As a preliminary matter, FNANB suggests that an arbitrator, and not this court, should
determine the merits of Reyes’s objections to the arbitration agreement. (Motion to Reconsider,
at 6.) In support of this position, FNANB cites Green Tree Financial Corp. v. Bazzle, 123 S.Ct.
2402 (2003), in which the Supreme Court held that it was for an arbitrator to decide whether the
contracts at issue prohibited class arbitration. /d. at 2407. The court finds Green Tree easily
distinguishable from this case, however, because there was no dispute that the parties had a valid
arbitration agreement. /d. Here, Reyes denies that he has entered into an enforceable arbitration
agreement with FNANB and, thus, the court will consider his arguments. As Green Tree
recognized, courts assume that parties intend courts, and not arbitrators, to decide such issues as
“whether the parties have a valid arbitration agreement at all”. /d.

In determining whether parties have entered into a valid agreement to arbitrate, “courts
generally . . . should apply ordinary state-law principles that govern the formation of contracts.”
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). See also Howsam v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (“arbitration is a matter of contract and a party cannot
be required to submit to arbitration any dispute which he has not agreed so to submit’) (internal
quotations omitted). Reyes argues that the arbitration agreement is unconscionable “by its very
nature” because credit card applicants had no choice whether to agree to its terms. (PI. Response,
at 5.) The court disagrees. The Notice of Amendment containing the arbitration provision
specifically instructed cardholders that they could reject the amended terms by returning their credit
cards to FNANB, and still pay off any account balance under the pre-existing terms. (Ex. 4 to
Motion to Reconsider.) Given that cardholders had a clear opportunity to reject the amendment,
it was not unconscionably one-sided on its face. See Walton v. Experian, No. 02 C 5067, 2003 WL
22110788, at *2 (N.D. Ill. Sept. 9, 2003) (in considering identical amendment to credit card
agreement at issue in this case, court held that “since plaintiff had a clear option to reject the

amended terms . . . the contract is mutual”).



Reyes claims that he “cannot afford the financial burdens that arbitrating his claim would
impose.” (PI. Response, at 8.) He notes that in the court system, he would not have to pay a fee
for each hearing and could represent himself even if he could not afford an attorney. (/d.) Reyes
does not explain why he would be unable to represent himself in an arbitration hearing. In any
event, Reyes directs the court to the National Arbitration Forum (“NAF”) fee schedule which, he
claims, indicates that “a claim filed between $15,000 and $30,000 has costs that exceed $1,200.”
(id. at 9.) He argues that this is a “steep expense” compared to filing a lawsuit for $150. He also
speculates that if he were unable to prove actual damages, his $1,000 in statutory damages under
the FCRA “would be completely swallowed up by the NAF fee schedule and Plaintiff would be in
a worse position than when he began because he would still owe an extra $200 plus dollars.” (/d.)

The court does not find any of these arguments persuasive. Reyes has not explained how
the costs of arbitrating his claims will exceed $1,200, much less “swallow up” any purported
statutory damages. The NAF fee schedule states that consumer claimants must pay a filing fee
of $60 and another $250 for the participatory hearing. (Ex. B to Pl. Response.) Reyes has not
submitted any evidence that he cannot afford $310 or that such an amount is prohibitive. See
Walton, 2003 WL 22110788, at *3 (finding arbitration not prohibitively expensive under arbitration
agreement identical to the one at issue in this case). Courts have declined to enforce arbitration
provisions due to the cost, but each of these cases involved expenses significantly greater than
those presented here. For example, in Phillips v. Associates Home Equity Servs., Inc., 179 F.
Supp. 2d 840 (N.D. Ill. 2001), the arbitration agreement provided that arbitration would be
conducted through the American Arbitration Association (“AAA”). /d. at 843. The plaintiff
presented evidence from the AAA that she would have to pay upwards of $4,000 just to file her
claim, and that she would also have to split the costs of the arbitrator's fee, which averaged $1,800
per day, travel expenses, and rental of a hearing room. In addition, the plaintiff submitted an
affidavit attesting to her inability to afford these expenses. /d. at 846.

7


(Ex. 4 to Motion to Reconsider.) The Notice notified cardholders that “[b]y using your credit card
anytime following the date of this amendment, you agree to the terms enclosed herein” and
“acknowledge that you prefer to resolve any claims, disputes or controversies through the
mediation and arbitration provisions set forth above.” (/d.) Cardholders who did not want to agree
to these new terms could return their credit card to FNANB and continue paying off their account
balances under the existing terms. (/d.)

Sometime after FNANB sent out the Notice, it allegedly began falsely reporting that Reyes
had filed for bankruptcy. Reyes responded with this lawsuit. FNANB moved to compel arbitration
of the dispute pursuant to the September 1997 Notice, but on June 27, 2003, this court denied that
motion on the basis that Reyes never signed the Notice containing the arbitration clause. Reyes v.
Equifax Credit Info. Servs., No. 03 C 1377 (N.D. Ill. June 27, 2003, Docket No. 14.) FNANB moved
for reconsideration, arguing that Reyes’ signature was not required to render the arbitration
provision valid and enforceable, and that issues of contract formation are, in any event, to be
considered by the arbitrator, not by this court. Reyes claims that he never got the Notice and
argues that enforcing the provision would be unconscionable and prohibitively expensive.

DISCUSSION

The Federal Arbitration Act, 9 U.S.C. § 1 et seg., provides that arbitration agreements “shall
be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. The Act establishes a “federal policy favoring arbitration”
and requires that courts “rigorously enforce agreements to arbitrate.” Shearson/American Express,
Inc. v. McMahon, 482 U.S. 220, 226 (1987) (internal quotations omitted). The party opposing
arbitration bears the burden of proving that the claims at issue are not referable to arbitration.
Green Tree Financial Corp. - Alabama v. Randolph, 631 U.S. 79, 91-92 (2000), Popovich v.

McDonala’s Corp., 189 F. Supp. 2d 772, 775 (N.D. Ill. 2002).


This does not resolve the issue, however, because Reyes claims that he never received the
Notice containing the new arbitration provision, which was “delivered to someone else at a different
address.” (Pl. Response, at 5; Reyes Aff. 4.) Implicit in this argument is that Reyes no longer
lives at the Los Feliz Boulevard address listed on the credit card application. (/d.) (questioning
“[w]hat happens in the event that the regular addressee moves, dies, or otherwise disappears?”)
Under the terms of the original Credit Card Agreement, however, it was Reyes’s responsibility as
a joint account holder to notify FNANB of any address change. FNANB presented evidence that
Reyes communicated with the bank prior to 1997, and Reyes has not asserted that he ever notified
FNANB that his address had changed. Nor does he cite any cases indicating that an arbitration
agreement is unenforceable against a party who did not receive the agreement because he failed
to fulfill a contractual duty to provide a current address.

In addition, although the court's bench ruling on this motion focused on the absence of
Reyes's signature, Reyes does not challenge FNANB’s assertion that the arbitration agreement
did not require a separate signature in order to be valid. In Fyrnetics (Hong Kong) Ltd. v. Quantum
Group, Inc., 293 F.3d 1023 (7th Cir. 2002), the Seventh Circuit affirmed a ruling that a license
agreement required arbitration of plaintiffs’ claims of misrepresentation, negligence, and breach
of warranty, but remanded for a determination of whether one of the plaintiffs, a non-signatory, was
nevertheless bound by that agreement. /d. at “1-2. On remand, the court noted that “[iJn the
absence of a signature, a party can be bound by an agreement's arbitration provision if that party's
conduct ‘manifest[s] an intention to be bound by that [a]greement.” No. 99 C 4704, 2003 WL
164220, *2 (N.D. Ill. Jan. 23, 2003) (quoting Thomson-CSF, S.A. v. American Arbitration Ass’n, 64
F.3d 773, 777 (2d Cir. 1995)). The court found such an intent because FHK assumed the license
agreement with the arbitration clause by becoming a sublicensee of another plaintiff. /d.

Here, Reyes chose to apply for a credit card with FNANB and signed the accompanying
Credit Card Agreement, which stated that its terms could be modified upon “prior written notice”

5


In Shankle v. B-G Maintenance Mgmt. of Colorado, Inc., 163 F.3d 1230 (10th Cir. 1999),
the plaintiff signed an arbitration agreement as a condition of continued employment. /d. at 1234.
The employer sought to arbitrate the plaintiffs employment discrimination claim but the court found
it prohibitively expensive. According to the court, “[t]he typical employment case averages between
fifteen to forty hours of arbitrator time” so the plaintiff would have to pay an arbitrator between
$1,875 and $5,000 to resolve his claims. /d. at 1234-35, n.5. See also Paladino v. Avnet
Computer Technologies, inc., 134 F.3d 1054, 1062 (11th Cir. 1998) (in concurring opinion, judges
found arbitration clause unenforceable in Title Vil case where it provided no prospect for
meaningful relief and the plaintiff would have to pay a $2,000 filing fee pursuant to AAA rules as
well as “at least half the hefty cost of an arbitration”). Reyes's conclusory assertion that he cannot
afford the financial burdens of arbitration, without more, is insufficient to demonstrate that
arbitration would be prohibitively expensive in this case. See Ortiz v. Winona Memorial Hosp., No.
1:02-CV~1975-JDT-TAB, 2003 WL 21696524, at *7 (S.D. Ind. June 4, 2003) (citing Tinder, 305
F.3d at 735) (“a party cannot avoid compelled arbitration by conclusory assertions’).

CONCLUSION

For the reasons stated above, FNANB’s Motion to Reconsider its motion to compel
arbitration (Doc. No. 15-1) is granted. The complaint is hereby dismissed without prejudice as to
Defendant FNANB.

ENTER:

Dated: December 9, 2003 Roca Cn hep
REBECCA R. PALIMEY
United States DistrittJudge



+. Minute Ordars’orm (06/97)

« Ss C United States District Court, Northern District of IHinois
vA
varie Magistrate Judge Rebgeg@ R. Pallmeyer han signed Suge
CASE NUMBER y 03 C 1377 DATE 12/9/2003
CASE John Reyes vs. Equifax Credit Information
TITLE

[in the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented.]

a)

MOTION:

DOCKET ENTRY:

qd) a Filed motion of [ use listing in “Motion” box above.]

(2) i] Brief in support of motion due

(G3) Oo Answer brief to motion due__. Reply to answer briefdue____.

(4) QO Ruling/Hearingon__setfor__—— i at__

(5) a Status hearing held.

(6) a Pretrial conference[held/continued to] [set for/re-set for] on___set for at_

(7) Oo Trial[set for/re-set for]on at.

(8) oO [Bench/Jury trial] [Hearing] held/continuedto____at

o a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) OLocal Rule 41.1 CIFRCP41(a)(1)  FRCP41(a)(2).

ao) of [Other docket entry] Enter Memorandum Opinion And Order. First North America Bank’s motion

to reconsider its motion to compel aribtration (Doc. No. 15-1) is granted. The complaint is hereby

dismissed without prejudice as to Defendant FNANB.

a [For further detail see order attached to the original minute order.]

No notices required, advised in open court. 2

jotices requi
No notices required. number of notices

Notices mailed by judge’s staff. DEC tome
tow

Notified counsel by telephone. date docketed

Docketing to mail notices.

Mait AQ 450 form. Es seuh initials
Copy to judge/magistrate judge.
1292001
poe 4 date mailed notice
courtroom vie A Ge =
ETV deputy’s we ue ev

initials

Datc/time regeived fa. (4A by
central Clerk's’ Office nailing deputy initiats



and that all notices would be sent to the billing address (presumably, the address provided on the
credit card application) unless the cardholder provided FNANB with a new address. (Ex. 2 to
Motion to Reconsider If] 19, 25.) On these facts, Reyes has not demonstrated that the arbitration
agreement is invalid merely because he did not receive or sign it. See, e.g., Tinder v. Pinkerton
Security, 305 F.3d 728, 735-36 (7th Cir. 2002) (enforcing arbitration agreement in Title Vil case
where employee claimed she never received it but employer testified that the agreement was
included with employee’s payroll check).

Also unavailing is Reyes’s objection that the arbitration agreement is unconscionable
because it is “one-sided” and FNANB is “without a doubt the ‘stronger party’ to the contract.” (PI.
Response, at 6.) The Walton court recently rejected a similar argument, noting that “mere disparity
of bargaining power is not sufficient grounds to vitiate contractual obligations.” 2003 WL
22110788, at *2 (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991)). Asin
Waiton, Reyes “could have easily applied for other credit cards if [he] did not like the terms of the
amended agreement.” /d. Thus, FNANB’s stronger bargaining position does not render the
arbitration agreement unconscionable.

Finally, Reyes attempts to avoid arbitration by arguing that it would be prohibitively
expensive. An arbitration agreement may be unenforceable if a party would “be saddled with
prohibitive [arbitration] costs.” Green Tree Financial Corp. - Alabama, 531 U.S. at 90-92. The
party seeking to invalidate an arbitration agreement on the grounds that arbitration would be
prohibitively expensive bears the burden of showing the likelihood of incurring such costs. /d. at
92. Specifically, the party objecting to arbitration on this ground “must provide some individualized
evidence that it likely will face prohibitive costs in the arbitration at issue and that it is financially
incapable of meeting those costs.” Livingston v. Associates Finance, Inc., 339 F.3d 553, 557 (7th

Cir. 2003).


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

JOHN REYES,
DOCKETED

Plaintiff,
DEC 19 2003

ve No. 03 C 1377
EQUIFAX CREDIT INFORMATION
SERVICES and FIRST NORTH
AMERICA BANK,

Judge Rebecca R. Pallmeyer

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiff John Reyes applied for and was issued a credit card through Defendant First North
American National Bank (“FNANB”). On March 14, 2003, he brought this action alleging that
FNANB and Defendant Equifax Credit Information Services (“Equifax”) have violated the Fair Credit
Reporting Act ("FCRA”), 15 U.S.C. § 1681 et seg. by falsely reporting to third parties that Reyes
filed for bankruptcy. Reyes also charges Equifax with defamation in connection with these credit
reports. On May 16, 2003, FNANB moved to dismiss the complaint and compe! arbitration under
the terms of the credit card agreement. The court denied the motion on June 27, 2003 and FNANB
now seeks reconsideration of that ruling. For the reasons set forth here, the court grants the
motion for reconsideration and orders arbitration of Plaintiff's claims against FNANB.

; BACKGROUND

On December 23, 1994, Reyes and his girlfriend Jenia Tahmasebi jointly applied for a
Circuit City credit card, which was issued through FNANB. Reyes signed the credit card application
as a co-applicant and listed as his mailing address an address on Los Feliz Boulevard in Los
Angeles, California — the same address provided by Tahmasebi. (Ex. 1 to Motion to Reconsider.)

In submitting the application, Reyes signed a statement acknowledging that he had received and

yu


reviewed a copy of the Circuit City Credit Card Agreement (“Credit Card Agreement’). (/d.) That
agreement stated:

If your Account is a joint account or if more than one person is permitted to use the
Account, you agree that all notices regarding the Account may be sent solely to the
address shown on our billing records. You agree to give us written notice of any
change in your billing address. Any such change will become effective upon our
receipt of your written notice at the Bank’s designated office.

(Ex. 2 to Motion to Reconsider fj 25.) The Credit Card Agreement also stated that:

You promise to pay us in accordance with the terms of this Agreement for all

purchases and advances made under the Account plus Finance Charges and any

other charges due under the terms of this Agreement.

(id. 92.) The terms “you,” “your,” and “yours” are defined as “each person signing the application
for a credit card account.” (/d. {| 1(a).) The Credit Card Agreement further notified applicants that
“[ulpon prior written notice as is required by applicable law, we may change the terms of this
agreement.” (/d. J 19.)

FNANB approved the joint credit card application submitted by Reyes and Tahmasebi and
mailed out their two credit cards on or about December 23, 1994. (Hewett Aff., Ex, 3 to Motion to
Reconsider.) Several years later in September 1997, FNANB sentits cardholders, including Reyes
and Tahmasebi, a Notice of Amendment to Agreement (“Notice”). (/d.) The Notice contained the
following mediation and arbitration clauses:

MEDIATION. Either you or we may request that a claim be submitted to nonbinding

mediation. Such claim shall be subject to nonbinding mediation if the other party

so agrees within 60 days of you or us making the request by letter. Any such

mediation so agreed to shall be held in the federal judicial district in which you

reside, and shall be conducted according to the mediation rules of the National

Arbitration Forum. You and we agree further to share the cost of any such

mediation equally. No mediation shall commence unless both parties agree to it,

and no mediation shall continue if either party declares an impasse.

ARBITRATION. Except as provided below, you and we agree that any claim that

is not resolved through the nonbinding mediation process outlined above shall be

resolved by binding arbitration conducted by and according to the Code of
Procedure of the National Arbitration Forum in effect at the time the claim is filed . . .