Weiss v. American Express National Bank

Background

Chaya Weiss sued American Express National Bank in New York state court, alleging that American Express failed to reasonably investigate unauthorized credit-card charges and improperly imposed charges, violating federal and New York law. American Express removed the case to federal court and moved under the Federal Arbitration Act, a federal law requiring enforcement of qualifying arbitration agreements, to compel arbitration and to stay or dismiss the case.

American Express relied on a cardholder agreement that it said governed Weiss’s account. The agreement stated that either party could choose individual arbitration and that the choosing party had to send a claim notice before beginning arbitration. The notice also had to identify either JAMS or the American Arbitration Association as the selected arbitration organization. The opinion states that Weiss did not return the card or express a desire to opt out, and later used the card.

Arguments and Analysis

Weiss made three arguments opposing arbitration: American Express had not shown that an enforceable arbitration clause governed the dispute; American Express could not rely on the clause after filing a separate debt-collection action; and American Express could not compel arbitration without first sending the required claim notice.

The court decided the third argument and said it did not need to address the first two. It interpreted the agreement as giving each party an option to arbitrate, rather than automatically requiring arbitration. Under the agreement, that option had to be exercised by sending the required claim notice and selecting an arbitration organization. Without that notice, the parties could litigate in court.

The court relied on a prior Southern District of New York decision involving an optional arbitration clause. That decision held that such a clause does not take effect until one side makes an arbitration demand. Here, American Express did not show that it had sent a claim notice or selected an arbitrator. The court also noted that American Express did not address this issue in its brief, even though Weiss had raised it.

Disposition

The court held that American Express had not chosen arbitration in compliance with the agreement and therefore could not be compelled to arbitrate at that time. Judge J. Paul Oetken denied American Express’s motion to compel arbitration and stay or dismiss the case. The Clerk of Court was directed to close the motion at Docket Number 8. The opinion did not decide the merits of Weiss’s claims about the disputed charges.