A District Court judge in California has denied a motion to remand a Fair Credit Reporting Act lawsuit back to small claims court, ruling that language in a cardholder agreement allowing disputes to be pursued in small claims court did not waive the defendant’s right to remove the case to federal court.
The background: The plaintiff, who is representing herself, filed suit against the defendant in small claims court earlier this year.
- The plaintiff accused the defendant of violating the FCRA by reporting an incorrect date of first delinquency on the plaintiff’s credit report and failing to conduct a reasonable investigation after the plaintiff disputed the information multiple times, and sought statutory and actual damages for the distress and time lost dealing with the errors.
- The defendant removed the case to federal court on the grounds that the complaint raised only federal claims.
- The plaintiff moved to remand, pointing to a provision in the arbitration section of the defendant’s cardholder agreement stating that a claim may be pursued in small claims court “provided that the action remains in that court.” The plaintiff argued that language imposed a mandatory, continuing obligation to keep disputes in small claims court.
- The plaintiff also argued that because the defendant’s answer raised the plaintiff’s lack of standing as an affirmative defense, the federal court was deprived of jurisdiction and had to send the case back.
The ruling: Judge Beth Labson Freeman of the District Court for the Northern District of California denied the motion to remand.
- Judge Freeman ruled that merely raising standing as an affirmative defense does not strip a court of jurisdiction, and after examining the issue herself, found the plaintiff’s alleged lost time and energy to be a concrete injury sufficient to keep the case in federal court.
- The judge noted that a forum selection clause does not affect a court’s subject matter jurisdiction and is not the kind of defect that requires a case to be sent back to state court.
- Because the provision the plaintiff relied on sits inside the arbitration section of the agreement, and neither side ever elected arbitration, the judge concluded the “remains in that court” language was a condition for pursuing small claims court as an alternative to arbitration, not a promise never to remove a case.
- Judge Freeman found persuasive the defendant’s argument that if it had “intended to waive removal, the agreement could have said so directly. It did not.”
- The judge pointed out that another judge in the same district recently reached the same conclusion about nearly identical language in a different card issuer’s agreement.
- The fact that the FCRA allows claims to be heard in any court of competent jurisdiction, not just federal court, did not by itself compel remand, the judge ruled.
- The plaintiff’s request for costs associated with the removal was also denied.
