Ostreicher v. Equifax Information Services, LLC

Background

Zev Ostreicher sued TransUnion, LLC; Discover Bank; Bank of America, N.A.; and TBF Financial, LLC, alleging violations of the Fair Credit Reporting Act. Ostreicher alleged that Discover furnished inaccurate information about his credit-card account to Equifax and TransUnion, including an incorrect balance and last-payment date. He also alleged that Discover failed to conduct a reasonable investigation after receiving notice of the disputed information and continued reporting it.

The court addressed only Discover Bank’s motion to compel arbitration and stay the case. Ostreicher had originally sued American Express Company and Equifax Information Services, LLC, but the opinion states that those parties were dismissed after settlements or stipulations. The opinion does not describe a ruling on the claims against the remaining nonmoving defendants.

Arbitration Agreement

Discover submitted the original cardmember agreement and a revised agreement. The original agreement stated that a dispute arising under or relating to the account could be submitted to binding arbitration if either side requested it. It also allowed Ostreicher to reject arbitration by sending written notice within 30 days after receiving the card.

The court found that the undisputed evidence showed Ostreicher applied for and opened the account, received the cardmember agreement, used the card, and did not cancel the account or send an arbitration opt-out notice. Applying Delaware contract law, the court held that this conduct established acceptance of the original agreement.

Discover later mailed Ostreicher notices of amendments, including a revised arbitration provision. The revised agreement again allowed rejection of arbitration within 30 days. The court found that Ostreicher did not opt out, did not claim that he stopped charging the account, and did not dispute that the account remained open. The court therefore concluded that his conduct demonstrated acceptance of the revised agreement.

Validity and Scope

Ostreicher argued that the revised arbitration provision was unconscionably broad because it also referred to “any other dispute” between him and Discover. Discover, however, sought arbitration under the narrower provision covering disputes “arising out of or relating to” the account. Because Discover did not rely on the broader language, the court declined to decide whether that language was enforceable and did not invalidate the entire arbitration provision based on it.

The court characterized the account-related provision as broad. It held that Ostreicher’s Fair Credit Reporting Act claims fell within that provision because they concerned Discover’s reporting of information about the account and its response to disputes about that information. The court also noted that the cardmember agreement expressly discussed reporting the account’s status and payment history to credit-reporting agencies.

The court rejected Ostreicher’s argument that the Fair Credit Reporting Act claims could not be arbitrated because the reporting duties came from the statute rather than the agreement. It concluded that Ostreicher had not shown that Congress barred arbitration of these statutory claims.

Disposition

The court found the arbitration provision enforceable as applied to this dispute and held that Ostreicher’s claims against Discover fell within its scope. Judge Kenneth M. Karas granted Discover’s motion to compel arbitration and stayed the action as it pertained to Discover pending arbitration. The order did not decide the merits of whether Discover violated the Fair Credit Reporting Act.