Clark v. Trans Union LLC

Opinion

----oo0oo---- BOBBY J. CLARK, JR., No. 2:24-cv-783 WBS CKD Plaintiff, v. MEMORANDUM AND ORDER RE: ALLY’S MOTION TO COMPEL TRANS UNION LLC; EXPERIAN ARBITRATION INFORMATION SOLUTIONS, INC.; LLC; ONEMAIN FINANCIAL GROUP, LLC; and ALLY FINANCIAL INC.; Defendants. ----oo0oo---- Plaintiff Bobby J. Clark, Jr. (“plaintiff”) brought this action against multiple entities, alleging violations of credit reporting statutes. (Docket No. 1.) One of those entities is defendant Ally Financial, Inc. (“Ally”), which moves to compel arbitration and stay the matter as to itself pending arbitration. (Docket No. 85.)1 1 The court previously granted a motion to compel arbitration by co-defendant Experian Information Solutions, LLC, I. Background Ally “is a bank holding company with its headquarters in Detroit, Michigan.” (Docket No. 1 at ¶ 24.) Ally is incorporated in Delaware. (Docket No. 92-3.) On October 21, 2021, Ally acquired Fair Square Financial Holdings LLC and its subsidiaries, including Ollo Card Services (“Ollo”). (Docket No. 85-1 at ¶¶ 2, 6.) The acquisition closed on December 1, 2021. (Id.) On April 24, 2022, plaintiff applied for an Ollo Rewards credit card, which Ollo approved that same day. (Id. at ¶ 7.) Shortly thereafter, the Bank of Missouri issued plaintiff the card with a cardmember agreement (“Ollo Agreement”) containing its terms of service. (Id.) Plaintiff used the card between June and August 2022. (Id. Ex. B at 13, 17.) On August 25, 2022, plaintiff signed up for a debt consolidation program to consolidate his debt, and in that process the card was paid off. (Docket No. 92-2 at ¶¶ 5-8.) Sometime between September 23, 2022, and September 28, 2022, Ally notified plaintiff that it had acquired Ollo and his credit card account. (Docket No. 85-1 at ¶ 12.) In that time, Ally also issued an amended cardholder agreement (“Ally Agreement”) to reflect its acquisition of Ollo. (Id.) Aside from the nominal change in counterparties, the only other apparent difference between the two agreements which has any relevance to this motion is that the Ollo Agreement’s choice of

and staying the claims against it. (Docket No. 59.)

law provision names Missouri while the Ally Agreement designates Utah as its choice of law.2 (Docket No. 85-1 at ¶¶ 10, 15.) Plaintiff asserts a single claim against Ally under 15 U.S.C. § 1681s-2(b). (Docket No. 1 at ¶¶ 224-229.) The crux of this claim is that Ally incorrectly reported the account for plaintiff’s Ollo Rewards credit card as past due despite plaintiff paying it off through debt consolidation. (Id. at ¶¶ 60-65, 110-20, 152-55, 192, 224-29.) II. Legal Standards The Federal Arbitration Act (“FAA”) provides that an arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA “mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). “The FAA limits courts’ involvement to ‘determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.’” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (quoting Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130-31 (9th Cir. 2000)) (capitalization altered). In doing so, the court must “rely on the summary judgment

2 Where the cardmember agreements, including their arbitration provisions, are substantially similar, the court only quotes the Ollo Agreement’s language. Also, the court uses the phrases “arbitration provision” and “arbitration agreement” interchangeably. standard” to resolve genuine disputes of material fact. Knapke v. PeopleConnect, Inc., 38 F.4th 824, 831 (9th Cir. 2022). The Ollo Agreement states that “all disputes against us and/or related third parties shall be resolved by binding arbitration only. . . . If either you or we elect to pursue any claim by either you or us against the other, then the claim shall be resolved exclusively by arbitration.” (Docket No. 85-1 Ex. A at 11 (capitalization altered).) It defines “claim” as “any claim, dispute or controversy arising from or relating in any way to this Agreement or your account, or their establishment, or any transaction or activity on your account.” (Id.) Ally seeks to enforce this arbitration agreement in the instant motion. III. Discussion A. Illusoriness “The essential elements of any contract, including one for arbitration, are offer, acceptance, and bargained for consideration.” Baker v. Bristol Care, Inc., 450 S.W.3d 770, 774 (Mo. 2014) (capitalization altered). Plaintiff argues that the Ollo Agreement is void because of Ally’s unilateral right to amend the terms of the agreement, which he claims makes the agreement illusory. Under Missouri law, a contract where a party retains “the unqualified right” to unilaterally amend its terms may lack consideration and become “illusory.” Johnson v. Menard, 632 S.W.3d 791, 797-98 (Mo. Ct. App. 2021). The policy rationale for this principle in Missouri contract law is the possibility that the party with “the unqualified right to unilaterally modify” the contract may retroactively modify the agreement to evade its contractual obligations when those obligations become inconvenient. Id. Missouri law affords an exception to this unilateral modification rule for contract for amendments which “are prospective in application” and give the counterparty “reasonable advance notice.” Patrick v. Altria Grp. Distrib. Co., 570 S.W.3d 138, 144 (Mo. Ct. App. 2019). The Ollo Agreement states that Ollo or Ally “can amend the terms of this Agreement by changing terms, adding new terms, or deleting terms from this Agreement at any time. We will give you notice of an amendment as required by applicable law.” (Docket No. 85-1 Ex. A at 10.) It continues that “any amendment of this agreement will become effective at the time stated in our notice. Unless we state otherwise, the amended terms will apply to all outstanding balances on your account as well as to new transactions to the extent permitted by applicable law.” (Id.) The Ollo Agreement’s amendment section is silent on whether it applies to the arbitration provision. Notwithstanding plaintiff’s argument that the Ollo Agreement is illusory, he does not claim that Ally exercised the unilateral modification provision in any way that was prejudicial to him and has not persuaded the court that the Ollo Agreement is void ab initio because of this provision. See Donelson v. Ameriprise Fin. Servs., Inc., 999 F.3d 1080, 1089-91 (8th Cir. 2021), where the Eighth Circuit applied Missouri law and enforced the defendant brokerage’s arbitration agreement over the plaintiff investor’s argument that it was illusory due to the brokerage retaining the unilateral right to modify it. The Eighth Circuit reasoned that the brokerage providing and servicing the plaintiff’s investment account constituted consideration for the underlying agreement. Id. at 1090-91. Its analysis in Donelson applies equally here to the Ollo agreement. See id. at 1089-91. Therefore, the court rejects plaintiff’s argument that the arbitration provision is illusory under Missouri state law. B. Unconscionability Plaintiff next argues that the Ollo Agreement Ally seeks to enforce is unconscionable due to its arbitration provision and unilateral modification provision. “Unconscionability is defined as an inequality so strong, gross, and manifest that it must be impossible to state it to one with common sense without producing an exclamation at the inequality of it. The unconscionability doctrine ‘guards against one-sided contracts, oppression, and unfair surprise.’” Id. at 1091 (citation omitted) (quoting Eaton v. CMH Homes, Inc., 461 S.W.3d 426, 432 (Mo. 2015)). In Donelson, 999 F.3d at 1089-91, the Eight Circuit rejected plaintiff’s unconscionability challenge where the agreement at issue was arguably more unconscionable than the Ollo Agreement because it made the investor arbitrate claims against the brokerage but not vice-versa. See id. at 1090-91. At minimum, the arbitration provision in the Ollo Agreement requires either party to arbitrate claims against the other. (See Docket No. 85-1 Ex. A at 11.) While the Ninth Circuit does not appear to have applied Missouri law in similar circumstances, it has rejected unconscionability challenges in instances where a plaintiff consumer has challenged the defendant’s arbitration agreement under the laws of different states. See, e.g., Patrick v. Running Warehouse, LLC, 93 F.4th 468, 479-80 (9th Cir. 2024); Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1032-33 (9th Cir. 2016). For example, the Ninth Circuit recently held in a dispute between retailers of sporting goods and customers that “the presence of a unilateral modification provision, without more, does not render a separate arbitration clause at all substantively unconscionable” under California law. Running Warehouse, 93 F.4th at 479-80. In doing so, the Ninth Circuit followed its prior reasoning in Tompkins v. 23andMe, Inc., 840 F.3d at 1032-33, where it came to the same conclusion regarding the alleged unconscionability of a contract containing both unilateral modification and arbitration provisions. There the Ninth Circuit held that “although we have held that a unilateral modification provision itself may be unconscionable, we have not held that such an unconscionable provision makes the arbitration provision or the contract as a whole unenforceable.” Id. at 1033. The same reasoning applies to the Ollo Agreement here. Regardless, the parties delegated adjudication of contractual challenges against the Ollo and Ally Agreements themselves such as lack of assent or consideration and unconscionability to the arbitrator. (See Docket No. 85-1 Ex. A at 11.) The Ollo Agreement’s arbitration provision states that “claims regarding the applicability of this arbitration provision or the validity of the entire Agreement shall be resolved exclusively by arbitration.” (Id. at 11 (capitalization altered).) Such delegation is sufficient to compel arbitration of his claim against Ally. See Running Warehouse, 93 F.4th at 479-80 (compelling arbitration because parties agreed to delegate arbitrability to arbitrator). C. Assent Plaintiff next argues that he never assented to the Ally Agreement. (See Docket No. 92-2 at ¶¶ 4-8.) Plaintiff’s reasoning is that he has not used the card since August 25, 2022, which predates Ally’s acquisition of Ollo. (See id.) As a result, plaintiff never used the card while the Ally Agreement was in effect, so its terms do not apply to him, in his view. But plaintiff’s assent to the Ally Agreement is not necessary to compel arbitration of his claim against Ally. The Ollo Agreement makes clear that the exclusive means of accepting it are (1) not cancelling the “account within 30 days after receiving a card,” or (2) using the account in any way, such as by making purchases using the card. (Docket No. 85-1 Ex. A at 8 (capitalization altered).) This means that plaintiff accepted the Ollo Agreement, including its arbitration provision, by using the card between June and August 2022, and by not closing the account afterwards. (See Docket No. 92-2 at ¶ 8.) In addition, the Ollo Agreement anticipates Ally’s acquisition of Ollo by including Ollo’s “employees, affiliates, beneficiaries, agents . . . and assigns” as potential enforcers of its arbitration agreement and clarifying that “the purchaser(s) of any balances of your account are express third- party beneficiaries of this arbitration provision and are entitled to enforce it to the same extent as if they were a party to this agreement.” (Id. (cleaned up).) As such, plaintiff’s acceptance of the Ollo Agreement survives Ally’s acquisition of Ollo, and plaintiff’s argument that he never assented to the Ally Agreement fails. D. Other Arguments Plaintiff also argues that Ally’s alleged non- compliance with formalities set out in federal and Delaware statutes extinguishes its right to compel arbitration; that the Frantz declaration submitted by Ally is inadmissible due to its lack of foundation and her lack of personal knowledge; and that Ally waived any right to compel arbitration by waiting ten months after being served with the complaint to move to compel arbitration. The court finds each of these arguments to be without merit. Plaintiff fails to cite any binding authority why any of the cited statutes preclude arbitration. See, e.g., 15 U.S.C. §§ 7001(c), 7006; 5 Del. Code § 952(a). Franz’s declaration reflects her personal knowledge and lays a proper foundation for her testimony. (See Docket No. 59 at 3-6 & n.2.) And Ally did not make “an intentional decision not to move to compel arbitration.” See Armstrong v. Michaels Stores, Inc., 59 F.4th 1011, 1014-5 (9th Cir. 2023). IT IS THEREFORE ORDERED that Ally’s motion to compel arbitration (Docket No. 85) be, and the same hereby is, GRANTED. IT IS FURTHER ORDERED that the claim against Ally is STAYED pending arbitration. Because all claims in this case have been dismissed or stayed, the Clerk shall close this file administratively, subject to it being reopened upon the application of any party after arbitration has been fully EERIE I ERI IIE RII IDE III RIS IIE IIIS SII ISIE ee

completed. dette Ah (hi. Dated: March 3, 2025 □□□□□□□□□□□□□□□□□□□□□ UNITED STATES DISTRICT JUDGE 10