Curtis v. JPMorgan Chase Bank, N.A.

Background

Keanna Curtis and Miranda Jane Bennett-Morales brought claims on behalf of a proposed class against JPMorgan Chase Bank, N.A. (Chase) and Early Warning Services (referred to in the opinion as Zelle). The claims included alleged violations of the Electronic Fund Transfer Act and New York General Business Law, breach of contract and the duty of good faith and fair dealing, unjust enrichment, and negligence.

The complaint alleged that Chase failed to refund Curtis for money she mistakenly sent through Zelle to scammers. It also alleged that Chase failed to refund Bennett-Morales for money that third parties sent through Zelle from her Chase account without authorization.

Chase and Zelle moved to compel arbitration of all claims. The court considered the allegations and the evidence submitted with the motion.

The Arbitration Agreements

When the plaintiffs opened their Chase accounts, they agreed to Chase’s Deposit Account Agreement (DAA). The DAA stated that disputes relating to an account or transactions would be resolved through binding arbitration rather than court litigation, except for matters in small claims court. It also waived the parties’ ability to bring or participate in class or representative proceedings in court or arbitration. The DAA allowed customers to opt out, but neither plaintiff did so.

The plaintiffs later enrolled in Chase’s online banking services and agreed to the Digital Service Agreement (DSA). They also enrolled in Zelle and agreed to the Zelle Service Agreement. The DSA and Zelle agreements likewise contained broad arbitration provisions covering disputes relating to the agreements and the digital services. The Zelle agreement in effect when Bennett-Morales enrolled also stated that Zelle and Early Warning Services could enforce the arbitration provision against customers.

Assent and Notice

The court held that the arbitration provisions were enforceable because the plaintiffs had inquiry notice—that is, the agreements were presented in a way that would alert a reasonable user to their terms, even if the plaintiffs did not have actual notice of every provision.

For the DAA, the plaintiffs had to scroll through the agreement and click an acknowledgment button before continuing. For the DSA and Zelle agreement, the plaintiffs received hyperlinks to the agreements and had to click boxes acknowledging that they had read and accepted the terms. The court found the arbitration provisions reasonably conspicuous because of the design of the interfaces and the use of bold headings and capitalized text. It also found that the plaintiffs’ affirmative clicks showed assent to the agreements.

The court declined to conduct a choice-of-law analysis concerning contract formation because New York and California apply substantially similar rules to determine whether parties agreed to contract terms. Curtis opened her account in New York, and Bennett-Morales opened hers in California.

Unconscionability

The plaintiffs argued that the arbitration agreements were unconscionable, meaning legally unfair because of both the way they were presented and the substance of their terms. The court rejected that argument under both New York and California law.

The court found no procedural unconscionability. Although the agreements were offered on a take-it-or-leave-it basis and were presented while the plaintiffs were at a bank, the court held that those facts alone did not show unfair pressure or surprise. The court also relied on the conspicuous presentation of the arbitration provisions.

The court likewise found no substantive unconscionability in the arbitration agreements themselves. The plaintiffs challenged provisions concerning public injunctive relief, punitive damages, shortened time limits for bringing claims, and Chase’s ability to modify the agreements. The court stated that even if such separate provisions were unenforceable, they could be severed from the arbitration agreements. The challenged provisions therefore did not make the arbitration provisions unenforceable.

Scope of Arbitration

The court held that the plaintiffs’ claims fell within the arbitration provisions’ scope. The agreements broadly covered disputes relating to the plaintiffs’ accounts, transactions, and use of the digital services. Because the claims concerned alleged failures to refund losses from Zelle payments made from the plaintiffs’ Chase accounts, the court found that they unambiguously related to covered accounts and transactions.

Zelle’s Ability to Compel Arbitration

The plaintiffs argued that Zelle could not enforce arbitration provisions contained in agreements between the plaintiffs and Chase. The court rejected that argument for two independent reasons.

First, the court held that Zelle was an intended third-party beneficiary of the Zelle agreement. The agreement expressly stated in one version that Zelle could enforce the arbitration provision, and earlier versions also extended the provision to Chase’s affiliates and related entities. The complaint alleged that Zelle was a subsidiary or affiliate of Chase and that Chase was one of the banks that owned Zelle.

Second, the court held that the plaintiffs were equitably estopped, meaning they could not rely on one part of the agreement while refusing to honor its arbitration provision in the same dispute. The court found that the relationship among the plaintiffs, Chase, and Zelle; the Zelle agreement; and the money transfers at issue were sufficiently connected to require arbitration of the claims against both Chase and Zelle.

Disposition

The court GRANTED the defendants’ motion to compel arbitration. All proceedings in the case were STAYED pending arbitration of the plaintiffs’ claims. The plaintiffs were ordered to file a status letter by March 26, 2024, and every two months afterward. Within seven days after the arbitration proceedings ended, the parties were ordered to file a status letter proposing any next steps in the litigation. The clerk was directed to close the motions at Dkt. Nos. 45 and 58.