Walters v. Citibank N.A.

Background

Quintin Walters, a Citibank customer, alleged that Citibank employees discriminated against him because of his race in the way they provided, or failed to provide, services. His complaint asserted two claims: one under section 51.5 of the California Civil Code and one for intentional infliction of emotional distress.

Citibank moved under the Federal Arbitration Act to require Walters to arbitrate the dispute. Citibank relied on an arbitration provision in an agreement titled Client Manual Consumer Accounts. The provision covered claims arising out of or related to a customer's accounts, previous related accounts, or the parties' relationship.

Court’s Analysis

The court stated that its role under the Federal Arbitration Act was to determine whether a valid arbitration agreement existed and, if so, whether the agreement covered the dispute. The parties did not dispute that Walters was a party to the account agreement or that the arbitration clause covered his claims.

Walters argued that the arbitration clause was unconscionable, meaning legally unfair and therefore unenforceable. The court explained that California law requires both procedural unconscionability, involving oppression or surprise from unequal bargaining power, and substantive unconscionability, involving overly harsh or one-sided terms.

The court rejected Walters’s substantive-unfairness argument based on arbitration fees. It found that the clause did not require Walters to pay those fees. For claims exceeding $74,000, the clause referred fee allocation to the applicable American Arbitration Association rules. Those rules required the business to pay the arbitrator’s compensation unless the consumer voluntarily chose, after the dispute arose, to pay part of it. The court also noted that, for qualifying claims of $74,000 or less, the clause stated that Citibank would pay both parties’ arbitration fees. The court therefore found that the clause was not substantively unconscionable.

Because both procedural and substantive unconscionability must be shown, the court did not address Walters’s separate argument that the clause was procedurally unconscionable.

Disposition

The court granted Citibank’s motion to compel arbitration. It vacated the hearing scheduled for May 14, 2021 and stayed the action pending completion of arbitration proceedings. The order did not decide the merits of Walters’s discrimination or intentional-infliction-of-emotional-distress claims. Judge Maxine M. Chesney signed the order.