Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-02137/USCOURTS-casd-3_11-cv-02137-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 28:1332 Diversity-Other Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PATRICK MCNAMARA, 

Plaintiff,

v.

ROYAL BANK OF SCOTLAND

GROUP, PLC; et al.,

Defendants.

)

)

)

)

)

)

)

)

)

)

)

Case No. 11-cv-2137-L(WVG)

ORDER:

(1) GRANTING DEFENDANTS’

MOTION TO COMPEL

ARBITRATION [DOC. 41]; AND

(2) DISMISSING WITHOUT

PREJUDICE THIS ACTION

Pending before the Court is Defendants Royal Bank of Scotland Group, PLC (“RBS”),

Citizens Financial Group, Inc., doing business as RBS Citizens N.A. (“Citizens”), and The

Kroger Company (“Kroger”)’s motion to compel Plaintiff Patrick McNamara’s claims for

alleged violations of the Telephone Consumer Protection Act (“TCPA”) to arbitration and to stay

the case pending the outcome of that arbitration. Plaintiff opposes. 1

The Court found this motion suitable for determination on the papers submitted and

without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 45.) For the following reasons, the Court

GRANTS Defendants’ motion to compel arbitration and DISMISSES WITHOUT

PREJUDICE this action in its entirety.

//

 Royal Bank of Scotland Group has since been dismissed from this case. (Doc. 51.) 1

11cv2137

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 1 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

I. BACKGROUND

Plaintiff is a resident of San Diego, California. (Compl. ¶ 2.) RBS is in the business of

issuing consumer credit cards to residents of the United States. (Id. ¶ 3.) Citizens is a wholly

owned subsidiary of RBS. (Id. ¶ 4.) Kroger is the largest retail supermarket chain the United

States. (Id. ¶ 5.) Kroger and RBS conducted a joint business venture to issue credit cards to

consumers under the name “Kroger Personal Finance.” (Id. ¶ 6.) 

On or about July 21, 2007, Plaintiff applied for a credit-card account via telephone with

Citizens under the Kroger Personal Finance program. (Klos Decl. ¶¶ 3–4; McNamara Decl. ¶ 3.) 

After his account was opened, Citizens mailed Plaintiff his credit card along with a Credit Card

Agreement (“Agreement”). (Klos Decl. ¶ 5.) Section 2 of the Agreement provides:

You agree to the terms of this Agreement, as it may be amended from

time to time, when you obtain credit . . . . By using your Account, or

by signing any charge slip drawn on your Account . . . you will be

confirming that you agree to the terms of this Agreement, as amended

from time to time.

(Klos Decl. Ex. A.) Sometime thereafter, under Section 2 of the Agreement, Citizens amended

the Agreement (“Amended Agreement”) with the following arbitration provisions:

UNDER THESE ARBITRATION PROVISIONS, YOU WAIVE

RIGHTS TO LITIGATE CLAIMS IN COURT BEFORE A JUDGE

OR JURY AND WAIVE YOUR RIGHTS TO BRING OR

PARTICIPATE IN CLASS ACTION LAWSUITS. OTHER RIGHTS

YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO NOT

BE AVAILABLE IN ARBITRATION.

Under these Arbitration Provisions, either you or the Bank may elect

that any claim, dispute or controversy of any nature (a “Claim”) under

or related to any Account you have with the Bank (including claims

related to advertisements, other solicitations, any benefits or services

related to your Account, any credit application to the Bank or any

servicing and collection activity and the 1-2-3 REWARDS® Program

including any claims regarding applicability of these Arbitration

Provisions) brought by either you or the Bank against the other or

against Kroger Personal Finance® or any affiliate thereof, their

successors or assigns (each a “party”), be resolved by binding

arbitration under the National Arbitration Forum (“NAF”), under the

Code of Procedure then in effect. If NAF is unable to serve as

arbitrator, the American Arbitration Association will be used in place

of NAF. Any party may elect arbitration at any time, unless a final

judgment on the Claim has been entered by a Court.

An Arbitrator can only consider your Claim as an individual and not as

a representative of others, and you may not bring an action as a private

11cv2137

2

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 2 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

attorney general or join the claims of other people who may have

similar claims (and you may not bring or participate in a class action

claim or serve as a private attorney general. Only a court of competent

jurisdiction may determine the validity and effect of the preceding

sentence.) Any arbitration hearing will take place in the Federal

judicial district where you live, unless you and the Bank agree

otherwise. The award of the arbitrator will be in writing and may be

enforced in any court with jurisdiction over the parties.

. . . . 

THE RESULT OF THESE ARBITRATION PROVISIONS IS THAT,

EXCEPT AS PROVIDED ABOVE, CLAIMS CANNOT BE

LITIGATED IN COURT INCLUDING SOME CLAIMS THAT

COULD HAVE BEEN TRIED BEFORE A JURY AS CLASS

ACTIONS OR AS PRIVATE ATTORNEY GENERAL ACTIONS.

(Klos Decl. ¶ 7 (citing Klos Decl. Ex. A) (capitalization in original).) Section 20 of the

Amended Agreement also includes a choice-of-law provision that indicates that federal and

Connecticut laws govern the Agreement. (Klos Decl. Ex. A.)

Once his account was opened, Plaintiff asked for a balance transfer in the amount of

$10,000.00. (McNamara Decl. ¶ 3.) To the best of his recollection, Plaintiff never used the

account to make purchases and did not use any of the cash-advance checks. (Id. ¶ 6.) Aside

from the initial balance transfer, Plaintiff did not use the credit extended to him. (Id.)

In early September 2009, he received a notice that his credit limit was being reduced due

to a drop in his credit score, even though he had never missed a payment until then. (McNamara

¶ 11.) However, Plaintiff eventually missed his first payment that was due in early October

2009. (Id. ¶ 12.) Even though Plaintiff never gave permission to call his cellular phone,

Citizens began calling his cellular phone regarding his credit card. (Id. ¶¶ 12–13.) Plaintiff

alleges that many of these phone calls used an artificial or pre-recorded voice to leave messages

or give instructions. (Compl. ¶ 8.) In total, Plaintiff received 22 calls to his cellular phone

relating to the credit card. (McNamara Decl. ¶ 16.)

On September 15, 2011, Plaintiff commenced this action in this Court, alleging that

Defendants violated the TCPA, 47 U.S.C. § 227, by negligently, knowingly, and willfully

contacting Plaintiff on his cellular telephone without his express prior consent. Specifically,

Plaintiff asserts two claims under the TCPA: (1) Negligent Violations of the TCPA, and (2)

Knowing or Willful Violations of the TCPA. Defendants now move to compel arbitration of the

11cv2137

3

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 3 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

claims asserted in the complaint and stay of this case pending the outcome of that arbitration. 

Plaintiff opposes.

II. LEGAL STANDARD

The Federal Arbitration Act (“FAA”) governs disputes involving contracts that touch

upon interstate commerce or maritime law. 9 U.S.C. §§ 1, et seq. The FAA preempts state law

where the validity of an arbitration clause is disputed. See Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 24 (1983). It also “embodies a clear federal policy in favor

of arbitration.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999)

“The standard for demonstrating arbitrability is not high.” Simula, 175 F.3d at 719. The

district court can only determine whether an agreement to arbitrate exists, and if so, to enforce it

in accordance with its terms. Id. at 720 (citing Howard Elec. & Mech. v. Briscoe Co., 754 F.2d

847, 849 (9th Cir. 1985)). In other words, the FAA “leaves no place for the exercise of

discretion by a district court, but instead mandates that district courts shall direct the 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).

To determine whether parties have agreed to arbitrate a dispute, courts apply general

state-law principles of contract interpretation. Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042,

1044 (9th Cir. 2009). Once an agreement to arbitrate is found to exist, “[the FAA] establishes

that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be

resolved in favor of arbitration, whether the problem at hand is construction of the contract

language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H.

Cone Mem’l Hosp., 460 U.S. at 24-25; see also Quakenbush v. Allstate Ins. Co., 121 F.3d 1372,

1380 (9th Cir. 1997). Enforcement of an arbitration agreement “should not be denied unless it

can be said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute.” AT&T Tech., Inc. v. Commc’n Workers, 475

U.S. 643, 650 (1986); see also United Food and Comm. Workers Union v. Geldin Meat Co., 13

F.3d 1365, 1368 (9th Cir. 1993) (“Doubts should be resolved in favor of coverage.”). Thus, to

11cv2137

4

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 4 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

determine whether this case must be submitted to arbitration, the Court must limit its inquiry to:

(1) whether a valid agreement to arbitrate exists, and if it does, (2) whether the dispute falls

within the scope of the agreement to arbitrate. See Chiron Corp. v. Ortho Diagnostic Sys., 207

F.3d 1126, 1130 (9th Cir. 2000).

III. DISCUSSION

A. Choice of Law

“In determining the validity of an agreement to arbitrate, federal courts ‘should apply

ordinary state-law principles governing formation of contracts.’” Ferguson v. Countrywide

Credit Indus., Inc., 298 F.3d 778, 782 (9th Cir. 2002) (quoting First Options of Chicago, Inc. v.

Kaplan, 514 U.S. 938, 944 (1995)). However, “[b]efore 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.” Pokorny v. Quixtar, Inc., 601 F.3d 987, 994 (9th Cir. 2010). “It makes this

determination using choice-of-law rules of the forum state.” Id. In this case, the forum state is

California.

When the parties have an agreement that another jurisdiction’s law will govern their

disputes, the Ninth Circuit instructs that the appropriate analysis for the trial court to undertake is

set forth in Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459 (1992), which addresses the

enforceability of contractual choice-of-law provisions. Wash. Mut. Bank, FA v. Superior Court,

24 Cal. 4th 906, 914-15 (2001); see also Pokorny, 601 F.3d at 994. Under Nedlloyd, the court

must first determine either: “(1) whether the chosen state has a substantial relationship to the

parties or their transaction, or (2) whether there is any other reasonable basis for the parties’

choice of law.” 3 Cal. 4th at 466. “If neither of these tests is met, that is the end of the inquiry,

and the court need not enforce the parties’ choice of law.” Id. “If, however, either test is met,

the court must next determine whether California has a ‘materially greater interest than the

chosen state in the determination of the particular issue[.]’” Id. “If California has a materially

greater interest than the chosen state, the choice of law shall not be enforced.” Id.

//

11cv2137

5

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 5 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Section 20 of the Amended Agreement contains a choice-of-law provision that states that

the “Agreement and the use of [the] Account are governed by, and interpreted under, Federal

law . . . including the United States Arbitration Act, and to the extent not governed or preempted

by Federal law, by the laws of the State of Connecticut applicable to contracts made and to be

performed therein without reference to principles of conflict of laws.” (Klos Decl. Ex. B.) 2

Both parties apply Connecticut law when addressing unconscionability, but not when addressing

waiver. Rather, the parties apply California law in their waiver analyses. More importantly,

neither party addresses the choice-of-law issue, and both parties failed to notice the

inconsistency of addressing the unconscionability defense under Connecticut law, but the waiver

defense under California law despite the existence of the choice-of-law provision in the

Agreement. See, e.g., Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1124 n.7 (9th Cir. 2008)

(rejecting the application of a waiver test articulated in a case because, after tracing its lineage,

that case’s test was found not to be based on California law); see also Moses H. Cone Mem’l

Hosp., 460 U.S. at 24-25.

After applying the Nedlloyd choice-of-law analysis, it appears that the choice-of-law

provision in the Agreement is unenforceable. See Nedlloyd, 3 Cal. 4th at 466. Based on the

allegations in the complaint, none of the parties have any connection to Connecticut, and the

transaction in question entirely took place in California. In fact, “Connecticut” literally does not

appear anywhere in the complaint. Also, there is no apparent reasonable basis for the choice of

law based on the allegations in the complaint or anything else provided by the parties. Because

the parties fail to meet either test, the choice-of-law inquiry ends and the court need not enforce

the parties’ choice of law. See id. Though it appears that the Agreement’s choice-of-law

provision may be unenforceable, the Court will nonetheless apply California law to the waiver

analysis and Connecticut law to the unconscionability analysis below, just as the parties do in

their moving papers.

 Neither party provides a legible copy of the Agreement, which forced the Court to refer 2

to the Amended Agreement instead.

11cv2137

6

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 6 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

B. Defendants Did Not Waive Their Right to Arbitrate.

“The right to arbitration, like any other contract right, can be waived.” United States v.

Park Place Assocs., Ltd., 563 F.3d 907, 921 (9th Cir. 2009). “[W]aiver of the right to arbitration

is disfavored because it is a contractual right, and thus any party arguing waiver of arbitration

bears a heavy burden of proof.” Id. (internal quotation marks omitted). “Generally, the

determination of waiver is a question of fact.” Saint Agnes Med. Ctr. v. PacificCare of Cal., 31

Cal. 4th 1187, 1196 (2003).

In determining waiver, a court can consider (1) whether the party’s

actions are inconsistent with the right to arbitrate; (2) whether the

litigation machineryhas been substantiallyinvoked and the parties were

well into preparation of a lawsuit before the party notified the opposing

party of an intent to arbitrate; (3) whether a party either requested

arbitration enforcement close to the trial date or delayed for a long

period before seeking a stay; (4) whether a defendant seeking

arbitration filed a counterclaim without asking for a stay of the

proceedings; (5) whether important intervening steps [e.g., taking

advantage of judicial discovery procedures not available in arbitration]

had taken place; and (6) whether the delay affected, misled, or

prejudiced the opposing party.

Id. (internal quotation marks omitted) (brackets in original); see also Cox, 533 F.3d at 1124.3

The California Supreme Court has stressed the “significance of the presence or absence of

prejudice.” Christensen v. Dewor Devs., 33 Cal. 3d 778, 782 (1983) (quoting Doers v. Golden

Gate Bridge, Highway & Transp. Dist., 23 Cal. 3d 180, 188 (1979)).

In April 2011, Plaintiff filed a complaint against Defendants in the San Diego Superior

Court. (Ankcorn Decl. ¶ 9.) He alleged claims for violations of the Rosenthal Fair Debt

Collection Practices Act and the TCPA, and for invasion of privacy by intrusion upon seclusion. 

(Ankcorn Decl. Ex. B.) Citizens and Kroger filed an answer, and Citizens independently filed a

 The Ninth Circuit noted in Cox that the state-law lineage of a waiver test is an important 3

consideration, suggesting that the basis of the waiver defense should be rooted in the same

state’s laws as the other defenses to arbitration. Cox, 533 F.3d at 1124 n.7. Defendants apply a

different three-factor test for waiver articulated in Park Place. (Defs.’ Reply 1:15–19.) 

However, upon closer inspection, that test is not based on California law, but rather primarily

based on Second Circuit law. See Park Place, 563 F.3d at 921 (citing Fisher v. A.G. Becker

Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)); Shinto Shipping Co., Ltd. v. Fibrex & Shipping

Co., Inc., 572 F.2d 1328, 1330 (9th Cir. 1978) (citing Scherk v. Alberto-Culver Co., 417 U.S.

506, 516-17 (1974) (arising from Illinois); Erving v. Va. Squires Basketball Club, 468 F.2d

1064, 1068 (2d Cir. 1972) (arising from New York)).

11cv2137

7

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 7 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

cross-complaint against Plaintiff seeking, among other things, the sum of the debt Plaintiff

owed. (Ankcorn Decl. Exs. D, E.) Though the parties engaged in discovery, Defendants note

that “no depositions occurred and no dispositive briefs were filed . . . [and] Plaintiff produced

fewer than 60 pages of documents.” (Ankcorn Decl. ¶¶ 22–47; Sullivan Decl. ¶ 8.) The parties

eventually settled the state action, but not before Plaintiff voluntarily dismissed his TCPA claim,

which is now the basis of the action currently before this Court. (Ankcorn Decl. ¶ 58; Sullivan

Decl. ¶ 2–7.) Plaintiff argues that Defendants waived their right to arbitration based on their

actions in the state action with each of the Saint Agnes factors weighing in his favor. 

“Waiver does not occur by mere participation in litigation; there must be ‘judicial

litigation of the merits of arbitrable issues,’ although ‘waiver could occur prior to a judgment on

the merits if prejudice could be demonstrated.’” Keating v. Super. Ct., 31 Cal. 3d 584, 607

(1982) (quoting Doers, 23 Cal. 3d at 188) (internal citations omitted). “Prejudice in the context

of wavier of the right to compel arbitration normally means some impairment of the other party’s

ability to participate in arbitration.” Groom v. Health Net, 82 Cal. App. 4th 1189, 1197 (2000). 

Indeed, the mere expense of responding to motions or other preliminary pleadings filed in court

is not the type of prejudice that bars a belated petition to compel arbitration. See id. Thus,

insofar as Defendants’ participation in defending themselves in the state action initiated by

Plaintiff that has since been settled and dismissed, Plaintiff fails to overcome the heavy burden

of proof needed to show waiver of arbitration. 

4

Moving on to the consequences of the discovery conducted in the state action, “courts

have found prejudice where the petitioning party used the judicial discovery process to gain

information about the other side’s case that could not have been gained in arbitration.” Saint

Agnes, 31 Cal. 4th at 1203. In Berman v. Health Net, 80 Cal. App. 4th 1359 (2000), the court

affirmed a finding of waiver based on the prejudice that the opposing party suffered as a result of

 Plaintiff argues that Defendants acted inconsistently with the right of arbitration based 4

on a statement that they made in a motion to dismiss filed in this Court but was withdrawn three

days later. The Court rejects this argument because it is based on a statement in a motion that

was properly withdraw, thereby also withdrawing that statement.

11cv2137

8

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 8 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

complying with “extensive discovery requests.” Berman, 80 Cal. App. 4th at 1362. However, in

this case, Defendants served the following discovery requests: (1) all correspondence sent by

Plaintiff to Citizens; (2) all documents which Plaintiff contends support any claim raised in the

complaint; (3) all contracts between Plaintiff and Citizens; and (4) all payments made by

Plaintiff to Citizens. (Ankcorn Decl. Ex. H.) Contrary to Plaintiff’s contention, those requests

do not appear to have given Defendants a “full and complete picture” of his case. And the fewer

than 60 pages of documents produced from these requests is hardly extensive. In addition to the

fact that there were no depositions taken, the discovery conducted in the state action was not so

extensive that it prejudices Plaintiff here to the point where he can overcome the heavy burden

of proof needed to show waiver.

Finally, the record before the Court does not show that Defendants requested arbitration

close to the trial date or delayed for a long period of time before seeking a stay. And though 5

Defendants did file a cross-complaint, it was not substantively related to the TCPA claims that

they now seek to arbitrate. (See Ankcorn Decl. Ex. E (alleging causes of action related to the

collection of Plaintiff’s outstanding balance for his credit card).)

In sum, though there is some basis for Plaintiff’s contentions that the Saint Agnes factors

may weigh in his favor, they do not weigh heavily enough to overcome the heavy burden of

proof needed to establish that Defendants waived their right to arbitration. See Saint Agnes, 31

Cal. 4th at 1196; see also Park Place, 563 F.3d at 921.

C. The TCPA Claims Relate to the Agreement.

The “principal purpose” of the FAA is to “ensur[e] that private arbitration agreements are

enforced according to their terms.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior

Univ., 489 U.S. 468, 478 (1989); see also Levine v. Advest, Inc., 244 Conn. 732, 746 (1998). 

 Defendants also substituted counsel in October 2011. (Ankcorn Decl. ¶ 53.) Though 5

neither party addresses that, the substitution of counsel may justify a reasonable delay to pursue

arbitration, especially in light of the fact that the state court continued a hearing two months to

allow the parties to discuss resolution of their dispute following the substitution of counsel. (See

id.)

11cv2137

9

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 9 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Thus, “parties may agree to limit the issues subject to arbitration, to arbitrate according to

specific rules, and to limit with whom a party will arbitrate disputes.” AT&T Mobility LLC v.

Concepcion, — U.S. —, 131 S. Ct. 1740, 1748-49 (2011) (internal citations omitted) (emphasis

in original).

Plaintiff relies heavily on In re Jiffy Lube International, Inc., Text Spam Litigation, 847 F.

Supp. 2d 1253 (S.D. Cal. 2012) (Miller, J.), where the district court “denied a motion to compel

arbitration of a TCPA claim, notwithstanding the ‘incredibly broad’ language of the arbitration

clause at issue.” (Pl.’s Opp’n 12:14–24.) In Jiffy Lube, the plaintiffs filed a class-action

complaint alleging that they received unauthorized text messages offering discount Jiffy Lube

services in violation of the TCPA. Jiffy Lube, 847 F. Supp. 2d at 1255-56. The arbitration

agreement at issue was allegedly signed by a plaintiff when he visited one of the defendant’s

store locations to receive an oil change. Id. at 1262-63. The court noted that the language of the

arbitration agreement was “incredibly broad” because “[i]t purports to apply to ‘any and all

disputes’ between [the parties], and is not limited to disputes arising from or related to the

transaction or contract at issue.” Id. at 1262. The court concluded that “a suit . . . regarding a

tort action arising from a completely separate incident could not be forced into arbitration—such

a clause would clearly be unconscionable.” Id. at 1263. To elaborate, the court further

explained that “[t]hough it seems likely that [the plaintiff] provided his telephone number when

signing the contract, it is unclear that later use of that number to commit a tort can be said to

relate to the contract . . . the fact that the text message offered membership in a club that would

provide discounts on an oil change does not establish that the text message was related to the

contract governing [the plaintiff’s] oil change.” Id.

The arbitration agreement at issue here is not as broad as the one in Jiffy Lube. 

Arbitration here is limited to “any claim, dispute or controversy of any nature . . . under or

related to any Account [Plaintiff has] with the Bank.” (Klos Decl. Ex. A (emphasis added).) 

The agreement even explicitly covers claims related to “any servicing and collection activity.” 

(Id.) More broadly, Section 29 of the Agreement also discusses consent regarding telephone

calls. Without a doubt, the phone calls to Plaintiff were related to “collection activity,” an issue

11cv2137

10

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 10 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

explicitly contemplated by the Agreement. Plaintiff himself concedes that the phone calls he

received were related to the credit card. (McNamara Decl. ¶ 16 (“I received 22 calls on my cell

phone relating to the Ralphs Rewards card.”).) Therefore, Plaintiff’s TCPA claims relate to his

Agreement with Defendants, and are consequently subject to arbitration. See Concepcion, 131

S. Ct. at 1748-49; see also Moses H. Cone Mem’l Hosp., 460 U.S. at 24-25 (“any doubts

concerning the scope of arbitrable issues should be resolved in favor of arbitration”); Knutson v.

Sirius XM Radio Inc., No. 12cv418, 2012 WL 1965337, at *8 (S.D. Cal. May 31, 2012)

(Battaglia, J.) (compelling arbitration for TCPA claims).

D. Plaintiff Fails to Show that the Arbitration Agreement Is Unconscionable.6

“It is clear that questions of contractual validity relating to the unconscionability of the

underlying arbitration agreement must be resolved first, as a matter of state law, before

compelling arbitration pursuant to the FAA.” Cap Gemini Ernst & Young, U.S., LLC v. Nackel,

346 F.3d 360, 365 (2d Cir. 2003). “Like other contracts . . . [arbitration agreements] may be

invalidated by ‘generally applicable contract defenses, such as fraud, duress, or

unconscionability.’” Rent-A-Center, West, Inc. v. Jackson, — U.S. —, 130 S. Ct. 2772, 2776

(2010).

“The classic definition of an unconscionable contract is one which no man in his senses,

not under delusion, would make, on the one hand, and which no fair and honest man would

accept, on the other.” Smith v. Mitsubishi Motors Credit of Am., Inc., 247 Conn. 342, 349

(1998). “Under Connecticut law, the party that raises unconscionability as a defense to the

enforcement of any contract typically has the burden of showing that the contract is both

procedurally and substantively unconscionable.” D’Antuono v. Serv. Rd. Corp., 789 F. Supp. 2d

308, 327 (D. Conn. 2011) (citing Bender v. Bender, 292 Conn. 696, 732 (2009)). “Substantive

 Plaintiff also argues that the arbitration agreement is illusory because it permits

6

Defendants to unilaterally modify the terms at any time. (Pl.’s Opp’n 18:19–20:26.) However,

he fails to cite any binding legal authority in doing so. (See id.) Plaintiff does not cite a single

case from California or Connecticut at the state or federal level. Thus, the Court rejects this

argument.

11cv2137

11

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 11 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

unconscionability focuses on the ‘content of the contract,’ as distinguished from procedural

unconscionability, which focuses on the ‘process by which the allegedly offensive terms found

their way into the agreement.’” Cheshire Mortg. Serv., Inc. v. Montes, 223 Conn. 80, 87 n.14

(1992). “In other words, the party usually must show both that there was an absence of

meaningful choice on the part of that party, and that the terms of the agreement were

unreasonably favorable toward the other party.” D’Antuono, 789 F. Supp. 2d at 327. “In some

rare cases, a contractual provision may be so outrageous as to warrant a court’s refusal to

enforce it based on substantive unconscionability alone.” Id. (citing Hottle v. BDO Seidman

LLP, 268 Conn. 694, 720-21 (2004)).

1. Procedural Unconscionability

“[T]he Connecticut Supreme Court has soundly rejected the notion that provisions in

form contracts are procedurally unconscionable whenever the party with greater bargaining

power fails to direct the other party’s attention to important provisions.” D’Antuono, 789 F.

Supp. 2d at 329 (citing Smith, 247 Conn. at 352). Moreover, there is no rule in Connecticut that

“take it or leave it” contracts are per se procedurally unconscionable. Id.

Here, Plaintiff argues that the arbitration agreement is procedurally unconscionable for

three reasons: (1) the terms of the agreement were only sent to Plaintiff after the credit card had

been extended and a balance transfer was completed; (2) the arbitration section is “on the back

of a long sheet of paper, in a two-column maze of legal jargon printed at less than 7 point type,”

where Defendants made no special effort to call Plaintiff’s attention to the arbitration section;

and (3) the agreement was offered on a “take it or leave it” basis, with no option to negotiate

terms or opt out of the arbitration provision. (Pl.’s Opp’n 21:19–22:7.) 

It is unclear what the significance of Plaintiff’s first reason is in the context of procedural

unconscionability. Plaintiff fails to explain how or why the first reason supports a finding of

procedural unconscionability. With respect to the remaining reasons, Connecticut law is clear

that those grounds are not sufficient to find procedural unconscionability. See D’Antuono, 789

F. Supp. 2d at 329; Smith, 247 Conn. at 352. On a final note, Plaintiff fails to provide any law to

11cv2137

12

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 12 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

support his contention that any of these reasons serve as a sufficient basis to show that the

arbitration agreement is procedurally unconscionable. (See Pl.’s Opp’n 21:19–22:7.)

Therefore, the arbitration agreement as issue here is not procedurally unconscionable

under Connecticut law. See D’Antuono, 789 F. Supp. 2d at 329; Smith, 247 Conn. at 349.

2. Substantive Unconscionability

Plaintiff fails to show that the arbitration clause is substantively unconscionable under

Connecticut law. Though it may very well be true that Citizens is entitled to unilateral revision

without giving notice, there is no opt-out provision, and the arbitration agreement lacks

procedural guidance regarding discovery, Plaintiff fails to cite any cases applying Connecticut

law that show any of these reasons amount to substantive unconscionability. Rather, without

much explanation, Plaintiff concludes that “[t]hese terms are so outrageously one-sided that the

contract may be held to be unconscionable on the substance of the terms alone, as Connecticut

law provides.” (Pl.’s Opp’n 22:24–26.) Though Plaintiff cites one case from the Connecticut

Supreme Court, Hottle, that case considered whether an arbitration agreement was substantively

unconscionable under New York contract law. See Hottle, 268 Conn. at 719-21. Consequently,

insofar as its guidance on the unconscionability defense, Hottle does not apply here.

Looking to the merits of Plaintiff’s argument, Plaintiff fails to show that he entered into

an agreement “which no man in his senses, not under delusion, would make . . . and which no

fair and honest man would accept.” See Smith, 247 Conn. at 349. There is also nothing before

the Court that shows the arbitration agreement is so outrageous as to warrant this Court’s refusal

to enforce it based on substantive unconscionability alone. See D’Antuono, 789 F. Supp. 2d at

327. In light of Connecticut’s policy favoring arbitration, the Court cannot conclude that the

arbitration agreement is substantively unconscionable under Connecticut law. See Waterbury

Teachers Ass’n v. City of Waterbury, 164 Conn. 426, 434 (1973).

//

//

//

11cv2137

13

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 13 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

E. Kroger Can Compel Arbitration.

“[U]nder both federal and California decisional authority, a nonsignatory defendant may

invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes

of action against the nonsignatory are ‘intimately founded in and intertwined’ with the

underlying contract obligations.” Boucher v. Alliance Title Co., Inc., 127 Cal. App. 4th 262, 271

(2005); see also Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006); Newton v. Am. Debt

Servs., 854 F. Supp. 2d 712, 730-31 (N.D. Cal. 2012). Here, the arbitration provision in the

Agreement contemplated the members of the Kroger Personal Finance joint venture—Kroger

and RBS—as parties that may resolve disputes in binding arbitration. (See Klos Decl. Ex. A.) 

Therefore, even though Kroger is a nonsignatory to the Agreement, it may bring a motion to

compel arbitration under that clause. See Boucher, 127 Cal. App. 4th at 271.

Plaintiff also challenges RBS’ authority to move to compel arbitration. Under the

Agreement, RBS’ status is identical to Kroger’s, thus RBS would also have been able to bring a

motion to compel arbitration. However, because RBS has since been dismissed from this action,

its authority to move to compel arbitration is moot.

IV. CONCLUSION & ORDER

In light of the foregoing, the Court GRANTS Defendants’ motion to compel arbitration

for all claims asserted in the complaint (Doc. 41), and DISMISSES WITHOUT PREJUDICE

this action in its entirety whereby the parties may re-file should further proceedings be necessary

following the completion of arbitration.

IT IS SO ORDERED.

DATED: November 5, 2012

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. WILLIAM V. GALLO

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

11cv2137

14

Case 3:11-cv-02137-L-WVG Document 59 Filed 11/05/12 Page 14 of 14