Opinion
3-05-CV-1137-L.
November 3, 2005
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Pursuant to the District Court's order of reference filed on July 25, 2005, came on to be heard Citibank (South Dakota), N.A.'s Motion to Compel Arbitration and Stay Proceedings, etc. filed on July 21, 2005, and the Magistrate Judges makes the following report and recommendation pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and (C):
The claim asserted in Plaintiff's live pleadings involves a dispute between a credit cardholder and the bank which issued the credit card which the cardholder used to reserve lodging at an inn in Switzerland. Citibank's motion to compel arbitration was filed after Plaintiff's petition was removed from a Texas state court.
The credit card account involved was opened in 1997. Accompanying Plaintiff's October 2001 statement was a notice of change in the terms and conditions governing the credit card account. See Exhibit A to Defendant's Appendix and Exhibit 3 thereto. The specific change provided for binding arbitration of "All claims relating to [the cardholder's] account." At the end of the notice (Appendix at 13) was set out in bold print "NON-ACCEPTANCE INSTRUCTIONS" which gave specific instructions in the event that the cardholder declined to accept the arbitration provisions set out in the notice. At the end of Plaintiff's November 2001 statement — in capital letters — he was reminded of the prior notice of changes and given directions for obtaining another copy (Appendix at 16).
The original credit card agreement (Exhibit 1, Appendix 7) "Changing this Agreement", specifically provided that: "Defendant can change this agreement . . . at any time." The paragraph further described the procedures to be followed if the cardholder did not agree to the changes.
Plaintiff never gave notice rejecting the changes in the notice sent with his October 2001 billing statement and continued to use the credit card issued by Defendant at least through the date of the disputed charge made by the Swiss inn.
It is clear that Exhibit 3 requires the dispute between the parties to be submitted to binding arbitration.
In attempting to defeat the plain language of the arbitration terms, Plaintiff argues that the arbitration provision is unconscionable because it bars him from participation in a class action. The law in this circuit rejects such an argument. E.g. see Carter v. Countrywide Credit Indus., Inc. 362 F.3d 294, 298 (5th Cir. 2004); Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 174-75 (5th Cir. 2004); see also Bank One, N.A. v. Coates, 125 F.Supp. 2d 819, 831 (S.D. Miss 2001), affirmed 34 Fed.Appx. 964 (5th Cir. 2002). Similarly, Texas state courts have found that a bar to class action participation does not render an arbitration provision fundamentally unfair. Automation USA Corp. v. Leroy, 105 S.W.3d 190, 300 (Tex.App.-Houston [14th Dist.] 2003, no pet.).
Plaintiff's argument that the change was unilateral and that he never agreed to accept arbitration as the method for resolving disputes is similarly unavailing. As noted above, the notice which accompanied his October 2001 statement clearly sets out the procedure for refusing to accept the noted change. Accord See Barker v. Citibank (South Dakota), N.A., No. A:03CA-130JN (W.D.Tex — Austin Div.) (Defendant's Appendix, Exhibit D), See also collected cases cited at page 8 of Defendant's reply memorandum).
Plaintiff's assertion that language in the notice of change stating that "Arbitration Procedures are Simpler and More Limited than Court Procedures (Defendant's Appendix at 11)," raises an issue of fraudulent inducement is patently specious. He has not claimed that he read this single statement in the notice, let alone that he relied on it in failing to give notice of his rejection of the change. See Bhetia v. Johnson, 818 F.2d 418, 422 (5th Cir. 1987) (concurring opinion of Judge Homer Thornberry).
Plaintiff's argument that he would incur excess fees if required to submit his dispute to arbitration is rendered moot by Defendant's agreement to pay the costs of arbitration. See Defendant's reply memorandum at page 7; see also Carter v. Countrywide Credit, supra, 362 F.3d at 300 and at n. 3.
Plaintiff's choice of law argument (Plaintiff's response at pages 16-17), is without merit. The initial agreement (Defendant's Appendix, Exhibit 1 at page 7), made clear that the law of South Dakota, where Defendant as issuer of the credit card, was located would apply. Aside from Plaintiff's acquiescence to this provision, it is clear that the credit card relationship between the parties and the transaction in dispute bore a reasonable relationship to South Dakota and its laws.
RECOMMENDATION:
Because the terms of specific changes noted in Defendant's Exhibit 3 clearly require the dispute alleged in Plaintiff's pleadings be submitted to binding arbitration and based upon the facts and reasons set out above, it is recommended that the District Court grant Defendant's motion and order that the claims asserted by Plaintiff be submitted to binding arbitration.