Court Revisits Denial of Motion to Compel Arbitration
True to my Borscht Belt heritage, I think of an old joke whenever a court gives multiple reasons for rejecting a claim. Like a lot of such jokes, one can vary it to one’s tastes. This is my current version:
A man meets with a psychiatrist for the first time. He recounts his tale of woe and all of his difficulties in dealing with his family and acquaintances. After sharing his most intimate experiences and thoughts with the psychiatrist, the man says, “So, what do you think?”
The psychiatrist sets down his note pad, gazes upon the client sympathetically, and says, “I think you’re crazy.”
The client is outraged. “You can’t just say that! I’ve only been here half an hour. You can’t make a diagnosis like that.”
The psychiatrist just shakes his head, affirming his certainty.
“Well,” says the client, rising to his feet, “I need a second opinion.”
“Okay,” says the psychiatrist. “You are also colorblind. I mean, your clothes. Damn!”
My jokes about contracts law would have killed here!
Thus spake the U.S. District Court for the Western District of Washington in Goudarzi v. J.P. Morgan Chase in providing two grounds for rejecting a motion by J.P. Morgan Chase (Chase) to compel arbitration last summer. Back in July, the Court found that J.P. Morgan had not met its burden of demonstrating that the plaintiffs received reasonable notice of arbitration and assented to Chase’s terms. That’s the “you’re crazy” part. Moreover, even if an arbitration agreement did exist, it was procedurally unconscionable. That’s the colorblind part.
In Goudarzi v. J.P. Morgan Chase, the Court revisited its earlier finding and offered a third opinion. Its original conclusion had been too hasty. The parties were entitled to limited discover to resolve factual disputes about whether an arbitration agreement was formed. The plaintiffs allege that Chase first refused to honor a cashier’s check and then closed their bank accounts for discriminatory reasons. They allege racial discrimination, as well as statutory violations.
When they brought suit, Chase sought to compel arbitration, pointing to a Deposit Account Agreement (DAA) that plaintiffs allegedly executed when they opened their accounts. Plaintiffs had no recollection of seeing or signing the DAA, and Chase provided no information about the manner in which it had been executed.
Last summer, in rejecting Chase’s motion to compel. The Court found that the DAA’s arbitration agreement did not delegate issues of arbitrability to the arbiter. It also found that Chase had not refuted plaintiffs’ claim that Chase never explained what they were agreeing to when they signed electronic signature cards. Though the information was available online, it was hidden in a maze of fine print. Either that did not amount to sufficient notice or it rendered the agreement procedurally unconscionable.
The Court was generally unimpressed with Chase’s arguments on its Rule 60(b) motion for relief from its earlier order. Chase either rehashed arguments that the Court had already rejected or raised new legal theories, but a party cannot raise new theories on a Rule 60(b) motion. Nonetheless, the Court conceded that it erred in finding the arbitration provision procedurally unconscionable. Neither party met its burden to show the manner in which the plaintiffs assented to Chase’s terms and the Court thus erred in ruling as it did. It should not have ordered limited discovery into the arbitrability of plaintiffs’ claims.
We wrote recently about a similar claim against Chase. That case involves allegations of trade libel and breach of the duty of good faith and fair dealing rather than discrimination. I wonder if Chase will invoke its arbitration clause in that case as well.