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Gillette v. First Premier Bank

United States District Court, Ninth Circuit

June 24, 2013

SHAIN GILLETTE, individually and on behalf of all others similarly situated, Plaintiff,


LARRY ALAN BURNS, District Judge.

Gillette alleges that First Premier Bank recorded debt collection calls it placed to him without his knowledge or consent, in violation of California Penal Code § 632.7. Now pending is First Premier's motion to compel arbitration.

I. Factual Background

Most of the relevant facts here aren't in dispute. Gillette filled out an online application for a First Premier credit card in December 2010. His application certified that he read, met, understood, and accepted all terms, one of which was an "Arbitration Notice." It said:

If you are issued a credit Card, your Credit Card Contract will contain a binding Arbitration Provision. In the event of any dispute relating to your Credit Card Contract, the dispute will be resolved by binding arbitration pursuant to the rules of the American Arbitration Association or an arbitration organization mutually agreed upon by the parties. Both you and we agree to waive the right to go to court or to have the dispute heard by a jury (except in regard to any collection activities on your Credit Account). You and we will be waiving any right to a jury trial and you also would not have the right to participate as part of a class of claimants relating to any dispute with us. Other rights available to you in court may also be unavailable in arbitration. When you receive your Credit Card Contract, you should read the Arbitration Provision in your agreement carefully and not accept or use the Card unless you agree to bound by the Arbitration Provision.

(Doc. No. 9-3 at 6, 10.) First Premier approved Gillette's application and opened a credit card account for him on December 19, 2010, and then promptly sent him a credit card and credit card contract. That contract contained a very comprehensive "Arbitration and Litigation" section spelling out the range of disputes Gillette was agreeing to arbitrate and the conditions of any such arbitration. (Doc. No. 9-4.) Right up front in that section was a notice to Gillette that he could opt out it (which he did not do), as well as an all-caps suggestion to read the section very carefully.

In July 2012, Gillette sued First Premier in Superior Court in Los Angeles for violations of the Rosenthal Fair Debt Collection Practices Act. (Doc. No. 11-2.) This case settled in April 2013 without First Premier making any arbitration demand under the credit card contract-presumably because it wasn't worth the trouble, or because the "Arbitration Notice" in the online application specified that disputes "in regard to any collection activities" aren't subject to binding arbitration.[1] The settlement agreement said it "constitutes the full and entire Agreement between the Settling Parties hereto with regard to the settlement of the Dispute and such Settling Parties acknowledge that there is no other agreement, oral and/or written, between the Settling Parties hereto with regard to the settlement of the Dispute." (Doc. No. 11-3 at ¶ 4.1.)

It was after Gillette sued First Premier in Superior Court, but before that case settled, that he sued First Premier in this Court for recording its debt collection calls without his consent.

II. Scope of the Court's Analysis

The parties agree that the Court should determine whether, in the first instance, a binding arbitration agreement exists. They disagree, though, on who should determine whether that agreement-assuming there is one-is valid, and whether it encompasses the present dispute. Gillette says the Court should make those determination; First Premier says the arbitrator should make them.

As a general rule, Gillette is right. The Ninth Circuit has recognized that a court's role under the Federal Arbitration Act is "limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). But what Gillette misses is that these questions can themselves be delegated to an arbitrator in an arbitration agreement. In other words, parties can agree to arbitrate arbitrability. See Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772, 2777 (2010) ("We have recognized that parties can agree to arbitrate gateway' questions of arbitrability, ' such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy."). There simply must be clear and unmistakable evidence that they made this agreement. See id. at 2778 n. 1; Fadal Machining Ctrs., LLC v. Compumachine, Inc., 461 Fed.Appx. 630, 632 (9th Cir. 2011) ("The language of an arbitration agreement establishes whether the determination of arbitrability is for the court or delegated to an arbitrator."); Momot v. Mastro, 652 F.3d 982, 988 (9th Cir. 2011) ("We hold that this language, delegating to the arbitrators the authority to determine the validity or application of any of the provisions of' the arbitration cause, constitutes an agreement to arbitrate threshold issues concerning the arbitration agreement.'" ( quoting Rent-A-Center, 130 S.Ct. at 2777).).

Under the "Arbitration and Litigation" section of the credit card contract, in a subsection titled "Parties and Matters Subject to Litigation, " a "claim" that's subject to arbitration is defined to include "claims regarding the applicability, enforceability or validity of this [Arbitration] Provision." That language couldn't be more clear: Gillette and First Premier agreed to arbitrate arbitrability. They agreed to arbitrate the question whether the arbitration agreement is valid, and they agreed to arbitrate whether it encompasses the present lawsuit.

III. Discussion

Given the parties' agreement to arbitrate gateway issues of arbitrability, there is actually very little here for the Court to decide. There's simply no disputing that the credit card application Gillette filled out, as well as the subsequent credit card contract, contain an agreement to arbitrate. This being the case, the Court's work is more or less done, although, as First Premier points out, two questions remain. The first is whether the settlement agreement in the Superior Court case displaced, or novated, the credit card contract and its arbitration provision. Frankly, the Court doesn't see why this isn't also a gateway question of arbitrability, but it will address it anyway. The second question is whether a class arbitration waiver in the credit card contract is enforceable. This question doesn't go to the ...

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