Juarez v. Social Finance, Inc.

Background

Ruben Juarez and Calin Constantin Segarceanu initially filed a proposed class action against Social Finance, Inc. and Social Finance Lending Corp. The second amended complaint added Emiliano Galicia and Josue Jimenez. The motion addressed only Galicia’s claims.

The complaint alleged that Galicia was born in Mexico, had lived in the United States since 1994, and obtained Deferred Action for Childhood Arrivals status in about 2012. In August 2019, he applied for a personal loan from Social Finance to fund his real estate consulting business. Social Finance denied the application because of his Deferred Action for Childhood Arrivals status. Galicia later contacted Social Finance in April 2021 to ask whether its policy had changed and to express his willingness to apply for a loan. He alleged that a customer service representative told him that recipients of that status remained ineligible unless they had a co-signer who was a U.S. citizen or lawful permanent resident. Galicia did not submit a new application because he believed doing so would be futile.

Galicia asserted claims for alienage discrimination under 42 U.S.C. § 1981 and discrimination under California’s Unruh Civil Rights Act.

Motion to Compel Arbitration

Social Finance argued that its records showed Galicia registered on its website on August 7, 2019, checked an “I Agree” box, accepted an arbitration agreement, and started a personal-loan application that day. The agreement covered claims connected with a non-mortgage loan and the application for such a loan. Social Finance argued that claims arising from the 2019 application therefore fell within the agreement.

Social Finance also argued that Galicia’s April 2021 telephone inquiry and other communications should be sent to arbitration under equitable estoppel. Equitable estoppel is a rule that can prevent a person from claiming a contract’s benefits while avoiding obligations imposed by that contract. Social Finance contended that Galicia had intentionally avoided the online application process to evade arbitration and that his claims relied on Social Finance’s Terms of Use, which referenced the arbitration agreement.

Court’s Analysis

The court concluded that claims arising from the 2019 loan application would be subject to the arbitration agreement based on Social Finance’s records and the agreement’s plain language. The court noted that the plaintiffs did not appear to challenge that conclusion or expressly disclaim reliance on the 2019 application. It therefore granted Social Finance’s motion as to those claims, but only to the extent the plaintiffs intended to pursue them.

For the April 2021 inquiry, the court relied on its earlier ruling that Social Finance’s arbitration agreement was limited in scope and applied on a transaction-by-transaction basis. The agreement did not extend to future registrations, submissions, or applications, and the court found that the telephone inquiry was not covered by its plain terms.

The court rejected Social Finance’s equitable-estoppel arguments. It found no supporting authority for applying equitable estoppel merely because Galicia contacted Social Finance by telephone rather than submitting an online application. It also found that Galicia’s claims did not depend on or seek to enforce the Terms of Use or the arbitration agreement. Instead, the claims challenged Social Finance’s alleged lending policies and practices concerning recipients of Deferred Action for Childhood Arrivals status. Merely referring to an agreement containing an arbitration clause was not enough to trigger equitable estoppel.

Disposition

The court granted in part and denied in part Social Finance’s motion to compel arbitration. It granted the motion for Galicia’s claims arising from his 2019 loan application, to the extent the plaintiffs intended to pursue those claims in arbitration, but otherwise denied the motion in its entirety. The existing case schedule remained in place, and the plaintiffs were directed to file a statement of no more than two pages by August 31, 2021, stating whether they intended to pursue Galicia’s 2019-application claims in arbitration.