Meeks at al. v. Consumer Adjustment Company, Inc.

Background

The plaintiffs signed up for CreditWorks and agreed to Terms of Use containing an arbitration clause. Experian Information Solutions, Inc. moved to compel arbitration, meaning it asked the court to require the plaintiffs to pursue their dispute in arbitration rather than in court.

On August 31, 2021, the court denied Experian’s motion because Experian was not a party to the relevant contract, the CreditWorks Terms of Use. The court stated that Experian could enforce the arbitration clause only under a theory allowing a nonparty to enforce a contract, such as being a third-party beneficiary, and that Experian had forfeited that argument. The court later granted Experian’s request to seek reconsideration, effectively vacating the earlier denial while it reconsidered the issue.

Experian’s Severability Argument

Experian argued that the arbitration clause was a “contract within a contract” and therefore should be analyzed separately from the rest of the Terms of Use. The court rejected that reading of Supreme Court decisions describing arbitration provisions as “severable.”

The court explained that severability means a party’s challenge to the contract as a whole—such as a claim of fraud, illegality, or unconscionability—does not prevent enforcement of the arbitration clause unless the challenge is directed specifically at that clause. The plaintiffs were not arguing that the contract or arbitration clause was invalid. They were arguing that Experian could not enforce the clause. The court therefore held that the severability rule did not resolve the issue presented.

Contract-Party and Third-Party-Beneficiary Analysis

The court applied a two-step analysis. First, it considered whether Experian was a party to the contract containing the arbitration clause. If not, it would then consider whether Experian could enforce the clause under a legal theory applicable to nonparties, including third-party-beneficiary status.

The Terms of Use identified the contracting entity as ConsumerInfo.com, Inc., and stated that “we,” “us,” or “ECS” referred to ConsumerInfo.com and certain related entities and service providers. The court found that Experian did not fall within that definition and therefore was not a party to the agreement.

The arbitration provision used broader language referring to parent entities, subsidiaries, affiliates, agents, employees, predecessors, successors, and assigns. The court stated that corporate affiliates of ConsumerInfo.com might be able to enforce the arbitration provision as third-party beneficiaries. But Experian had not made that argument and had expressly declined to do so in its reply brief. As a result, Experian did not meet its burden of proving that it was a third-party beneficiary.

Disposition

Upon reconsideration, the court reaffirmed its prior holding and denied Experian’s motion to compel arbitration.

The supplied case name refers to Consumer Adjustment Company, Inc., but the opinion’s caption identifies the case as Elettra Meeks, et al. v. Experian Information Solutions, Inc., et al. This summary follows the opinion’s caption.