District Court: Bankruptcy Discharge did Not render Arbitration Agreement Unenforceable in FCRA Case

District Court: Bankruptcy Discharge did Not render Arbitration Agreement Unenforceable in FCRA Case

  In this proposed class action, Plaintiff  alleges that Defendant Bank (“Defendant”) willfully and negligently violated 15 U.S.C. § 1681-1692x, The Fair Credit Reporting Act (“the FCRA”) by submitting credit report inquiries after Plaintiff’s debt to Defendant had been discharged through Chapter 7 bankruptcy proceedings. This case is now before the Court on Defendant’s motion to dismiss and to compel arbitration, or, in the alternative, to stay this action pending arbitration  and the parties’ responsive memoranda.

Defendant is a bank that offers consumer lending, among other banking services. (Doc. 1 at ¶ 11). In December, 2008, Plaintiff opened a credit card account with Defendant (the “Account”) and subsequently incurred debt owed to Defendant. Pursuant to Defendant’s automated credit processing system, upon opening the Account, Plaintiff was mailed his credit card (“Credit Card”) with a copy of the terms governing the Account (“the Cardmember Agreement”). (Doc. 10-2 at ¶ 6). The Cardmember Agreement provided that Defendant:

may reevaluate [Plaintiff’s] financial condition and investigate any information you provided on your Account application at any time, and in the course of doing so, we may obtain a current credit report and ask you for any additional information about your financial condition by completing a Personal Financial Statement or such other form that we request from time to time. You authorize us and give us permission to obtain any information about you that we believe would be beneficial to facilitate our determination of your eligibility for the Account and the Card, including credit reports from consumer reporting agencies.

(Doc. 10-4 at ¶ 23).

The Cardmember Agreement also contains an arbitration agreement (“Arbitration Agreement”):

You and we each agree that any Claim (as defined below) will be arbitrated instead of litigated in court under the circumstances and procedures set forth below. The term Claim (a) means any claim, dispute or controversy between you and us arising from or relating to this Agreement, any prior agreement that you may have had with us or the relationships resulting from the Agreement or any prior agreement, including the validity, enforceability or scope of this provision, the Agreement or any prior agreement and (b) includes claims of every kind and nature, including but not limited to initial claims, counterclaims, cross-claims and third-party claims and claims based upon contract, tort, fraud and other intentional torts, statute, common law and equity. The term Claim is to be given the broadest possible meaning and includes, by way of example and without limitation, any claim, dispute or controversy that arises from or relates to (i) the Account created by the Agreement or any prior agreement or any balances on the Account, (ii) advertisements, promotions or oral or written statements related to the Account or the terms of financing and (iii) your use of the Account. Any Claim will be resolved upon the election of you or us by arbitration pursuant to this provision and the Code of Procedure (Code) of the National Arbitration Forum (NAF) in effect at the time the Claim is filed. (If for any reason the NAF is unable or unwilling or ceases to serve as arbitration administrator, another nationally recognized arbitration organization utilizing similar rules and procedures will be substituted by us.) With respect to Claims covered by this provision, a party who has asserted a Claim in a lawsuit in court may elect arbitration with respect to any Claim subsequently asserted in that lawsuit by any other party or parties. IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT TO A CLAIM, NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR HAVE A JURY TRIAL ON THAT CLAIM, OR TO ENGAGE IN PREARBITRATlON DISCOVERY EXCEPT AS PROVIDED FOR IN THE NAF CODE. FURTHER, YOU WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. EXCEPT AS SET FORTH BELOW, THE ARBITRATOR’S DECISION WILL BE FINAL AND BINDING. NOTE THAT OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION.

(Doc. 10-4 at ¶ 25). While the Cardmember Agreement was revised several times over the next few years, the Arbitration Agreement remained substantively the same from October 13, 2008 to May 1, 2012. (Doc. 10-1 at 6; Doc. 10-2 at ¶¶ 6-8).

For more than two years, Plaintiff used the Credit Card to make charges to the Account and received monthly statements reflecting his activity. (Doc. 10-1 at 5; Doc. 10-3). On or about August 12, 2011, Plaintiff made his last purchase on the Account. (Doc. 10-1 at 6). On September 16, 2011, Plaintiff became delinquent on the Account. (Doc. 10-1 at 7). On March 30, 2012, Defendant “charged off” Plaintiff’s delinquent balance after Plaintiff continually failed to make payments. (Doc. 10-1 at 7).

On November 29, 2012, Plaintiff filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of Nevada (“Bankruptcy Court”). (Doc. 1 at ¶ 16). On March 6, 2013, the Bankruptcy Court granted Plaintiff a discharge, which included the debt owed to Defendant. (Doc. 1 at ¶¶ 16-21; Doc. 13-3; Doc. 13-5). Plaintiff did not make any charges to the Account after the discharge. (Doc. 1 at ¶ 23).

On or about September 30, 2013, and March 3, 2014, Defendant submitted credit report inquiries to TransUnion, a credit reporting agency. (Id. at ¶ 24). Plaintiff alleges these inquiries were unlawful because the bankruptcy discharge “extinguished any relationship between Plaintiff and Defendant.” (Id. at ¶¶ 22-28). Plaintiff further claims Defendant’s credit inquiries fall outside the scope of permissible uses provided for under 15 U.S.C. §1681b. (Id. at ¶ 26). On October 21, 2016, Plaintiff filed, on behalf of himself and all others similarly situated, a single-count complaint asserting Defendant’s post-discharge credit report inquiries violated the Fair Credit Reporting Act.

Defendant has moved to dismiss (or in the alternative, stay) this action on the grounds that the Arbitration Agreement requires Plaintiff to arbitrate his claim. Plaintiff opposes Defendant’s motion.


Please note, in order to view NACBA Member Content, you must sign in and then visit NEWS. If you are not a NACBA member, you may Become a NACBA Member 

No Comments

Post a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.