Theodore v. American Express National Bank

Background

Diana Theodore brought a putative class action against American Express National Bank. She alleged that American Express violated the Truth in Lending Act and California’s Unfair Competition Law by implementing unlawful interest-rate increases. American Express moved to compel arbitration of Theodore’s individual claims and to dismiss or stay the action while arbitration proceeded. The court stated that the sole disputed issue was whether Theodore had agreed to arbitrate her claims.

Agreement and Arguments

The 2018 agreement governing Theodore’s American Express card included a section titled “Claims Resolution.” That section stated that either party could elect to resolve a claim through individual arbitration and that, if arbitration was chosen, the parties would not have the right to litigate that claim in court, have a jury trial, or participate in a representative or class action concerning the claim.

Immediately afterward, the agreement included a section titled “Claims Resolution for Covered Borrowers.” That section stated that a covered borrower could elect, but was not required, to resolve a claim through individual arbitration, and that American Express could request arbitration without requiring the borrower to accept the request.

Theodore relied on the covered-borrower provision and argued that it gave her the choice whether to arbitrate. The court rejected that interpretation. It applied the contract-interpretation principle that an agreement must be read to give effect to each provision rather than disregarding one provision in favor of another.

The court noted that the agreement did not separately define “covered borrower,” but it found that the section concerning the Military Lending Act supplied the meaning. That section described protections for members of the Armed Forces and their dependents and stated that, if a borrower was covered, the general Claims Resolution section would not apply and the Claims Resolution for Covered Borrowers section would apply instead. The court concluded that this language harmonized the two provisions and showed that the general arbitration provision applied to Theodore.

Ruling

The court held that Theodore agreed to arbitrate her claims. It therefore GRANTED American Express’s motion to compel arbitration and STAYED the action pending arbitration. The order did not decide the merits of Theodore’s claims concerning the alleged interest-rate increases.