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Plaintiff Cannot Dodge Arbitration Agreement Where He Used Credit Card After Receiving Terms

Enforcing an arbitration clause is not always easy. For instance, a court recently denied the defendant’s motion to compel arbitration where the plaintiff swore he never visited the defendant’s website. While the Ninth Circuit ended up reversing that court’s order and remanding the case for a jury trial on the issue of arbitrability, the case is still not in arbitration over one year later.

Alas, a recent decision out of the Southern District of California is not so messy. Hartranft v. Encore Capital Group, 3:18-cv-01187-BEN-RBB, 2021 U.S. Dist. LEXIS 113909 (S.D. Cal. June 16, 2021). In that case, Mr. Hartranft opened a big-box-store credit card, and at some point the store transferred the credit card (and Mr. Hartranft’s balance) to Citibank. Citibank sent him a formal transfer notice. The notice included a section entitled ARBITRATION, which informed Mr. Hartranft that any claims between him and the bank would be subject to arbitration.

The warning is a nice example of communicating lawyer-speak in plain English:

You or we may arbitrate any claim, dispute or controversy between you and us arising out of or relating to your Accounting, a previous related Account, or our relationship.

If arbitration is chosen by any party, neither you nor we will have the right to litigate that Claim in Court or have a jury trial on that claim.

The notice included a disclaimer explaining the “Rules for rejecting this arbitration provision.”  It gave Mr. Hartranft until a date-certain to reject arbitration. The agreement also included a class action waiver prohibiting Mr. Hartranft from participating in a class action or acting as a class representative.

Encore Capital Group (who stood in the shoes of Citibank through an assignment) made calls to collect Mr. Hartranft’s outstanding credit card balance. Mr. Hartranft sued, alleging TCPA violations for the calls he received. And Encore moved to enforce the agreement’s arbitration clause.

Mr. Hartranft took the “kitchen-sink” approach to opposing arbitration, arguing: (1) The credit agreement was not admissible because it “lacked foundation”; (2) Encore did not sign the agreement; (3) Mr. Hartranft himself never signed the agreement; (4) the card agreement is “unconscionable”; and (5) Encore waived the right to arbitrate through some pre-motion litigation.

The Court rejected each argument. It held: that (1) Encore laid a proper foundation for the agreement; that (2 & 3) the agreement was enforceable under the controlling South Dakota law, and that Mr. Hartranft consented to the credit agreement by continuing to use it after receiving it; that (4) the agreement was not “unconscionable,” noting that numerous courts have upheld the same agreement; and that (5) that Encore did not waive its right to arbitrate through some pre-motion litigation. The Court concluded that the claims fell within the scope of the agreement, struck the class allegations, and dismissed the case.

This is a good example of how to draft and enforce an arbitration class and class action waiver.  It’s also a good reminder of why such clauses are useful for mitigating the risk of TCPA claims.

© Copyright 2023 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 173

About this Author

Brent Owen Energy Litigation Attorney Squire Patton Boggs Denver, CO
Senior Associate

Brent Owen represents energy, mining, construction, consumer services, and political clients in high-stakes litigation at trial and on appeal. Brent’s college experience as a full-scholarship Division I offensive lineman allows him to appreciate the value of consistent hard work in achieving a favorable result.

His experience includes all aspects of litigation, including trials in both state and federal courts before judges and juries and in arbitration tribunals, including the International Chamber of Commerce and the American Arbitration Association. A former law clerk to the...