Perez v. Discover Bank

Background

Iliana Perez, Flavio Guzman Magaña, and Josue Jimenez Magaña allege that Discover Bank unlawfully discriminated against them by denying loans or credit based on citizenship and immigration status. They assert claims under California’s Unruh Civil Rights Act and 42 U.S.C. § 1981, and they seek to represent a class.

Perez received a student loan from The Student Loan Corporation, a nonparty subsidiary of Citibank, in early 2010. Discover later acquired that company and currently holds the loan. In 2019, Perez applied to Discover for a private loan consolidation that would have refinanced her student loan at a lower interest rate. After Perez disclosed her Deferred Action for Childhood Arrivals status, a Discover representative allegedly denied the application and told her that, because of her immigration status, she should not have received the earlier student loan.

Guzman Magaña applied for a Discover graduate student loan in 2016. The application required immigration documents and a co-signer who was a United States citizen or lawful permanent resident; Guzman Magaña applied with a co-signer and received a loan. Jimenez Magaña contacted Discover in 2021 about a home-equity line of credit and was allegedly told that Discover did not issue loans to non-lawful permanent residents.

Earlier Arbitration Rulings and Appeal

Discover moved to compel Perez and Guzman Magaña to arbitrate under arbitration agreements in their loan applications. Discover also argued that Perez’s claims were subject to an arbitration agreement in the earlier Citibank loan. The agreements included provisions allowing an applicant to reject arbitration by sending written notice within 30 days after the loan was completed.

The court initially granted Discover’s motion to compel arbitration and stayed the action pending arbitration. Perez later sent Discover a written request to opt out of arbitration. After Discover disputed the effect of that request, Perez sought reconsideration of the order compelling arbitration. The court granted Perez’s motion for partial reconsideration on February 2, 2022. Discover appealed that decision to the United States Court of Appeals for the Ninth Circuit.

The appeal concerns Perez’s claims. Guzman Magaña’s claims are already stayed pending arbitration, and the parties agree that Jimenez Magaña’s claims are not subject to arbitration. Discover moved to stay the entire case while the appeal proceeds.

Court’s Analysis

A stay pending appeal is discretionary. The party seeking one must show circumstances supporting a stay. The court considered the likelihood of success on appeal, possible irreparable injury without a stay, harm to the other parties, and the public interest. Under the court’s stated sliding-scale approach, a strong showing on one factor may offset a weaker showing on another.

The court found that Discover had a fair prospect of success on arguments that Perez could not opt out of arbitration for claims that had already accrued and that the Citibank agreement’s delegation provision might apply. A delegation provision assigns the initial decision about whether a dispute must be arbitrated to an arbitrator. The court noted that it continued to believe the delegation provision could not apply because it concerned a different product, but it found Discover’s arguments sufficient to meet the required showing for a stay.

The court also found potential irreparable harm because proceeding with litigation could deprive Discover of arbitration’s advantages of speed and economy. The plaintiffs identified delayed discovery as their harm, but the court found no substantial harm beyond delay, particularly because the case remained in its early stages. The court further found that the public interest favored a stay because proceeding with the case could waste judicial resources if the dispute were later sent to arbitration.

Disposition

Judge Susan Illston granted defendants’ motion to stay the case pending Discover’s appeal of the order granting plaintiffs’ motion for partial reconsideration. The opinion does not decide the merits of the plaintiffs’ discrimination claims or the ultimate arbitration question.