NerdWallet, Inc. v. Fidelity Information Services, LLC

Background

NerdWallet sued Fidelity Information Services, LLC, doing business as Atelio, for breach of contract and indemnification. The dispute arose from Atelio’s alleged performance of obligations connected to closing the NerdUp Card program, including disabling cards, issuing customer refunds, delivering final statements, and completing other wind-down tasks.

The parties’ Terms of Use required senior representatives to negotiate disputes in good faith. If they could not resolve a dispute within 30 days, “either party may commence binding arbitration” under the rules of the Judicial Arbitration and Mediation Services. The agreement also stated that arbitration proceedings would take place in San Francisco, California.

Atelio moved to stay the federal case and compel arbitration. The parties agreed that a valid arbitration agreement existed and that the agreement covered this dispute. They disagreed about whether the word “may” made arbitration optional rather than mandatory.

Motion to Stay and Compel Arbitration

The court held that the arbitration clause was mandatory when read in the context of the entire agreement. Although “may” can ordinarily suggest permission, the Terms of Use identified arbitration as the only formal dispute-resolution method after unsuccessful negotiations and contained no separate provision allowing the dispute to proceed in court. The court concluded that the clause gave either party the right to commence arbitration, and that the other party then had to proceed with it.

The court also rejected NerdWallet’s argument that a separate Technology Licensing and Onboarding Agreement, which used the word “shall” in its arbitration clause, showed that the Terms of Use was intentionally permissive. The court found the Terms of Use sufficiently clear and therefore did not consider that separate agreement helpful to interpreting the clause.

The court found that the required steps had occurred: the parties engaged in good-faith efforts to resolve the dispute, they did not reach an agreement, and Atelio requested arbitration. Atelio’s motion to stay and compel arbitration was GRANTED.

Attorneys’ Fees

Atelio also sought attorneys’ fees for litigating in federal court, arguing that NerdWallet acted in bad faith by pursuing a frivolous lawsuit despite the arbitration clause and Atelio’s efforts to resolve the issue without motion practice.

The court explained that fees may be awarded in exceptional circumstances when a party acts in bad faith, vexatiously, wantonly, or for oppressive reasons. It found that NerdWallet incorrectly interpreted the Terms of Use, but that its position was not totally frivolous. The court also found that the record did not explicitly show bad faith. Atelio’s request for attorneys’ fees was therefore DENIED.

Motions to Seal

Atelio sought to seal several documents in their entirety, including the Terms of Use, the Technology Licensing and Onboarding Agreement, and the Wind-Down Plan. The court found that much of the information had already been made public or discussed in the parties’ filings. It also found that Atelio had not identified specific facts showing that disclosure would cause competitive harm. Atelio’s sealing request was DENIED, although the court allowed Atelio to submit a narrower proposal identifying specific information that might warrant protection.

NerdWallet separately sought to seal portions of its exhibits. That request was GRANTED IN PART and DENIED IN PART: the court granted the request to seal the names of specific customers who complained to Atelio, but denied the other sealing requests. The court said it would reconsider the denied requests if the parties submitted a narrower redaction proposal.

Conclusion

The court ordered the parties to proceed to arbitration and required them to file periodic joint status reports. The court also required a case-management request or notice of resolution after the arbitration or any settlement. Judge William H. Orrick granted Atelio’s motion to stay and compel arbitration, denied Atelio’s motion for attorneys’ fees, denied Atelio’s motion to seal, and granted in part and denied in part NerdWallet’s motion to seal.