Opinion
No. MDL 1409.
August 22, 2005
Dear Judge Pauley:
We represent the Citigroup Defendants in the above-styled MDL matter. Pursuant to the Court's Individual Practices, we are writing to request a pre-motion conference to present a motion to stay the claims of the newly named Diners Club cardholder plaintiffs and those claims they now propose to bring on behalf of putative Diners Club class members who agreed to arbitrate any disputes relating to their Diners Club cards, pursuant to Section 3 of the Federal Arbitration Act (the "FAA"), 9 U.S.C. § 3.
Background. Plaintiffs in MDL 1409 filed their first Consolidated Amended Class Action Complaint in January 2002, and filed their Second Consolidated Amended Class Action Complaint (the "Complaint"), which remains the operative complaint, in August 2003. In the Complaint, plaintiffs purported to bring claims on behalf of holders of Diners Club cards. However, no named plaintiff had standing to assert a claim against Diners Club as a Diners Club cardholder, because none was a Diners Club cardholder.
In March 2005, the Court rejected plaintiffs' request to certify a class of Diners Club cardholders: "Because no named plaintiff is a Diners Club cardholder, this Court declines to certify any Diners Club subclass." In re Currency Conversion Fee Antitrust Litig., 361 F. Supp. 2d 237, 247 (S.D.N.Y. 2005) ("Currency Conversion III"). The Court affirmed that ruling when plaintiffs moved for reconsideration. In re Currency Conversion Fee Antitrust Litig., ___ F.R.D. ___, 2005 U.S. Dist. LEXIS 11695, *20-23 (S.D.N.Y. June 16, 2005) ("Currency Conversion IV"). As a result of these rulings, no Diners Club cardholders have been part of MDL 1409, either as named parties or as class members.
In July 2005, the Court granted plaintiffs leave to add newly named Diners Club plaintiffs, who would then be permitted to seek certification of a proposed class of Diners Club cardholders who had theretofore not been a part of the case. Plaintiffs have proposed two individuals: Woodrow Clark and Pamela S. Meyerson.
Motion to Stay. The Citigroup Defendants propose to file a motion, pursuant to Section 3 of the FAA, to stay the claims of Mr. Clark, Ms. Meyerson, and any putative Diners Club class members that agreed to arbitrate their claims concerning their Diners Club cards. The cardmember agreements governing the terms of the Diners Club accounts of Mr. Clark, Ms. Meyerson, and the vast majority of individual Diners Club cardmembers, require arbitration of claims. Those agreements should be enforced by staying the litigation of such claims and allowing the cardmembers, if they choose, to pursue claims in arbitration. This Court has previously, and repeatedly, recognized that arbitration agreements in cardmember agreements are binding and enforceable, and require that claims brought in litigation be stayed in favor of arbitration. In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385, 403 (S.D.N.Y. 2003) ("Currency Conversion I"); In re Currency Conversion Fee Antitrust Litig., 224 F.R.D. 555, 570 (S.D.N.Y. 2004) ("Currency Conversion II"); Currency Conversion III, 361 F. Supp. 2d at 258.
Alternatively, as to the putative class members with arbitration agreements, there is no need to enter a formal stay of such claims if the claims are never certified for inclusion in this litigation.
The Court has declined to enforce the arbitration agreements (at least in part) of two defendants (Citibank and Chase) on two grounds that are inapplicable here: allegedly improper communications with a putative class member, and waiver.Currency Conversion III, 361 F. Supp. 2d at 248-58. Early on, the Court also applied its reasoning with respect to arbitration agreements of Diners Club cardmembers added after the filing of litigation — but the Court subsequently recognized that no Diners Club cardmembers could properly be included in the litigation at all, because no named plaintiff in MDL 1409 could assert, and none of them had asserted, any claim based on a Diners Club account. See Currency Conversion II, 224 F.R.D. at 569-70 (applying rationale with respect to post-litigation arbitration agreements added by Diners Club) and Currency Conversion III, 361 F. Supp. 2d at 247 (excluding Diners Club cardmembers from class). We respectfully submit that given the different circumstances regarding Diners Club — including, most importantly, the previous absence of any named Diners Club cardholder against whom an arbitration agreement could be invoked, and the previous express denial of a request for class certification with respect to Diners Club cardholders — the Court's reasoning on allegedly improper communications and waiver does not apply to the new addition of named Diners Club cardmembers and the new attempt to obtain class certification.
The Citigroup Defendants respectfully disagree with the Court's rulings with respect to the Chase and Citibank arbitration agreements, and are briefing that matter before the Second Circuit. For purposes of the present motion, however, we will not repeat arguments that the Court has previously rejected, although reserving our objections to those prior rulings.
First, because no Diners Club cardmembers were ever properly before the Court in MDL 1409, the analysis regarding arbitration agreements added after the commencement of litigation does not apply. The Diners Club cardmembers "were not putative class members," compare Currency Conversion III, 361 F. Supp. 2d at 258, when the litigation was filed because there was no named plaintiff with standing to assert an individual claim with respect to Diners Club's foreign currency conversion charges or disclosures, let alone a representative class claim on behalf of Diners Club cardholders. Id. at 247; Currency Conversion IV, 2005 U.S. Dist. LEXIS 11695 at *21-23. Moreover, the fact is that this Court previously denied the prior class certification motion to include Diners Club cardholders for precisely this reason. What is now anticipated is a new proposed motion — made for the first time by newly named plaintiffs who allegedly were cardholders — and it is thus only now that standing exists sufficient to cause any rights in this action that these putative cardholders might have to materialize. In short, we respectfully submit that Diners Club cardmembers had no protected rights in this litigation until (if at all) the plaintiffs proposed proper class representatives, a fact underscored by this Court's previous denial of class certification. This new addition of named plaintiffs and new attempt at class certification did not occur until twenty days ago, well after the arbitration agreements became effective.
Second, the Court's waiver conclusions also cannot apply to the Diners Club cardmembers because Diners Club had no one against whom to enforce arbitration rights pursuant to Section 3, a fact that this Court recognized in formerly excluding Diners Club cardmembers from the putative class. Currency Conversion III, 361 F. Supp. 2d at 247; Currency Conversion IV, 2005 U.S. Dist. LEXIS 11695, at *23. By proposing to name the new class representatives, and to bring Diners Club cardmembers into the case, plaintiffs are seeking — for the first time — to properly bring the Diners Club cardmembers' claims before the Court. Thus, this is the very first time that the Citigroup Defendants could have enforced their arbitration rights, and they have filed this letter raising the issue promptly.
Conclusion. For the reasons set forth above, and as will be more fully explained in formal motion papers, the Citigroup Defendants seek to file a motion pursuant to Section 3 of the FAA to stay the claims of all Diners Club cardmembers, including the two class representatives, in favor of arbitration. Counsel is available at the Court's convenience for a pre-motion conference to address this matter further and to enter a briefing schedule.