Smelser v. Discover Bank

          ORDER

          SUSAN O. HICKEY CHIEF UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant's Motion to Compel Arbitration. (ECF No. 17). Plaintiff has filed a response. (ECF No. 22). Defendant has filed a reply. (ECF No. 24). The Court finds this matter ripe for consideration.

         BACKGROUND

         Plaintiff Jeffery Smelser applied for a credit card account and obtained a credit card with Defendant Discover Bank in August 2015. Plaintiff activated his card and made purchases on his account. However, Plaintiff subsequently failed to make payments, and his account went into default. Plaintiff alleges that Defendant then commenced a relentless campaign of automated telephone calls seeking to recover the outstanding balance owed on his account. On May 31, 2019, Plaintiff brought this action, alleging that Defendant's automated telephone calls have violated the Telephone Consumer Protection Act, 47 U.S.C. §227 (“TCPA”). Plaintiff has also brought a common law invasion of privacy claim, alleging that Defendant's telephone calls have intruded upon his right to seclusion.

         When Plaintiff applied for the credit card account in August 2015, Defendant mailed him a packet containing the credit card and a copy of the cardmember agreement. The cardmember agreement cautioned Plaintiff that he would agree to its terms and conditions if he did not cancel his credit card within thirty days. The cardmember agreement also contained a provision requiring Plaintiff to arbitrate all claims relating to his credit card account. In September 2017, Defendant mailed Plaintiff an updated cardmember agreement containing a similar arbitration clause.

         On August 26, 2019, Defendant filed the instant motion, arguing that Plaintiff's claims are subject to binding, valid arbitration agreements and that this action should be stayed pending the outcome of arbitration. (ECF No. 11). Plaintiff opposes the motion, arguing that the arbitration clauses in his cardmember agreements are unconscionable and that this dispute is outside the scope of the arbitration agreements. (ECF No. 22).

         DISCUSSION

         In addressing motions to compel arbitration, courts generally ask: (1) whether there is a valid arbitration agreement, and (2) whether the particular dispute falls within the terms of that agreement. E.E.O.C. v. Woodmen of the World Life Ins. Soc., 479 F.3d 561, 565 (8th Cir. 2007). These two determinations are guided by a “liberal federal policy favoring arbitration agreements.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991).

         The Court will first determine whether the arbitration agreements are valid. If the Court answers that question in the affirmative, it will then determine whether the claims at issue fall within the terms of the arbitration agreements. If so, the Court will determine whether this action should be dismissed or stayed pending arbitration.

         A. Validity of the Arbitration Agreements

         The Court will now determine the validity of the arbitration agreements. “The validity of the agreement is determined by state contract law.” Woodmen, 479 F.3d at 565. Arbitration agreements are examined in the same way as other contractual agreements, and the same rules of construction and interpretation apply to arbitration agreements as apply to agreements in general. See Keymer v. Mgmt. Recruiters Int'l, Inc., 169 F.3d 501, 504 (8th Cir. 1999). The instant arbitration agreements appear to be governed by Arkansas law.^[1] Under Arkansas law, “[t]he essential elements of a contract are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligation.” City of Dardanelle v. City of Russellville, 372 Ark. 486, 490, 277 S.W.3d 562, 565-66 (2008) (citing Williamson v. Sanofi Winthrop Phars., 347 Ark. 89, 60 S.W.3d 428 (2001)). Moreover, Arkansas law provides that:

[t]he acceptance of the terms and conditions of a credit card account by a cardholder may be established as binding and enforceable by . . . [t]he use of the credit card account by the named credit card account member . . . if the credit card agreement provides that any use of the credit card account constitutes an acceptance of the terms and conditions of the credit card agreement if the time prescribed in 12 C.F.R. § 202.12(b) has expired.

Ark. Code Ann. § 4-107-304(2).

         In the case at bar, Plaintiff does not appear to dispute that he accepted the cardholder agreements, including the arbitration clauses.^[2] However, Plaintiff argues that the arbitration clauses in his ...