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Elsie Cayanan, et al v. Citi Holdings

February 28, 2013

ELSIE CAYANAN, ET AL.,
PLAINTIFFS,
v.
CITI HOLDINGS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge

ORDER GRANTING DEFENDANTS' MOTION TO COMPEL ARBITRATION AND STAY ACTION [Doc. No. 16]

Plaintiffs Elsie Cayanan, Kimberly Baker, and Jesse McKay bring this putative class action for alleged violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. §§ 227 et seq. Defendants Citibank, N.A.; Citigroup, Inc.; and CitiFinancial Services, Inc., move to compel arbitration of Plaintiffs' claims in separate, individual arbitrations, in accordance with agreements requiring individual arbitration of all claims related to Plaintiffs' consumer credit accounts held by Defendants. The Court finds this matter suitable for decision on the papers and without oral argument pursuant to Civil Local Rule 7.1.d.1. For the reasons set forth below, the Court GRANTS Defendants' motion.

I.BACKGROUND

A. Plaintiff Elsie Cayanan

Plaintiff Cayanan, a resident of California, obtained two personal loans from CitiFinancial. First, on March 7, 2007, Cayanan borrowed $5,353.34, and in the process signed two documents entitled "Disclosure Statement, Note and Security Agreement" (the "2007 Note") and "Arbitration Agreement." [Baer Decl., Doc. No. 16-2 at ¶ 3; Baer Suppl. Decl., Doc. No. 26-1 at ¶ 2.] Then, on January 15, 2008, Cayanan borrowed another $5,045.38 from CitiFinancial and again signed new "Disclosure Statement, Note and Security Agreement" (the "2008 Note") and "Arbitration Agreement" documents. [Baer Decl. at ¶ 69; Baer Suppl. Decl. at ¶ 3.] Both the 2007 Note and 2008 Note contained the following language above their signature blocks: "ARBITRATION. Borrower . . . and Lender have entered into a separate Arbitration Agreement on this date, the terms of which are incorporated and made a part of this Disclosure Statement, Note and Security Agreement by this reference." [Exs. 1, 3 to Baer Decl., Doc. No. 16-3 at 5, 12 (formatting in original).]*fn1 The two arbitration agreements that bear Cayanan's signatures both contain the following language:

THIS ARBITRATION AGREEMENT PROVIDES THAT ALL DISPUTES BETWEEN BORROWER AND CERTAIN OTHER PERSONS ON THE ONE HAND AND LENDER AND CERTAIN OTHER PERSONS AND ENTITIES ON THE OTHER HAND, EXCEPT THOSE SPECIFIED BELOW, WILL BE RESOLVED BY MANDATORY, BINDING ARBITRATION. YOU THUS GIVE UP YOUR RIGHT TO GO TO COURT TO ASSERT OR DEFEND YOUR RIGHTS (EXCEPT FOR MATTERS THAT ARE EXCLUDED FROM ARBITRATION AS SPECIFIED BELOW). YOUR RIGHTS WILL BE DETERMINED BY A NEUTRAL ARBITRATOR AND NOT A JUDGE OR JURY. YOU ARE ENTITLED TO A FAIR HEARING, BUT THE ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN RULES APPLICABLE IN COURT. . . . .

"Claim" means any case, controversy, dispute, tort, disagreement, lawsuit, or claim now or hereafter existing between You and Us. A Claim includes, without limitation, anything related to:

* The Note, this Agreement, or the enforceability, or the arbitrability of any Claim pursuant to this Agreement, including but not limited to the scope of this Agreement and any defenses to enforcement of the Note or this Agreement;

* Any Credit Transaction;

* Any past, present, or future insurance, service, or other product that is offered or purchased in connection with a Credit Transaction;

* Any documents or instruments that contain information about any Credit Transaction, insurance, Service, or product;

* Any act or omission by any of Us;

* Fraud or misrepresentation, including claims for failing to disclose material facts;

* Any federal or state statute or regulation, or any alleged violation thereof, including without limitation insurance, usury, and lending laws;

* Any party's execution of this Agreement and/or willingness to be bound by its terms and provisions; or

* Any dispute about closing, servicing, collecting, or enforcing a Credit Transaction. . . . .

No Class Actions/No Joinder of Parties. You agree that any arbitration proceeding will only consider Your Claims. Claims by or on behalf of other borrowers will not be arbitrated in any proceeding that is considering Your or Our Claims. Because You have agreed to arbitrate all Claims, You may not serve as a class representative or participate as a class member in a putative class action against any party entitled to compel arbitration under this Agreement. [Exs. 2, 4 to Baer Decl., Doc. No. 16-3 at 7, 14 (formatting in original).]

As of April 15, 2012, Cayanan was "delinquent in her monthly payments to CitiFinancial," and, as a result, CitiFinancial began "placing collection calls to Cayanan to attempt to collect the debt" from April 16, 2012, to June 19, 2012. [Baer Suppl. Decl. at ¶¶ 4-5.] In addition to these calls in 2012, Cayanan recalls receiving collection calls in 2008, when she had lost her employment, "struggled to keep paying on the loan," and missed one or more payments. [Cayanan Suppl. Decl., Doc. No. 27-1 at ¶ 6.] Cayanan recounts that she received numerous telephone calls in 2008 and 2012--several on the same day, sometimes in rapid succession, and at all hours of the day. [Id. ¶¶ 6, 10.] From April through June 2012, Cayanan received at least 116 collection calls. [Id. ¶ 5.]

B. Plaintiff Kimberly Baker

Plaintiff Baker, also a California resident, has maintained three credit card accounts serviced by Citibank. In 1997, Baker applied for and obtained a "GTE" brand credit card. [Baker Decl., Doc. No. 27-4 at ¶ 3.] It is unclear whether the GTE card application process involved execution of an arbitration agreement. [Id.

¶ 6.] In 2000, Citibank began servicing Baker's GTE card account and eventually converted it to a Citibank Thank You credit card (the "Thank You Card"). [Id. ¶ 8.]

In the years after Citibank began servicing the Thank You Card, Citibank periodically mailed Baker several change-of-terms notices--to which Baker refers as "bill stuffers"--that informed her of various changes to her account. The first notice was sent in April 2003 and included a complete cardmember agreement. [Barnette Decl., Doc. No. 16-6 at ¶ 7.] The notice informed Baker that Citibank intended to change the terms of her cardmember agreement and indicated that the enclosed cardmember agreement would replace any existing agreement beginning in late May 2003. [Id. ¶ 8.] The notice provided that Baker could notify Citibank in writing of her intent not to be bound by the new cardmember agreement, that doing so would result in the closure of her account, and that she could pay off her "account under the existing terms" after the account closure. [Ex. 1 to Barnette Decl., Doc. No. 16-7 at 3.] The cardmember agreement that accompanied the notice contained the following arbitration clause:

ARBITRATION:

PLEASE READ THIS PROVISION OF THE AGREEMENT CAREFULLY. IT PROVIDES THAT ANY DISPUTE MAY BE RESOLVED BY BINDING ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO TO COURT, INCLUDING THE RIGHT TO A JURY AND THE RIGHT TO PARTICIPATE IN A CLASS ACTION OR SIMILAR PROCEEDING. IN ARBITRATION, A DISPUTE IS RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE OR JURY. ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN COURT PROCEDURES.

Agreement to Arbitrate: Either you or we may, without the other's consent, elect mandatory, binding arbitration for any claim, dispute, or controversy between you and us (called "Claims").

Claims Covered: What Claims are subject to arbitration? All Claims relating to your account, a prior related account, or our relationship are subject to arbitration, including Claims regarding the application, enforceability, or interpretation of this Agreement and this arbitration provision. All Claims are subject to arbitration, no matter what legal theory they are based on or what remedy (damages, or injunctive or declaratory relief) they seek. This includes Claims based on contract, tort (including intentional tort), fraud, agency, your or our negligence, statutory or regulatory provisions, or any other sources of law; Claims made as counterclaims, cross-claims, third-party claims, interpleaders or otherwise; and Claims made independently or with other claims. A party who initiates a proceeding in court may elect arbitration with respect to any Claim advanced in that proceeding by any other party.

Claims and remedies sought as part of a class action, private attorney general or other representative action are subject to arbitration on an individual (non-class, nonrepresentative) basis, and the arbitrator may award relief only on an individual (nonclass, non-representative) basis. . . . .

Broadest Interpretation. Any questions about whether Claims are subject to arbitration shall be resolved by interpreting this arbitration provision in the broadest way the law will allow it to be enforced. This arbitration provision is governed by the Federal Arbitration Act (the "FAA"). [Id. at 14-15 (formatting in original).] Citibank does not have a record that Baker notified Citibank of her intent not to be bound by the new cardmember agreement or that the April 2003 notice was returned as undeliverable. [Barnette Decl. at ¶ 9.] Baker continued to use the Thank You Card as evidenced by a credit card statement dated May 17, 2004--more than a year after the notice was sent. [Ex. 3 to Barnette Decl., Doc. No. 16-7 at 21.] Thereafter, Citibank mailed Baker complete cardmember agreements on at least three more occasions: in April 2007 in connection with a conversion to a Citi Diamond Preferred Rewards American Express credit card (Barnette Decl. at ¶¶ 16-17; Exs. 6, 7); in May 2009 in connection with a change in pricing (id. ¶¶ 19-20; Exs. 9, 10); and in April 2011 in connection with a final conversion to the Thank You card (id. ¶¶ 22-23; Exs. 12, 13). After each time Citibank sent Baker the notices, complete cardmember agreements, and arbitration agreement above, she continued to use the Thank You Card account as evidenced by billing statements that include charges made to the account. [Id. ¶¶ 18, 21, 24; Exs. 8, 11, 14.]

In addition to the Thank You Card, Baker also used two other charge cards serviced by Citibank: a Sears MasterCard ("Sears Card I") and a Sears Home Improvement Card ("Sears Card II"). [Barnette Suppl. Decl., Doc. No. 26-3 at ¶ 2.] Baker applied for Sears Card I in March 2008, and Citibank sent her a cardmember agreement that included an arbitration agreement "when she opened" the account. [Barnett Decl. at ¶¶ 30-31.] Baker used the Sears Card I from April 2008 to February 2009. [Id. ¶ 32.] Subsequently, Baker applied for the Sears Card II account in September 2010, and Citibank sent her a cardmember and arbitration agreement "when [the account] was opened." [Id. ¶¶ 26-27.] Unlike with the Thank You Card account, however, Citibank does not provide any additional details about supplemental cardmember agreements, opt out opportunities, or whether Baker was informed of the arbitration agreement at the time she applied for the Sears Card I and Sears Card II accounts.

In late 2011, Baker began receiving numerous telephone calls on both her cellular telephone and land-based home telephone. [Baker Decl. at ¶ 10.] Prior to this time, Baker's Thank You Card account had become delinquent, and Defendants began calling her in order to "collect" on the account. [Barnette Suppl. Decl. at ¶ 3.] Baker subsequently became delinquent on the Sears Card I and Sears Card II accounts in early 2012, and Defendants continued calling her to collect on these accounts in addition to the Thank You Card account. [Id.] She received these calls sometimes in rapid succession, as early as 8:00 a.m., and as late as 10:00 p.m. [Baker Decl. at ¶ 11.]

C. Plaintiff Jesse McKay

On August 20, 2008, Plaintiff McKay, a resident of Connecticut, completed and submitted an electronic application for a $12,000 student loan using Citibank's internet website. [McKay Decl., Doc. No. 27-3 at ¶ 3; House Suppl. Decl., Doc. No. 26-2 at ¶ 2.] The signature box of the electronic application included the following language:

Please read your enclosed Promissory Note in its entirety before signing this section. . . . . Promise to pay: I promise to pay Citibank, N.A. or any other holder of the accompanying promissory note (the "Note") all sums disbursed under the terms of this application (the "Loan") plus interest, fees and other charges which may have become due as provided by the Note. The terms and conditions of this application, the Note, any Conditional Approval Letter and any other disclosures collectively constitute the entire agreement between you and me. . . . . [Ex. 1 to House Decl., Doc. No. 16-5 at 3 (formatting in original).] However, before McKay could affix his electronic signature to this section of the loan application, he was required to view, among other things, a Promissory Note that included the following arbitration clause:

ARBITRATION OF DISPUTES

PLEASE READ THIS ARBITRATION PROVISION CAREFULLY. IT PROVIDES THAT EITHER YOU OR I CAN REQUIRE THAT ANY CONTROVERSY OR DISPUTE BE RESOLVED BY BINDING ARBITRATION (EXCEPT FOR MATTERS THAT ARE EXCLUDED FROM ARBITRATION AS SPECIFIED BELOW). ARBITRATION REPLACES THE RIGHT TO GO TO COURT, INCLUDING THE RIGHT TO A JURY AND THE RIGHT TO PARTICIPATE IN A CLASS ACTION OR SIMILAR PROCEEDING. IN ARBITRATION, A DISPUTE IS RESOLVED BY A NEUTRAL ARBITRATOR INSTEAD OF A JUDGE OR JURY. ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN RULES APPLICABLE IN COURT. . . . .

Agreement to Arbitrate: You and I agree that either you or I may, without the other's consent, require that Claims between you and me be submitted to mandatory, binding arbitration except for certain matters excluded below. This arbitration provision is made pursuant to a transaction involving interstate commerce, and shall be governed by, and enforceable under, the Federal Arbitration Act (the "FAA"), 9 U.S.C. §1 et seq., and (to the extent State law is applicable), the State law governing this transaction.

Claims subject to Arbitration include, but are not limited to: * Claims relating to: 1) any and all aspects of my Account including without limitation the origination, establishment, terms, treatment, operation, handling, billing, servicing, limitations on or termination or acceleration of my Account; 2) any disclosures or statements relating to my Account; 3) the application, enforceability or interpretation of my Account, including this arbitration provision. Any questions about what Claims are subject to arbitration shall be resolved by interpreting this arbitration provision in the broadest way the law will allow it to be enforced. . . . .

* Claims based on any theory of law, any contract, statute, regulation, ordinance, tort (including fraud or any intentional tort), common law, constitutional provision, respondeat superior, agency or other doctrine concerning liability for other persons, custom or course of dealing or any other legal or equitable ground (including any claim for injunctive or declaratory relief). . . . .

* Claims made as part of a class action or other representative action, and the arbitration of such Claims must proceed on an individual (non-class, nonrepresentative) basis. If you or I require arbitration of a particular Claim, neither you, me, nor any other person may pursue the Claim in any litigation, whether as a class action, private attorney general action, other representative action or otherwise. . . . .

No consolidation or joinder of parties: All parties to the arbitration must be individually named. Claims by persons other than individually named parties shall not be raised or determined. Notwithstanding anything else that may be in this arbitration provision, no class action, private attorney general action or other representative action may be pursued in arbitration, nor may such action be pursued in court if any party has elected arbitration. Unless consented to by all parties to the arbitration, Claims of two or more persons may not be joined, consolidated or otherwise brought together in the same arbitration (unless those persons are applicants, co-applicants on a single Account and/or related Accounts or parties to a single transaction or related transactions); this is so whether or not the Claims (or any interest in the Claims) may have been assigned. [Ex. 5 to House Decl. at 18-19.] As Timothy House, a Citibank Senior Vice President, explains in his declaration, "[c]onsumers who failed to access [the Promissory Note] received an error message notifying them of their failure to complete the required step(s) and preventing them from completing the application." [Id. ¶ 4.] Once McKay viewed the Promissory Note, it was available to him to print in electronic Portable Document Format ("PDF"). [See Ex. 2 to House Decl.] Citibank's computer system recorded that McKay viewed the Promissory Note on August 20, 2008, at 10:33:37 a.m. EST, and electronically signed the loan application on August 20, 2008, at 10:33:44 a.m. EST. [Id. ¶ 8; Ex. 4.]

McKay's student loan entered repayment in 2009 and is currently in default. [House Suppl. Decl. at ¶¶ 3, 5.] With respect to Citbank's contacts with McKay, Citibank explains that, "[i]n May 2010, Citibank contacted McKay twice by telephone regarding repayment of his loan" and had previously "sent McKay several letters regarding repayment options, and also had called to verify his correct address and email address." [Id. ¶ 3.] Citibank further explains that, "[f]rom July 2010 through August 2010, McKay and Citibank discussed the possible forebearance of his loan" and "[f]rom December 2010 through July 2011, . . . [they] further discussed hardship and repayment options on the loan." [Id. ¶ 4.] However, McKay avers he received many more prerecorded calls--up to 10 to 12 times per day, sometimes in rapid succession, and at "all hours of the day." [McKay Decl. at ¶ 7.]

II.LEGAL STANDARD

The Federal Arbitration Act ("FAA") permits "[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States District Court . . . for an order directing that . . . arbitration proceed in the manner provided for in [the arbitration] agreement." 9 U.S.C. § 4. Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration. Id. If such a showing is made, the district court shall also stay the proceedings pending resolution of the arbitration at the request of one of the parties bound to arbitrate. Id. § 3.

The Supreme Court has stated that the FAA espouses a general policy favoring arbitration agreements. AT&T Mobility v. Concepcion, 131 S. Ct. 1740, 1745-46 (2011). Federal courts are required to rigorously enforce an agreement to arbitrate. See id. Courts are also directed to resolve any "ambiguities as to the scope of the arbitration clause itself . . . in favor of arbitration." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 476-77 (1989).

In determining whether to issue an order compelling arbitration, the Court may not review the merits of the dispute and must limit its inquiry to (1) whether the contract containing the arbitration agreement evidences a transaction involving interstate commerce,*fn2 (2) whether there exists a valid agreement to arbitrate, and (3) whether the dispute falls within the scope of the agreement to arbitrate. See Republic of Nicar. v. Standard Fruit Co., 937 F.2d 469, 477-78 (9th Cir. 1991). If the answer to each of these queries is in the affirmative, then the Court must order the parties to arbitration in accordance with the terms of their agreement. See 9 U.S.C. § 4. If there is a genuine dispute of material fact as to any of these queries, a district court should apply a "standard similar to the summary judgment standard of [Federal Rule of Civil Procedure 56]." Concat LP v. Unilever, PLC, 350 F. Supp. 2d 796, 804 (N.D. Cal. 2004).

The foregoing notwithstanding, the strong presumption in favor of arbitration "does not confer a right to compel arbitration of any dispute at any time." Volt Info. Scis., Inc., 489 U.S. at 474. The FAA provides that arbitration agreements are unenforceable "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. "Thus, generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening" federal law. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). This is because "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). Accordingly, the Court reviews Plaintiffs' arbitration agreements in light of the "liberal federal policy favoring arbitration," Concepcion, 131 S. Ct. at 1745, and considers the enforceability according to the laws of the state of contract formation. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Ingle v. Circuit City Stores, 328 F.3d 1165, 1170 (9th Cir. 2003).

III.DISCUSSION

A. Whether Enforceable Arbitration Agreements Exist

The Court's first inquiry is whether each named Plaintiff entered into an arbitration agreement with Defendants. This inquiry necessarily requires the Court to discuss the enforceability of each agreement under the rubric of the applicable state's contract law. Here, because either California, South Dakota, or Nevada law could govern one or more of Plaintiffs' agreements, the Court first conducts a choice-of-law analysis for each Plaintiff's agreement and then proceeds to analyze the enforceability of each agreement under the applicable state law.

1. Choice of Law

"Before a federal court may apply state-law principles to determine the validity of an arbitration agreement, it must determine which state's laws to apply. It makes this determination using the choice-of-law rules of the forum state . . . ." Pokorny v. Quixtar, Inc., 601 F.3d 987, 994 (9th Cir. 2010) (citing Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1164 (9th Cir. 1996)). Therefore, since Plaintiffs brought this lawsuit in California, the Court applies California's choice of law rules to determine whether to apply California, South Dakota (for Baker), or Nevada (for McKay) law. Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1002 (9th Cir. 2010).

"When an agreement contains a choice of law provision, California courts apply the parties' choice of law unless the analytical approach articulated in § 187(2) of the Restatement (Second) of Conflict of Laws . . . dictates a different result." Id. (quoting Hoffman v. Citibank (S.D.), N.A., 546 F.3d 1078, 1082 (9th Cir. 2008) (per curiam)). "Under the Restatement approach, the court must first determine 'whether the chosen state has a substantial relationship to the parties or their transaction, . . . or whether there is any other reasonable basis for the parties' choice of law.'" Id. (quoting Nedlloyd Lines B.V. v. Sup. Ct., 834 P.2d 1148, 1152 (Cal. 1992). "If . . . either test is met, the court must next determine whether the chosen state's law is contrary to a fundamental policy of California." Id. (same). "If the court finds such a conflict, it 'must then determine whether California has a 'materially greater interest than the chosen state in the determination of the particular issue.'" Id. (same). "If California possesses the materially greater interest, the court applies California law despite the choice of law clause." Id. at 1002-03.

Here, the Court applies California law in its analysis of Cayanan's arbitration agreements, as Cayanan is a California resident, whose two personal loans were obtained in California from a CitiFinancial branch located in California, and because the two arbitration agreements' choice of law provisions designate "federal law and . . . the laws of the state where the closing of the Credit Transaction took place . . . ." [Doc. No. 16-3 at 8, 15.] However, the parties have offered scant guidance on which state law the Court should apply to McKay's and ...


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