KPA Promotion & Awards, Inc. v. JPMorgan Chase & Co.

Background

KPA Promotion & Awards, Inc. and Above & Beyond Preschool, LLC were Chase banking customers that applied for federally guaranteed Paycheck Protection Program loans. KPA ultimately received a loan, but the deposited funds were backdated by several weeks. Above & Beyond’s two applications were denied. The plaintiffs alleged that Chase favored commercial and private banking customers over small-business customers, contrary to the program’s first-come, first-served requirement and Chase’s representations.

The complaint asserted claims under New York’s General Business Law for deceptive practices and false advertising, claims under Florida’s Deceptive and Unfair Trade Practices Act, and claims for fraudulent concealment, breach of fiduciary duty, and negligence. Chase moved to compel arbitration and stay the case.

Arbitration Agreements

When the plaintiffs opened their Chase accounts, they signed signature cards agreeing to the terms of Chase’s Deposit Account Agreement. That agreement contained a broad arbitration clause covering disputes relating in any way to the accounts, transactions, related services, and the agreement itself. It also stated that claims were subject to arbitration regardless of the legal theory or remedy sought. The agreement allowed customers to opt out of arbitration within 60 days after opening an account, but neither plaintiff did so.

The plaintiffs also accepted Chase’s Online Services Agreement when they opened accounts through Chase’s online system. That agreement required arbitration of disputes arising under or relating in any way to the agreement or online services. It also barred court class actions and stated that claims concerning the applicability of the arbitration clause itself were subject to arbitration.

Court’s Analysis

Applying the Federal Arbitration Act, the court explained that arbitration agreements are enforceable according to their terms, but a party cannot be required to arbitrate a dispute it did not agree to arbitrate. The plaintiffs did not contest that they agreed to the Deposit Account Agreement and Online Services Agreement or that the agreements contained arbitration provisions.

The court held that the agreements clearly and unmistakably assigned the question of whether the plaintiffs’ claims belonged in arbitration to the arbitrator. The agreements incorporated the procedures of the American Arbitration Association or Judicial Arbitration and Mediation Services, whose rules give arbitrators authority to decide their own jurisdiction and the scope of arbitration. The agreements also expressly covered disputes about the applicability of the arbitration clause and used broad language covering claims related in any way to the accounts, transactions, agreements, and online services.

The court therefore ruled that the plaintiffs had to raise their arguments that the arbitration provisions did not cover the PPP lending claims with the arbitrator in the first instance. The court added that, if it addressed the scope question itself, it likely would find that the provisions covered the claims because the PPP applications were submitted through Chase’s online portal and approved funds would be deposited into the plaintiffs’ Chase checking accounts.

Disposition

Judge Naomi Reice Buchwald granted Chase’s motion to compel arbitration and stay the action. The clerk was directed to terminate the pending motion and mark the case as stayed. Chase was directed to file a brief letter every 60 days reporting on the status of the arbitration. The opinion did not decide whether the plaintiffs’ allegations about Chase’s PPP lending practices were ultimately correct.