Title: MBNA America Bank, N.A., v. John L. McGoldrick Arbitration award dispute

State: idaho

Issuer: Idaho Supreme Court (civil)

Document:

IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket No. 34055 
 
MBNA AMERICA BANK, N.A., 
 
Plaintiff-Respondent, 
 
v. 
 
JOHN L. McGOLDRICK, 
 
Defendant-Appellant. 
 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
 
Boise, June 2008 Term 
 
2008 Opinion No.  93 
 
Filed: July 1, 2008 
 
Stephen W. Kenyon, Clerk 
 
 
 
Appeal from the District Court of the Fourth Judicial District of the State of 
Idaho, in and for Valley County.  The Hon. George D. Carey, District Judge. 
 
The judgment of the district court is reversed. 
 
Belnap, Curtis & Williams, PLLC, Boise, for appellant.  R. Wade Curtis argued. 
 
Wilson & McColl, Boise, for respondent.  Alec T. Pechota argued. 
 
 
 
EISMANN, Chief Justice. 
 
This is an appeal from a judgment confirming an arbitration award.  Because the plaintiff 
failed to prove that the parties had entered into an agreement to arbitrate, we reverse the 
judgment. 
 
I.  FACTS AND PROCEDURAL HISTORY 
 
John McGoldrick opened a credit card account with MBNA America Bank, N.A., 
(MBNA) on July 8, 1994.  After a billing dispute arose, MBNA submitted its claim against 
McGoldrick to arbitration.  He filed a written objection, contending that there was no valid 
arbitration agreement between him and MBNA and that he would not submit to arbitration.  
MBNA proceeded with the arbitration, and on February 5, 2003, it obtained an award against 
McGoldrick in the sum of $22,889.57. 
 
On December 10, 2003, MBNA filed this action for confirmation of the arbitration 
award.  It contemporaneously moved to have the arbitration award confirmed. McGoldrick 
appeared pro se, raising various defenses and asking to have the arbitration award vacated.  
McGoldrick also filed an affidavit in opposition, asserting that there was no agreement to 
arbitrate.  The district court treated the motion for confirmation as a motion for summary 
judgment and denied it on the ground that there were genuine issues of material fact. 
 
On April 19, 2004, McGoldrick moved to vacate the arbitration award.  MBNA 
responded with an affidavit of its counsel, who attached to his affidavit copies of an MBNA 
credit card agreement and documents related to the arbitration.  It then moved again to confirm 
the award.  The district court treated the motions as cross motions for summary judgment and 
denied them on the ground that there was a genuine issue of material fact as to whether there was 
an agreement to arbitrate. 
On March 1, 2005, MBNA again moved to confirm the arbitration award.  It supported 
this motion with the affidavit of one of its assistant vice presidents Ken Ballinger.  He averred 
that attached to his affidavit was a true and correct copy of McGoldrick’s cardholder agreement.  
The copy of the attached credit card agreement did not contain an agreement to arbitrate, but it 
did include a provision permitting MBNA to amend the agreement.  Ballinger also stated that on 
or about December 20, 1999, MBNA mailed to McGoldrick and other MBNA cardholders 
written notification that MBNA was amending the cardholder agreements to add a mandatory 
arbitration provision; that the notification informed the cardholders that they could opt out by 
providing MBNA with written notification by January 25, 2000; and that MBNA did not receive 
timely notification from McGoldrick that he elected to opt out of the arbitration provision.  
McGoldrick responded by again moving to vacate the arbitration award.  He supported his 
motion with an affidavit in which he stated that he had never received notice of the amendment 
to add an arbitration clause to his cardholder agreement.  The district court again treated the 
motions as motions for summary judgment and held that the competing affidavits created a 
genuine issue of material fact as to whether there was a valid arbitration agreement between 
MBNA and McGoldrick. 
The matter was tried to the district court on June 8, 2006.  At the beginning of the trial, 
the district court announced that the factual matters to be tried were whether there was an 
agreement to arbitrate and, if so, whether the arbitration provision was procedurally 
 
2
unconscionable.  After the trial, the district court issued written findings of fact and conclusions 
of law.  It found that McGoldrick’s original cardholder agreement included a provision giving 
MBNA the right to amend the agreement under certain circumstances; that in late 1999 MBNA 
mailed McGoldrick and other cardholders written notifications that it was amending their 
cardholder agreements to add a mandatory arbitration provision; that MBNA allowed them to 
reject the amendments by giving written notification by a specified time; that McGoldrick 
received the written notification of the amendment in the mail and did not give written notice 
that he was rejecting the amendment.  The court confirmed the arbitration award.  It entered 
judgment in favor of MBNA against McGoldrick in the sum of $42,046.36, which included the 
arbitration award, pre-judgment interest, court costs and attorney fees.  McGoldrick timely 
appealed.  After he filed the appeal, McGoldrick retained counsel to represent him on the appeal. 
 
II.  ISSUES ON APPEAL 
1. 
Is the district court’s finding that there was an agreement to arbitrate supported by  
 
substantial and competent evidence? 
2. 
Is either party entitled to an award of attorney fees on appeal? 
 
III.  ANALYSIS 
A.  Is the District Court’s Finding that There Was an Agreement to Arbitrate Supported 
by Substantial and Competent Evidence? 
 
The original cardholder agreement between McGoldrick and MBNA did not include an 
arbitration provision.  At the commencement of the trial, the district court stated that the factual 
issues to be tried were “whether there was an agreement to arbitrate, and alternatively, whether 
the arbitration provision, if any, was procedurally unconscionable.”  After the trial, the court 
found that MBNA amended McGoldrick’s cardholder agreement in December 1999 when it 
mailed him written notification that it was adding a mandatory arbitration provision to his 
cardholder agreement and he failed to timely reject the amendment.  McGoldrick contends that 
the court’s finding is not supported by substantial and competent evidence because MBNA did 
not offer his original cardholder agreement into evidence. 
 
 “A trial court’s findings of fact will not be set aside on appeal unless they are clearly 
erroneous.  . . .  On appeal, this Court examines the record to see if challenged findings of fact 
 
3
are supported by substantial and competent evidence.”  Thomas v. Madsen, 142 Idaho 635, 637-
38, 132 P.3d 392, 394-95 (2006) (citation omitted). 
 
In his opening brief, McGoldrick argued, among other things, that without the original 
cardholder agreement there was no evidence of “how to give notice of the amendment and what 
choice of law controls the contract.”  He also stated that “MBNA must prove the predicate that 
the contract being amended has a provision authorizing amendment, the manner and 
circumstances for such amendment and how notice of the amendment is to be given.” 
 
MBNA responded by asserting that its right to amend the cardholder agreement had been 
established pursuant to Rule 56(d) of the Idaho Rules of Civil Procedure.1  In its order denying 
MBNA’s third motion to confirm the arbitration award, which the district court treated as a 
motion for summary judgment, the court listed “facts [that] are now in the record.”  The list 
included, “The agreement, which was on an MBNA-prepared form not subject to negotiation, did 
not include an arbitration provision, but it did provide MBNA with the right to change the 
agreement under certain circumstances.”  Rule 56(d) provides that if a motion for summary 
judgment is denied, the trial court can “make an order specifying the facts that appear without 
substantial controversy . . . .  Upon the trial of the action the facts so specified shall be deemed 
established, and the trial shall be conducted accordingly.”  MBNA argues that under Rule 56(d) 
it was not required to offer evidence at trial regarding the fact that McGoldrick’s cardholder 
agreement provided that MBNA could amend it. 
 
In his reply brief, McGoldrick countered by arguing that even if MBNA had the right to 
change his cardholder agreement “under certain circumstances,” the court “did not specify under 
what circumstances MBNA could amend the original agreement between the parties.”  
Therefore, MBNA was required to prove the provisions in the original agreement “by which an 
                                                 
1 That Rule provides: 
 
If on motion under this rule judgment is not rendered upon the whole case or for all the 
relief asked and a trial is necessary, the court at the hearing of the motion, by examining the 
pleadings and the evidence before it and by interrogating counsel, shall if practicable ascertain 
what material facts exist without substantial controversy and what material facts are actually and 
in good faith controverted.  It shall thereupon make an order specifying the facts that appear 
without substantial controversy, including the extent to which the amount of damages or other 
relief is not in controversy, and directing such further proceedings in the action as are just.  Upon 
the trial of the action the facts so specified shall be deemed established, and the trial shall be 
conducted accordingly. 
 
4
amendment could be effectuated and under what circumstances.  MBNA had to prove that it 
properly amended the agreement with an arbitration clause.” 
 
The district court did not refer to Rule 56(d) in its order denying MBNA’s third motion 
for confirmation, which the court treated as a motion for summary judgment, nor did it state that 
the facts were deemed established and need not be proven at trial.2  Assuming that the district 
court’s list of facts “in the record” constituted a list of established facts under Rule 56(d), the 
court merely found that McGoldrick’s cardholder agreement could be amended “under certain 
circumstances.”  The court did not specify what those circumstances were.  At trial, MBNA did 
not offer any evidence as to what those circumstances were, nor did its witness testify that the 
procedures it followed were in accordance with the cardholder agreement or applicable law.  
Absent evidence as to what those circumstances were or that it complied with the applicable 
requirements for amendment, MBNA did not prove that it amended the cardholder agreement. 
 
MBNA argues that “the terms of the original agreement, including the right to amend, 
were . . . found by the district court on February 21, 2006.”  This assertion is incorrect.  On 
March 1, 2005, MBNA filed its third motion to confirm the arbitration award, and it supported 
the motion with the Ballinger affidavit.  In his affidavit, Ballinger stated that a true and correct 
copy of the cardholder agreement for McGoldrick’s account was attached to the affidavit as 
Exhibit 1.  Although there was no “Exhibit 1” attached to the affidavit, there was an “Exhibit A” 
consisting of two documents.  The first was entitled “Credit Card Agreement Additional Terms 
and Conditions,” and the second was entitled “Credit Card Agreement.”  In its order denying 
summary judgment, the district court did not state that those documents constituted the terms of 
McGoldrick’s cardholder agreement.  Indeed, the document entitled “Credit Card Agreement 
Additional Terms and Conditions” included an arbitration provision.  Had the court found that 
Exhibit A to Ballinger’s affidavit was a true copy of McGoldrick’s cardholder agreement, it 
would not have denied the motion for confirmation on the ground that there was an issue of fact 
as to whether there was “a valid arbitration agreement between the plaintiff and the defendant.” 
 
MBNA contends that during argument on its third motion for confirmation of the 
arbitration award, McGoldrick admitted that Exhibit A to the Ballinger affidavit was a true and 
correct copy of the original cardholder agreement.  During that argument, McGoldrick stated: 
                                                 
2 To avoid confusion, a trial court should clearly state that it is deeming the specified facts as established pursuant to 
Rule 56(d).  
 
5
“Plaintiff has submitted a copy of the parties’ original agreement, marked as Exhibit A.  This 
version is the only agreement recognized by defendant, and it contains no arbitration clause.”  
The only facts deemed established under Rule 56(d) are those that the trial court specifies in its 
order as being without substantial controversy.  The Rule states, “Upon the trial of the action the 
facts so specified shall be deemed established, and the trial shall be conducted accordingly.”  
(Emphasis added.)  Facts that could have been, but were not, so specified are not deemed 
established. 
 
Next, MBNA contends that McGoldrick offered the Ballinger affidavit into evidence 
during the trial.  He questioned MBNA’s witness about an exhibit to that affidavit, but he did not 
offer either the affidavit or the exhibit into evidence. 
 
Finally, MBNA points to McGoldrick’s cross-examination of its witness during which 
the witness stated that the verbiage of MBNA’s several cardholder agreements is the same.  The 
following exchange occurred: 
 
Q.  (BY MR. MCGOLDRICK)  Is that [an exhibit to Ballinger’s affidavit] 
a copy of the original agreement containing the same terms and conditions that 
were in effect at the time the account was opened? 
 
A.  This is a copy of one of several MBNA credit card agreements.  This 
particular one does not – I don’t see it containing the arbitration clause, so this 
may very well be the one that would have been sent to you back in July of 1994 
when you opened the account. 
 
Not all of the agreements look the same.  The verbiage from agreement to 
agreement is consistent, but the appearance of the agreements may vary 
depending upon the particular affinity group that the card is associated with. 
 
Q.    Obviously, the terms and conditions can’t be the same if there is 
changes made.  Do you have any idea how many revisions have been made to this 
agreement since 1994? 
 
A.  I do not. 
 
 
MBNA argues that the circumstances under which it could amend McGoldrick’s original 
cardholder agreement were established because its witness testified that the verbiage in the 
various MBNA credit card agreements is consistent.  That testimony does not establish the 
circumstances under which MBNA could amend the agreements.  Testimony that “the verbiage 
from agreement to agreement is consistent” does not by itself establish what the verbiage in any 
agreement is.  MBNA did not offer the verbiage of any cardholder agreement into evidence at 
the trial. 
 
6
 
In finding that MBNA had amended McGoldrick’s cardholder agreement, the district 
court also relied upon various statutes enacted in the state of Delaware.  There was no evidence 
presented during the trial, however, showing that Delaware law applied to this case.   
 
The district court found that McGoldrick’s original cardholder agreement “did not have 
an arbitration provision, but gave MBNA the right to change the agreement under certain 
circumstances.”  There was no evidence admitted during the trial as to what those circumstances 
were or as to whether MBNA complied with them.  Absent that evidence, MBNA failed to prove 
that it amended McGoldrick’s original cardholder agreement to add a provision requiring 
mandatory arbitration, and it therefore failed to prove that there was an agreement to arbitrate.  
The order of the district court confirming the arbitration award is reversed.  Because of our 
resolution of this issue, we will not address the remaining issues that McGoldrick raised to 
challenge the confirmation of the arbitration award.  
 
B.  Is Either Party Entitled to an Award of Attorney Fees on Appeal? 
 
MBNA requests an award of attorney fees on appeal pursuant to Idaho Code §§ 12-
120(3) and 12-121.  Since it is not the prevailing party on appeal, it is not entitled to an award of 
attorney fees under either of those statutes. 
 
McGoldrick requests an award of attorney fees on appeal “pursuant to Idaho Code 
Sections 12-120 and 12-121.”  “If the party is claiming that a statute provides authority for an 
award of attorney fees, the party must cite to the statute and, if applicable, the specific subsection 
of the statute upon which the party relies.”  Bream v. Benscoter, 139 Idaho 364, 369, 79 P.3d 
723, 728 (2003).  Because Idaho Code § 12-120 has differing subsections, merely citing the 
statute without specifying the portion of the statute upon which the claim for attorney fees is 
based is not sufficient.  Appel v. LePage, 135 Idaho 133, 138, 15 P.3d 1141, 1146 (2000).  
Because McGoldrick has not specified the portion of Section 12-120 upon which he relies, he 
cannot recover attorney fees under that statute, assuming it is applicable. 
 
Attorney fees can be awarded on appeal under Idaho Code § 12-121 only if the appeal 
was brought or defended frivolously, unreasonably, or without foundation.  Cole v. Esquibel, ___ 
Idaho ___, ___, 182 P.3d 709, 713 (2008).  We do not find that MBNA defended this appeal 
frivolously, unreasonably, or without foundation. 
 
 
7
 
8
IV.  CONCLUSION 
 
The judgment is reversed and this case is remanded with instructions to dismiss the 
complaint with prejudice.  We award costs on appeal, but not attorney fees, to the appellant. 
 
 
Justices BURDICK, J. JONES, W. JONES and HORTON CONCUR.