS STATED BELOW, MUST BE RESOLVED BY BINDING ARBITRATION WHEN EITHER YOU OR WE REQUEST IT.

Deck Decl., Exh. D at 23; id., Exh. G at 15. While the DAA gave depositors the ability to opt-out of the arbitration clause, neither Chen nor Williams did so. Garrett Decl. ¶ 7.

In order to maintain their credit card accounts, Chen and Williams agreed to the terms of a cardmember agreement ("CMA"). Singh Decl. ¶ 4. Those agreements were amended in June 2019 to include an arbitration provision. Singh Decl. ¶¶ 8, 13. The new provision states in pertinent part:

ARBITRATION AGREEMENT ... all disputes between you and Chase must be resolved by BINDING ARBITRATION whenever you or we choose to submit or refer a dispute to arbitration. By accepting this arbitration agreement you GIVE UP YOUR RIGHT TO GO TO COURT (except for matters that may be taken to a small claims court).

Singh Decl., Exh. 3 at 4; id., Exh. 6 at 1-2. The CMA also gave card holders the ability to opt-out of this clause, but neither Chen nor Williams did so. Singh Decl. ¶¶ 10, 14.

II. GOVERNING LAW

Section 2 of the Federal Arbitration Act ("FAA") provides in pertinent part:

A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, ... shall be 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. The FAA reflects "a strong federal policy favoring arbitration as an alternative means of dispute resolution." Ross v. Am. Express Co., 547 F.3d 137, 142 (2d Cir. 2008) (punctuation omitted).

The Second Circuit has held that a court considering a motion to compel arbitration of a dispute first must

determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance of the proceedings pending arbitration.

JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 169 (2d Cir. 2004).

"[U]nder the FAA, ‘any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.’ " Id. (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ).

In determining whether an issue must be arbitrated, courts apply the same standard used at summary judgment. See Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003). Thus, "[i]f undisputed facts in the record required the issue of arbitrability to be resolved against the Plaintiff as a matter of law," the motion must be granted. Id.

III. DISCUSSION

Because plaintiffs do not contest that the parties agreed to arbitrate, the Court will not spend time analyzing whether, under the applicable state laws that govern each agreement at issue here, an agreement was made. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ("When deciding whether the parties agreed to arbitrate a certain matter ... courts generally ... should apply ordinary state-law principles that govern the formation of contracts.").

Plaintiffs’ arguments — made in a total of three pages — are directed exclusively to the second step of analysis: "the scope" of the arbitration agreements.³ JLM Indus., Inc., 387 F.3d at 169. Plaintiffs assert that 1) the DAA arbitration clause was permissive, and since plaintiffs "chose not to elect arbitration," the agreement "cannot now retroactively nullify that selection;" 2) neither the DAA or CMA clauses apply to this case, because the plaintiffs "are not seeking to ‘go to’ court; they are already in court;" 3) Chase waived its right to arbitration by participating in this litigation; and 4) the CMA arbitration clause does not mandate arbitration because it was "not put into effect until after the filing of this case in February 2019." Opp. Mem. at 1-3 (emphasis original). Finally, plaintiffs argue that even if the Court found that the clauses mandated arbitration of this dispute, it "would still be unable to compel arbitration," because the agreements require that arbitration take place outside this district. Id. at 3.

With respect to whether the DAA arbitration clause is permissive, the clause states, in capital letters, that disputes "must be" resolved by arbitration "when either you or we request it." Deck Decl., Exh. D at 23; id., Exh. G at 15. Thus, plaintiffs’ contention — that, because they did not request arbitration, Chase is now barred from doing so — conflicts with the plain language of the agreement. Once Chase requested arbitration, the dispute between the parties "must be" resolved by arbitration.

Similarly, plaintiffs’ argument that Chase lost its right to compel arbitration once the plaintiffs filed their lawsuit is contradicted by the text of both clauses. There is no limitation on the circumstances under which a party may demand arbitration or the time when a party may demand arbitration. The agreements simply state that arbitration must take place "when either you or we request it," or "whenever you or we choose" arbitration....