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McGhee v. North American Bancard, LLC

United States District Court, S.D. California

July 21, 2017

GERALD MCGHEE, An Individual, On Behalf of Himself and All Others Similarly Situated, Plaintiff,
v.
NORTH AMERICAN BANCARD, LLC, Defendant.

          ORDER: (1) DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION, (Doc. No. 13); AND (2) GRANTING DEFENDANT'S REQUEST TO STRIKE DECLARATION FILED CONCURRENTLY WITH MOTION TO COMPEL, (Doc. No. 18)

         Presently before the Court is Defendant North American Bancard, LLC's (“NAB”) motion to compel arbitration. (Doc. No. 13.) Plaintiff Gerald McGhee (“McGhee”) opposes the motion. (Doc. No. 23.) Having reviewed the parties' arguments in light of controlling authority, and pursuant to Local Civil Rule 7.1.d.1, the Court finds the matter suitable for disposition without oral argument. For the reasons set forth below, the Court DENIES NAB's motion.

         Background

         The facts underlying this dispute are simple and largely undisputed. NAB is the provider of mobile credit card processing services called “PayAnywhere.” McGhee, a merchant, acquired a card reader from NAB, but never used it. After more than one year, NAB began deducting a monthly non-use fee from McGhee's bank account. Despite contacting NAB to stop the charges and demand a refund, NAB continued to charge McGhee for several months and has refused to issue him a refund.

         McGhee instituted this lawsuit on March 24, 2017, by filling the class action complaint. (Doc. No. 1.) McGhee brings this nationwide putative class action on behalf of “[a]ll persons in the United States charged a Fee as a result of obtaining [NAB]'s Card Reader beginning at the start of the applicable statute of limitations period and ending on the date as determined by the Court . . . .” (Doc. No. 1 ¶ 20.) On May 15, 2017, NAB filed the instant motion to compel arbitration, asserting that McGhee agreed to arbitrate his claims when he signed up for NAB's services. (Doc. No. 13.) McGhee filed an opposition, (Doc. No. 23), and NAB replied, (Doc. No. 25). This order follows.[1]

         Legal Standard

         The Federal Arbitration Act governs the enforcement of arbitration agreements involving interstate commerce. 9 U.S.C. § 2. Pursuant to § 2 of the FAA, an arbitration agreement is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Id. The 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 such arbitration proceed in the manner provided for in [the] agreement.” Id. § 4.

         Given the liberal federal policy favoring arbitration, the FAA “mandates that district courts shall direct parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)(emphasis in original). Thus, in a motion to compel arbitration, the district court's role 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.” Kilgore v. KeyBank Nat'l Ass'n, 673 F.3d 947, 955-56 (9th Cir. 2012) (citing Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)). If these factors are met, the court must enforce the arbitration agreement in accordance with its precise terms. Id.

         While generally applicable defenses to contract, such as fraud, duress, or unconscionability, may invalidate arbitration agreements, the FAA preempts state law defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). There is generally a strong policy favoring arbitration, which requires any doubts to be resolved in favor of the party moving to compel arbitration. Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). However, where a party challenges the existence of an arbitration agreement, “the presumption in favor of arbitrability does not apply.” Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 742 (9th Cir. 2014).

         Discussion

         NAB asserts that when McGhee signed up for NAB's credit card processing services, McGhee was required to accept the “Terms and Conditions” by clicking on a button next to the words “I have read and agree to the Terms and Conditions.” (Doc. No.13 at 9.) Because he agreed to the Terms and Conditions by checking the box, NAB argues he also agreed to the User Agreement, a hyperlink to which was contained on the Terms and Conditions page. (Id. at 9-10.) In turn, the User Agreement contains the arbitration clause that NAB now invokes. (Id. at 10-11; Doc. No. 19 at 2-3 ¶¶ 4, 6-8.) That arbitration clause states, in pertinent part, the following:

22. Disputes: PA [PayAnywhere] and you each agreement that any dispute or claim arising out of or relating to this Agreement or the Services (each, a ‘Dispute'), shall be settled by following the procedures: . . .
c. IN THE ABSENCE OF RESOLVING THE DISPUTE, AND INSTEAD OF SUING IN COURT, PA AND YOU AGREE TO SETTLE AND RESOLVE FULLY AND FINALLY ALL DISPUTES EXCLUSIVELY BY ARBITRATION . . . . THE AGREEMENT TO HAVE DISPUTES RESOLVED BY ARBITRATION IS MADE WITH THE UNDERSTANDING THAT EACH PARTY IS IRREVOCABLY, KNOWINGLY AND INTELLIGENTLY WAIVING AND RELEASING ITS RIGHT TO LITIGATE DISPUTES THROUGH A COURT AND TO HAVE A JUDGE OR JURY DECIDE DISPUTES.

         (Doc. No. 19 at 36.) Based on this arbitration clause, NAB argues that because McGhee clicked the box stating he accepted the Terms and Conditions, he agreed to binding arbitration. (Doc. No. 13 at 12.) Thus, NAB asserts the Court must compel the parties to arbitrate McGhee's claims. (Id. at 15.) In opposition, McGhee makes two arguments: (1) the User Agreement was a “browsewrap” agreement that cannot be enforced; and (2) even if the User Agreement is enforceable, the claims brought in this case fall outside the arbitration clause's purview. (Doc. No. 23.) Because the Court finds McGhee did not assent to the User Agreement, the Court does not reach McGhee's argument that his claims do not fall within the arbitration clause's scope.

         If the facts of this case were as simple as NAB suggests, it would present a clear-cut case of assent to a modified clickwrap agreement. The Ninth Circuit recently explained the spectrum of ways website operators attempt to establish mutual manifestation of assent.[2]At one end of this spectrum are “‘clickwrap' (or ‘click-through') agreements, in which website users are required to click on an ‘I agree' box after being presented with a list of terms and conditions of use[.]” Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175-76 (9th Cir. 2014). At the other end of the spectrum are “‘browsewrap' agreements, where a website's terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen. . . . Unlike a clickwrap agreement, a browsewrap ...


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