Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00785/USCOURTS-caed-2_07-cv-00785-3/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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 The California State Bar website lists plaintiff as an inactive member of the state bar. 

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http://members.calbar.ca.gov/search/member_search.aspx?ms=Gerber%2C+Joseph.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

JOSEPH E. GERBER, 

an individual,

Plaintiff, No. CIV S-07-0785 WBS JFM PS

vs.

CITIGROUP, INC., etc., et al.,

Defendants. FINDINGS AND RECOMMENDATIONS

 /

Plaintiff is proceeding pro se with a complaint challenging the handling of his 1

credit card account alleging, inter alia, violation of the Fair Debt Collection Practices Act

(FDCPA), 15 U.S.C. § 1692 et seq. This case was referred to the undersigned pursuant to Local

Rule 72-302(c)(21). Pending before the court is a motion to compel arbitration and stay action

filed on June 21, 2007, by defendant, Citibank (South Dakota), N.A. Plaintiff has filed an

opposition.

In the instant motion, defendant Citibank seeks to compel arbitration pursuant to a

binding arbitration agreement allegedly contained in plaintiff’s credit card agreement. Defendant

argues the credit card agreement, dated 2000, resulted in plaintiff’s original debt, and requires

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plaintiff to submit the instant action to arbitration based on South Dakota law. (Manfredi Decl.,

Ex. 1.) 

Because the agreement between plaintiff and defendant is a “contract[] evidencing

transactions involving commerce,” the agreement is subject to the Federal Arbitration Act

(“FAA”). 9 U.S.C. § 2; Chiron Corp. v. Ortho Diagnostic Sys., 207 F.3d 1126, 1130 (9th Cir.

2000). The FAA confers on the parties involved the right to obtain an order directing that

arbitration proceed in the manner provided for in a contract between them. 9 U.S.C. § 4; Volt

Info. Sciences, Inc. v. Bd. of Trustees, 489 U.S. 468, 474-75 (1989); Mastrobuono v. Shearson

Lehman Hutton, Inc., 514 U.S. 52, 58 (1995). 

The threshold inquiry here is whether the parties agreed to arbitrate the disputes at

issue. Leicht v. Bateman Eichler, Hill Richards, Inc., 848 F.2d 130, 132 (9th Cir. 1988);

Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). “Under § 4

of the FAA, a district court must issue an order compelling arbitration if the following twopronged test is satisfied: (1) a valid agreement to arbitrate exists, and (2) that agreement

encompasses the dispute at issue.” United Computer Systems, Inc. v. AT&T Corp., 298 F.3d

756, 766 (9th Cir. 2002). If the response is affirmative on both counts, then the FAA requires the

court to enforce the arbitration agreement in accordance with its terms. Chiron, 207 F.3d at

1130; Volt, 489 U.S. at 474-75 (FAA only confers “right to obtain an order directing that

‘arbitration proceed in the manner provided for in [the parties’] agreement.’” (emphasis in

original)). 

To the extent there are ambiguities in contract terms, the common law rule of

construction against the drafter applies. Mastrobuono, 514 U.S. at 62 (1995). Particular

ambiguities as to the scope of arbitration must be construed in favor of arbitration. Volt, 489

U.S. at 475; see also Moses H. Cone Memorial Hospital v. Mercury Construction Co., 460 U.S.

1, 24-25 (1983). Moreover, a document “should be read to give effect to all of its provisions and

to render them consistent with each other.” Mastrobuono, 514 U.S. at 63.

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In the instant action, it is undisputed that Universal Bank, N.A. (“Universal

Bank”) issued plaintiff a credit card in 1995. Defendant Citibank merged with Universal Bank in

January of 2002 and became the issuer of plaintiff’s account. (Manifredi Decl., at 2-3.)

Defendant Citibank has provided what it describes as an exemplary Cardmember

Agreement. (Manifredi Decl., Ex. 1.) The first page of the exemplar is entitled “Important

Notice of Change in Terms,” and states that “[a] number of changes are being made to the terms

of your Cardmember Agreement. This page summarizes certain of those changes, whose titles

are listed below.” (Id.) Page 3 contains a subheading entitled “Cardmember Agreement.” (Id. at

3.) The exemplar contains a copyright date of 2000 (id. at 13), but is imprinted with “UCITGEN 12/99" on page 14. Defendant Citibank contends the agreement was effective in 1999;

plaintiff argues it could not have been effective prior to the copyright date. In any event, plaintiff

denies having received the exemplar document.

No party has provided the original agreement from 1995, nor an exemplar

agreement effective in 1995 when plaintiff’s credit card was first issued by Universal Bank. 

While defendant argues that plaintiff was bound by subsequent change in terms notices mailed to

him, this court is unable to evaluate the change in terms without benefit of the initial agreement. 

Defendant has provided no evidence that the initial agreement contained a provision that plaintiff

would be subject to change in terms notices mailed to plaintiff; nor has defendant provided any

evidence that the 1995 agreement bound this court to follow South Dakota law. Indeed, a close

reading of the exemplar document reflects that “[t]he terms and enforcement of this Agreement

shall be governed by federal law and the law of Georgia, where we are located.” (Manfredi

Decl., Ex. 1, at 13.) But there is no evidence before the court that Universal Bank was located in

Georgia in 1995, when the initial agreement issued, or that the 1995 initial agreement also

provided that Georgia law would apply. Accordingly, this court will apply California law. 

Under California law, on these facts, plaintiff is not bound to change in terms

notices mailed to his home address. Badie v. Bank of America, 67 Cal.App.4th 779, 79

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Cal.Rptr.2d 273 (1998) (where initial original agreement was ambiguous as to whether it could

be unilaterally amended to include an arbitration clause, bank could not amend the terms of

credit card account agreements by adding an arbitration clause, despite provisions in the account

agreements authorizing the bank to change terms of the accounts). Here, it is clear the initial

agreement did not contain an arbitration requirement or Universal Bank would not have

attempted to modify the initial agreement to include the arbitration clause. (Manifredi Decl., Ex.

2.) In addition, there is no evidence that the original agreement allowed unilateral amendment by

Universal Bank or allowed Universal to add terms by sending plaintiff a notice to which he must

respond in order to avoid having the new term added. 

The exemplar document includes paragraphs that state:

Changing the Agreement:

We can change the Agreement, including all fees and the annual

percentage rate, at any time. . . . Your decision to keep your

account open after any charge will constitute your agreement to the

change. 

(Manifredi Decl., Ex. 1, at 12.) 

The terms set forth below in the revised Cardmember Agreement

will become effective automatically unless you notify us on or

before February 29, 2000 that you do not accept these terms. If

you do not accept these terms, then your account will be closed,

and you will be obligated to pay off any remaining balances in the

same manner and under the same terms that were in effect prior to

these changes. You may notify us of your non-acceptance by

calling 1-800-796-3689; please have your account number

available.

(Manifredi Decl., Ex. 1, at 2.) While these paragraphs are not expressly referenced in the

“Important Notice of Change in Terms” section, the precatory language contained in the initial

notice states “certain of those changes” were summarized, suggesting changes may have been

included but not specifically referenced in the notice section. Again, without benefit of the 1995

initial agreement, the court cannot discern whether these important clauses were in effect in 1995

such that the mailed notice of change in terms was sufficient to change the initial agreement

terms, or to render effective the subsequent notice of change to require mandatory arbitration.

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Because defendant has failed to demonstrate that plaintiff was bound to change in

terms notices mailed to his home address under California law, Citibank has failed to

demonstrate that a valid agreement to arbitrate exists. Although the FAA incorporates a strong

federal policy of enforcing arbitration agreements, Armendariz v. Foundation Health Psychcare

Services, Inc., 24 Cal.4th 83, 96, 99 Cal.Rptr.2d 745 (2000), that policy does not arise until an

enforceable agreement is established. The instant record does not reflect that plaintiff agreed to

mandatory arbitration. Badie, 67 Cal.App.4th at 790. Thus, the court is not required to enforce

arbitration. Chiron Corp., 207 F.3d at 1130. Accordingly, defendant’s motion to compel

arbitration and for stay should be denied.

Accordingly, IT IS HEREBY RECOMMENDED that Citibank’s June 21, 2007

motion to compel arbitration and stay the action [docket no. 38] be denied. 

These findings and recommendations are submitted to the United States District

Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within ten days

after being served with these findings and recommendations, any party may file written

objections with the court and serve a copy on all parties. Such a document should be captioned 

“Objections to Magistrate Judge’s Findings and Recommendations.” The parties are advised that

failure to file objections within the specified time may waive the right to appeal the District

Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991). 

DATED: February 29, 2008.

/001; gerber.amd

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