Clark v. Trans Union LLC

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 BOBBY J. CLARK, JR., No. 2:24-cv-783 WBS CKD 13 Plaintiff, 14 v. MEMORANDUM AND ORDER RE: ALLY’S MOTION TO COMPEL 15 TRANS UNION LLC; EXPERIAN ARBITRATION INFORMATION SOLUTIONS, INC.; 16 EQUIFAX INFORMATION SERVICES, LLC; ONEMAIN FINANCIAL GROUP, 17 LLC; and ALLY FINANCIAL INC.; 18 Defendants. 19 ----oo0oo---- 20 21 Plaintiff Bobby J. Clark, Jr. (“plaintiff”) brought 22 this action against multiple entities, alleging violations of 23 credit reporting statutes. (Docket No. 1.) One of those 24 entities is defendant Ally Financial, Inc. (“Ally”), which moves 25 to compel arbitration and stay the matter as to itself pending 26 arbitration. (Docket No. 85.)1 27 1 The court previously granted a motion to compel 28 arbitration by co-defendant Experian Information Solutions, LLC, 1 I. Background 2 Ally “is a bank holding company with its headquarters 3 in Detroit, Michigan.” (Docket No. 1 at ¶ 24.) Ally is 4 incorporated in Delaware. (Docket No. 92-3.) On October 21, 5 2021, Ally acquired Fair Square Financial Holdings LLC and its 6 subsidiaries, including Ollo Card Services (“Ollo”). (Docket 7 No. 85-1 at ¶¶ 2, 6.) The acquisition closed on December 1, 8 2021. (Id.) 9 On April 24, 2022, plaintiff applied for an Ollo 10 Rewards credit card, which Ollo approved that same day. (Id. at 11 ¶ 7.) Shortly thereafter, the Bank of Missouri issued plaintiff 12 the card with a cardmember agreement (“Ollo Agreement”) 13 containing its terms of service. (Id.) Plaintiff used the card 14 between June and August 2022. (Id. Ex. B at 13, 17.) On August 15 25, 2022, plaintiff signed up for a debt consolidation program to 16 consolidate his debt, and in that process the card was paid off. 17 (Docket No. 92-2 at ¶¶ 5-8.) 18 Sometime between September 23, 2022, and September 28, 19 2022, Ally notified plaintiff that it had acquired Ollo and his 20 credit card account. (Docket No. 85-1 at ¶ 12.) In that time, 21 Ally also issued an amended cardholder agreement (“Ally 22 Agreement”) to reflect its acquisition of Ollo. (Id.) Aside 23 from the nominal change in counterparties, the only other 24 apparent difference between the two agreements which has any 25 relevance to this motion is that the Ollo Agreement’s choice of 26

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

28 1 law provision names Missouri while the Ally Agreement designates 2 Utah as its choice of law.2 (Docket No. 85-1 at ¶¶ 10, 15.) 3 Plaintiff asserts a single claim against Ally under 4 15 U.S.C. § 1681s-2(b). (Docket No. 1 at ¶¶ 224-229.) The crux 5 of this claim is that Ally incorrectly reported the account for 6 plaintiff’s Ollo Rewards credit card as past due despite 7 plaintiff paying it off through debt consolidation. (Id. 8 at ¶¶ 60-65, 110-20, 152-55, 192, 224-29.) 9 II. Legal Standards 10 The Federal Arbitration Act (“FAA”) provides that an 11 arbitration agreement “shall be valid, irrevocable, and 12 enforceable, save upon such grounds as exist at law or in equity 13 for the revocation of any contract.” 9 U.S.C. § 2. The FAA 14 “mandates that district courts shall direct the parties to 15 proceed to arbitration on issues as to which an arbitration 16 agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 17 470 U.S. 213, 218 (1985). 18 “The FAA limits courts’ involvement to ‘determining 19 (1) whether a valid agreement to arbitrate exists and, if it 20 does, (2) whether the agreement encompasses the dispute at 21 issue.’” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th 22 Cir. 2008) (quoting Chiron Corp. v. Ortho Diagnostic Sys., Inc., 23 207 F.3d 1126, 1130-31 (9th Cir. 2000)) (capitalization altered). 24 In doing so, the court must “rely on the summary judgment 25

26 2 Where the cardmember agreements, including their arbitration provisions, are substantially similar, the court only 27 quotes the Ollo Agreement’s language. Also, the court uses the phrases “arbitration provision” and “arbitration agreement” 28 interchangeably. 1 standard” to resolve genuine disputes of material fact. Knapke 2 v. PeopleConnect, Inc., 38 F.4th 824, 831 (9th Cir. 2022). 3 The Ollo Agreement states that “all disputes against us 4 and/or related third parties shall be resolved by binding 5 arbitration only. . . . If either you or we elect to pursue any 6 claim by either you or us against the other, then the claim shall 7 be resolved exclusively by arbitration.” (Docket No. 85-1 Ex. A 8 at 11 (capitalization altered).) It defines “claim” as “any 9 claim, dispute or controversy arising from or relating in any way 10 to this Agreement or your account, or their establishment, or any 11 transaction or activity on your account.” (Id.) Ally seeks to 12 enforce this arbitration agreement in the instant motion. 13 III. Discussion 14 A. Illusoriness 15 “The essential elements of any contract, including one 16 for arbitration, are offer, acceptance, and bargained for 17 consideration.” Baker v. Bristol Care, Inc., 450 S.W.3d 770, 774 18 (Mo. 2014) (capitalization altered). Plaintiff argues that the 19 Ollo Agreement is void because of Ally’s unilateral right to 20 amend the terms of the agreement, which he claims makes the 21 agreement illusory. Under Missouri law, a contract where a party 22 retains “the unqualified right” to unilaterally amend its terms 23 may lack consideration and become “illusory.” Johnson v. Menard, 24 632 S.W.3d 791, 797-98 (Mo. Ct. App. 2021). 25 The policy rationale for this principle in Missouri 26 contract law is the possibility that the party with “the 27 unqualified right to unilaterally modify” the contract may 28 retroactively modify the agreement to evade its contractual 1 obligations when those obligations become inconvenient. Id. 2 Missouri law affords an exception to this unilateral modification 3 rule for contract for amendments which “are prospective in 4 application” and give the counterparty “reasonable advance 5 notice.” Patrick v. Altria Grp. Distrib. Co., 570 S.W.3d 138, 6 144 (Mo. Ct. App. 2019). 7 The Ollo Agreement states that Ollo or Ally “can amend 8 the terms of this Agreement by changing terms, adding new terms, 9 or deleting terms from this Agreement at any time. We will give 10 you notice of an amendment as required by applicable law.” 11 (Docket No. 85-1 Ex. A at 10.) It continues that “any amendment 12 of this agreement will become effective at the time stated in our 13 notice. Unless we state otherwise, the amended terms will apply 14 to all outstanding balances on your account as well as to new 15 transactions to the extent permitted by applicable law.” (Id.) 16 The Ollo Agreement’s amendment section is silent on whether it 17 applies to the arbitration provision. 18 Notwithstanding plaintiff’s argument that the Ollo 19 Agreement is illusory, he does not claim that Ally exercised the 20 unilateral modification provision in any way that was prejudicial 21 to him and has not persuaded the court that the Ollo Agreement is 22 void ab initio because of this provision. See Donelson v. 23 Ameriprise Fin. Servs., Inc., 999 F.3d 1080, 1089-91 (8th Cir. 24 2021), where the Eighth Circuit applied Missouri law and enforced 25 the defendant brokerage’s arbitration agreement over the 26 plaintiff investor’s argument that it was illusory due to the 27 brokerage retaining the unilateral right to modify it. The 28 Eighth Circuit reasoned that the brokerage providing and 1 servicing the plaintiff’s investment account constituted 2 consideration for the underlying agreement. Id. at 1090-91. Its 3 analysis in Donelson applies equally here to the Ollo agreement. 4 See id. at 1089-91. 5 Therefore, the court rejects plaintiff’s argument that 6 the arbitration provision is illusory under Missouri state law. 7 B. Unconscionability 8 Plaintiff next argues that the Ollo Agreement Ally 9 seeks to enforce is unconscionable due to its arbitration 10 provision and unilateral modification provision. 11 “Unconscionability is defined as an inequality so strong, gross, 12 and manifest that it must be impossible to state it to one with 13 common sense without producing an exclamation at the inequality 14 of it. The unconscionability doctrine ‘guards against one-sided 15 contracts, oppression, and unfair surprise.’” Id. at 1091 16 (citation omitted) (quoting Eaton v. CMH Homes, Inc., 461 S.W.3d 17 426, 432 (Mo. 2015)). 18 In Donelson, 999 F.3d at 1089-91, the Eight Circuit 19 rejected plaintiff’s unconscionability challenge where the 20 agreement at issue was arguably more unconscionable than the Ollo 21 Agreement because it made the investor arbitrate claims against 22 the brokerage but not vice-versa. See id. at 1090-91. At 23 minimum, the arbitration provision in the Ollo Agreement requires 24 either party to arbitrate claims against the other. (See Docket 25 No. 85-1 Ex. A at 11.) 26 While the Ninth Circuit does not appear to have applied 27 Missouri law in similar circumstances, it has rejected 28 unconscionability challenges in instances where a plaintiff 1 consumer has challenged the defendant’s arbitration agreement 2 under the laws of different states. See, e.g., Patrick v. 3 Running Warehouse, LLC, 93 F.4th 468, 479-80 (9th Cir. 2024); 4 Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1032-33 (9th Cir. 5 2016). 6 For example, the Ninth Circuit recently held in a 7 dispute between retailers of sporting goods and customers that 8 “the presence of a unilateral modification provision, without 9 more, does not render a separate arbitration clause at all 10 substantively unconscionable” under California law. Running 11 Warehouse, 93 F.4th at 479-80. In doing so, the Ninth Circuit 12 followed its prior reasoning in Tompkins v. 23andMe, Inc., 840 13 F.3d at 1032-33, where it came to the same conclusion regarding 14 the alleged unconscionability of a contract containing both 15 unilateral modification and arbitration provisions. There the 16 Ninth Circuit held that “although we have held that a unilateral 17 modification provision itself may be unconscionable, we have not 18 held that such an unconscionable provision makes the arbitration 19 provision or the contract as a whole unenforceable.” Id. at 20 1033. The same reasoning applies to the Ollo Agreement here. 21 Regardless, the parties delegated adjudication of 22 contractual challenges against the Ollo and Ally Agreements 23 themselves such as lack of assent or consideration and 24 unconscionability to the arbitrator. (See Docket No. 85-1 Ex. A 25 at 11.) The Ollo Agreement’s arbitration provision states that 26 “claims regarding the applicability of this arbitration provision 27 or the validity of the entire Agreement shall be resolved 28 exclusively by arbitration.” (Id. at 11 (capitalization 1 altered).) Such delegation is sufficient to compel arbitration 2 of his claim against Ally. See Running Warehouse, 93 F.4th at 3 479-80 (compelling arbitration because parties agreed to delegate 4 arbitrability to arbitrator). 5 C. Assent 6 Plaintiff next argues that he never assented to the 7 Ally Agreement. (See Docket No. 92-2 at ¶¶ 4-8.) Plaintiff’s 8 reasoning is that he has not used the card since August 25, 2022, 9 which predates Ally’s acquisition of Ollo. (See id.) As a 10 result, plaintiff never used the card while the Ally Agreement 11 was in effect, so its terms do not apply to him, in his view. 12 But plaintiff’s assent to the Ally Agreement is not 13 necessary to compel arbitration of his claim against Ally. The 14 Ollo Agreement makes clear that the exclusive means of accepting 15 it are (1) not cancelling the “account within 30 days after 16 receiving a card,” or (2) using the account in any way, such as 17 by making purchases using the card. (Docket No. 85-1 Ex. A at 8 18 (capitalization altered).) This means that plaintiff accepted 19 the Ollo Agreement, including its arbitration provision, by using 20 the card between June and August 2022, and by not closing the 21 account afterwards. (See Docket No. 92-2 at ¶ 8.) 22 In addition, the Ollo Agreement anticipates Ally’s 23 acquisition of Ollo by including Ollo’s “employees, affiliates, 24 beneficiaries, agents . . . and assigns” as potential enforcers 25 of its arbitration agreement and clarifying that “the 26 purchaser(s) of any balances of your account are express third- 27 party beneficiaries of this arbitration provision and are 28 entitled to enforce it to the same extent as if they were a party 1 to this agreement.” (Id. (cleaned up).) As such, plaintiff’s 2 acceptance of the Ollo Agreement survives Ally’s acquisition of 3 Ollo, and plaintiff’s argument that he never assented to the Ally 4 Agreement fails. 5 D. Other Arguments 6 Plaintiff also argues that Ally’s alleged non- 7 compliance with formalities set out in federal and Delaware 8 statutes extinguishes its right to compel arbitration; that the 9 Frantz declaration submitted by Ally is inadmissible due to its 10 lack of foundation and her lack of personal knowledge; and that 11 Ally waived any right to compel arbitration by waiting ten months 12 after being served with the complaint to move to compel 13 arbitration. The court finds each of these arguments to be 14 without merit. Plaintiff fails to cite any binding authority why 15 any of the cited statutes preclude arbitration. See, e.g., 16 15 U.S.C. §§ 7001(c), 7006; 5 Del. Code § 952(a). Franz’s 17 declaration reflects her personal knowledge and lays a proper 18 foundation for her testimony. (See Docket No. 59 at 3-6 & n.2.) 19 And Ally did not make “an intentional decision not to move to 20 compel arbitration.” See Armstrong v. Michaels Stores, Inc., 21 59 F.4th 1011, 1014-5 (9th Cir. 2023). 22 IT IS THEREFORE ORDERED that Ally’s motion to compel 23 arbitration (Docket No. 85) be, and the same hereby is, GRANTED. 24 IT IS FURTHER ORDERED that the claim against Ally is STAYED 25 pending arbitration. Because all claims in this case have been 26 dismissed or stayed, the Clerk shall close this file 27 administratively, subject to it being reopened upon the 28 application of any party after arbitration has been fully EERIE I ERI IIE RII IDE III RIS IIE IIIS SII ISIE ee

1 completed. dette Ah (hi. 2 Dated: March 3, 2025 □□□□□□□□□□□□□□□□□□□□□ 3 UNITED STATES DISTRICT JUDGE 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10