The Court of Appeals for the Third Circuit has affirmed an order compelling arbitration of a consumer’s Fair Credit Reporting Act lawsuit, holding that her claim fell within the broad reach of an arbitration clause in her credit card agreement.
The background: The case traces back to an old credit card account and a credit report inquiry the plaintiff insisted should never have happened.
- The plaintiff opened a credit card with the defendant more than a decade ago and, over about two years, ran up an unpaid balance of roughly $1,351 before the account was charged off as a loss.
- The defendant later assigned the debt to a third-party debt collector, ending the parties’ active relationship.
- More than eight years after the charge-off, the plaintiff filed a class action, alleging the defendant violated the FCRA by pulling her credit report “without consent or any lawful reason,” arguing that no credit relationship remained to justify the inquiry.
- The defendant removed the case to federal court and moved to compel arbitration, pointing to a clause in the cardholder agreement that covered “all controversies and claims of any kind” between the parties, including any disputes over information it reported to or obtained from credit bureaus.
The ruling: The Appeals Court affirmed the order sending the case to arbitration, even as it took issue with how the lower court got there.
- Judge Michael A. Chagares of the Third Circuit, who wrote that the plaintiff’s claim turned on the status of the relationship between the parties, and that the cardholder agreement governed that relationship. A dispute is covered, he explained, when it bears “some logical or causal connection to the agreement.”
- The plaintiff’s own theory worked against her. By insisting that no credit relationship existed when her report was pulled, she tied her claim directly to the agreement that had defined that relationship.
- The arbitration clause itself was sweeping, reaching any claim “arising from or relating in any way” to the account and specifically listing disputes over information obtained from credit bureaus, which was exactly what she alleged.
- The Appeals Court faulted the lower court for applying the wrong procedural standard, treating arbitrability as obvious from the face of the complaint when it was not. The result held anyway, because the plaintiff was not entitled to discovery on the question: she never disputed that the arbitration agreement existed.
