Anderjaska v. Bank of America, N.A.

Background

The plaintiffs brought a putative class action against Bank of America, N.A., Capital One, N.A., Citibank, N.A., J.P. Morgan Chase, N.A., and Wells Fargo Bank, N.A. They alleged that the defendant banks injured them by negligently failing to prevent them from becoming victims of a fraudulent “binary options” scheme, aiding and abetting the scheme, and fraudulently concealing it.

Chungyao Chen and Calvin Williams alleged that they used Chase credit or debit cards to make payments to the scheme’s operators. Both had Chase deposit accounts governed by deposit-account agreements containing arbitration provisions. Neither opted out. Both also had Chase credit-card accounts governed by cardmember agreements. Those agreements were amended in June 2019 to include arbitration provisions, and neither plaintiff opted out of those provisions either.

Chase moved to compel Chen and Williams to arbitrate their claims and to stay the case while arbitration proceeded. The plaintiffs did not dispute that they had agreed to arbitration. Instead, they argued that the agreements did not cover this dispute, that Chase had waived arbitration by participating in the litigation, and that the later credit-card arbitration provisions could not apply. They also argued that the court could not compel arbitration because the agreements required arbitration outside the Southern District of New York.

Court’s analysis

The court explained that the Federal Arbitration Act generally makes written arbitration provisions enforceable. It treated the arbitration clauses as broad. The deposit-account agreement stated that disputes “must be” arbitrated when either side requested arbitration, and the credit-card agreement similarly required arbitration whenever either side chose it. The court rejected the plaintiffs’ argument that filing a lawsuit prevented Chase from later requesting arbitration.

The court also rejected the waiver argument. It considered the time that passed, the amount of litigation, and prejudice to the plaintiffs. The court noted that the delay was related to the plaintiffs’ motion to return the case to state court, that no litigation on the merits had occurred, and that no discovery had taken place. The plaintiffs had not shown that they would be prejudiced by arbitration.

The court found it unnecessary to decide whether the deposit-account clause covered the claims because the plaintiffs did not contest Chase’s argument that the clause, if applicable, covered all of Chen and Williams’ claims. The court nevertheless rejected the argument that the credit-card clause could not apply because it was added after the lawsuit began, noting that the clause covered past, present, and future claims and allowed cardholders to opt out.

The court agreed with the plaintiffs on the location issue. Under Section 4 of the Federal Arbitration Act, the court concluded that it could compel arbitration only within its district. The agreements required arbitration in the federal district including the claimant’s address when the claim was filed, unless the parties agreed to another location. Because the required arbitration location was outside this district, the court could not issue an order compelling arbitration.

Disposition

Judge Gabriel W. Gorenstein denied Chase’s motion to compel arbitration. The court granted Chase’s motion to stay all claims of Chungyao Chen and Calvin Williams pending arbitration.