Summary
holding that a lawyer who files a collections lawsuit in state court has not waived his right to arbitrate a FDCPA claim subsequently brought by the cardholder in federal court
Summary of this case from Hodson v. Javitch, Block & Rathbone, LLPOpinion
CAUSE NO. IP-01-1036-C-B/S
March 14, 2002
ENTRY AND ORDER
This cause comes before the Court on Defendants' motions to compel arbitration and motions to dismiss. For the following reasons, the Court grants in part and denies in part the motions to compel, denies the motions to dismiss, and orders limited discovery on the issue of prohibitive arbitration costs.
Background
In 1987, defendant Greenwood Trust Company/Discover Financial Services, Inc. (Discover) issued a credit card to plaintiff Marilyn J. Fields (Fields). Compl. ¶ 1. By February 2001, Fields was in default on her Discover account. Compl. ¶ 12. In a February 14, 2001 letter to Fields, Discover requested that she pay the outstanding balance on her account — an amount totaling $9,329.33. Compl. ¶¶ 13-15, Ex. A. On April 5, 2001, defendant Howard Howe (Howe), an attorney retained by Discover to collect Fields' debt, sent Fields a letter asking her to make arrangements to pay the credit card debt. Compl. ¶¶ 20-21. Fields' continued failure to pay prompted Howe to file a complaint on behalf of Discover against Fields in Marion [County] Superior Court on May 15, 2001 seeking the balance due on her Discover account, interest, attorney fees and costs. Significant to the present case, Discover and Howe sought $1,950 in attorney fees and costs, Comp. ¶¶ 39-42, Ex. C, and on June 8, 2001, along with his application for a default judgment against Fields, Howe submitted to the Marion Superior Court a verified affidavit in support of his request for attorney fees. Compl. ¶¶ 60-64.
Fields responded by filing the present action in federal court against Howe and Discover on July 16, 2001, alleging that the defendants violated state and federal law in their attempts to collect Fields' Discover debt. Fields lodges claims under the Fair Debt Collection Practices Act (FDCPA) and under the Organized Crime Control Act of 1970, Racketeer Influenced and Corrupt Organizations (RICO). Her complaint, which seeks class certification, also includes claims of statutory deception, attorney deceit, common law breach of contract and abuse of the legal process. On September 25, 2001 and October 23, 2001, Discover and Howe, respectively, filed motions to compel arbitration and motions to dismiss. We turn now to a discussion of these motions.
Discussion
Federal policy favors the enforcement of private arbitration agreements. Brown v. Surety Fin. Serv., Inc., 2000 WL 528631, *1 (N.D.Ill. March 24, 2000) (citing Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983)). Under such policy, the Federal Arbitration Act (FAA) "authorizes a district court to compel arbitration of any issue covered by a valid and enforceable arbitration agreement." Id. (citing 9 U.S.C. § 4). According to the Seventh Circuit, an agreement to arbitrate "must be enforced `save upon such grounds as exist at law or in equity for the revocation of any contract.'" Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1148 (7th Cir. 1997) (quoting 9 U.S.C. § 2).
Fields launches several arguments in support of her position that arbitration in the case is inappropriate. She contends that under the terms of the original agreement between herself and Discover, Discover was authorized to change only existing terms; it could not add new terms, such as the arbitration provision that was added to her agreement in the latter half of 1999 (1999 arbitration provision). Second, Fields argues that Discover has failed to demonstrate that she received notice of Discover's March 1999 amendment allowing Discover to add new terms to the Cardmember Agreement (1999 change of terms provision). Next, Fields contends that defendants have waived any right to arbitrate. Lastly, Fields asserts that discovery should proceed before we reach a decision on the arbitration issue because, she insists, arbitration could prove prohibitively costly and could result in a biased decision. We address Fields' contentions seriatim.
First, Fields opines that although the language of the original agreement she entered with Discover allowed Discover to change the terms in the agreement, it did not permit Discover to add new terms. Thus, Fields concludes, Discover was not at liberty to add the 1999 arbitration provision at the foundation of Discover's motion to compel. Discover responds that its amendment of the Cardmember Agreement to add the 1999 arbitration provision was proper and that the arbitration provision precludes Fields from maintaining the present court action against it.
The language in the Cardmember Agreement initiating the relationship between Fields and Discover provided, in relevant part:
CHANGE OF TERMS. We may change any term or part of this Agreement, including any finance charge rate, fee or method of computing any balance upon which the finance charge rate is assessed, by sending you a written notice at least 30 days before the change is to become effective. . . . If you do not agree to the change, you must notify us in writing within 30 days after the mailing of the notice of change at the address provided in the notice of change, in which case your Account will be closed and you must pay us the balance you owe us under the existing terms of the unchanged notice. Use of your Account after the effective date of the change will be deemed acceptance of the new terms as of such effective date, even if you previously notified us that you did not agree to the change.
Compl., Ex. C.
Beginning in December 1998 and continuing through January 1999, Discover mailed with its monthly billing statements to its card members a notice of amendment. Matysik Decl. ¶ 6. The notice stipulated, in relevant part, that
[w]e are changing this section to permit us to change any term or part of the Agreement or to add any new term or part to the Agreement by sending you a written notice at least 15 days, instead of 30 days, before the change is to become effective. In addition, we are changing this section to require you to notify us in writing within 15 days, instead of 30 days, after the mailing of the notice of change that you do not agree to the change.
Matysik Decl. ¶ 6 and Ex. B. In accordance with the notice, Discover amended its "Change of Terms" clause. The revised 1999 change of terms provision incorporated the reduction in time for notice and response and permitted Discover to add new terms, but otherwise was identical to the original Cardmember Agreement, providing that
[w]e may change any term or part of this Agreement, including any finance charge rate, fee or method of computing any balance upon which the finance charge rate is assessed, or add any new term or part to this Agreement by sending you a written notice at least 15 days before the change is to become effective. We may apply any such change to the outstanding balance of your Account on the effective date of the change and to new charges made after that date. If you do not agree to the change, you must notify us in writing within 15 days after the mailing of the notice of change at the address provided in the notice of change, in which case your Account will be closed and you must pay the balance that you owe us under the existing terms of the unchanged Agreement. Otherwise, you will have agreed to the changes in the notice. Use of your Account after the effective date of the change will be deemed acceptance of the new terms of such effective date, even if you previously notified us that you did not agree to the change.
Matysik Decl. ¶ 6 and Ex. A.
Discover later mailed another notice of amendment to its cardholders. Beginning in July 1999 and continuing through August 1999, Discover notified cardholders that it was adding an arbitration clause to the Cardmember Agreement — that is, the 1999 arbitration provision. The notice provided as follows:
NOTICE OF AMENDMENT TO DISCOVER CARDMEMBER AGREEMENT
This notice informs you of changes to your current Discover Cardmember Agreement. Please note the effective date of the changes shown below and retain this notice for your records — WE ARE ADDING A NEW ARBITRATION SECTION WHICH PROVIDES THAT IN THE EVENT YOU OR WE ELECT TO RESOLVE ANY CLAIM OR DISPUTE BETWEEN US BY ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM. THIS ARBITRATION SECTION WILL NOT APPLY TO LAWSUITS FILED BEFORE THE EFFECTIVE DATE.
Matysik Decl. ¶ 15 and Ex. C. Discover's newly added arbitration clause, set forth in the same mailing as the notice, provided as follows:
ARBITRATION. WE ARE ADDING A NEW SECTION TO READ AS FOLLOWS:
ARBITRATION OF DISPUTES. In the event of any past, present or future claim or dispute (whether based upon contract, tort, statute, common law or equity) between you and us arising from or relating to your Account, any prior account you have had with us, your application, the relationships which result from your Account or the enforceability or scope of this arbitration provision, of the Agreement or any prior agreement, you or we may elect to resolve the claim or dispute by binding arbitration.
IF EITHER YOU OR WE ELECT ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM. PRE-HEARING DISCOVERY RIGHTS AND POST-HEARING APPEAL RIGHTS WILL BE LIMITED. NEITHER YOU NOR WE SHALL BE ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN ARBITRATION BY OR AGAINST OTHER CARDMEMBERS WITH RESPECT TO OTHER ACCOUNTS, OR ARBITRATE ANY CLAIMS AS A REPRESENTATIVE OR MEMBER OF A CLASS OR IN A PRIVATE ATTORNEY GENERAL CAPACITY. . . .
Matysik Decl. ¶ 16 and Ex. C.
Fields appears to agree that if the 1999 arbitration provision is enforceable, she is precluded from maintaining this cause in federal court. Fields contends, however, the clause is unenforceable against her. In particular, she claims that her original Cardmember Agreement permitted a change in its terms, but it did not permit addition of new terms. Thus, she argues that the 1999 change of terms provision Discover issued in late 1998 through early 1999 was ineffective to pave the way for Discover's addition of the arbitration clause.
In accordance with the Cardmember Agreement, our consideration of this issue is framed by Delaware law. See Compl., Ex. C (wherein it is provided that "[t]his agreement will be governed by the laws of the State of Delaware and applicable federal laws.). Significantly, a Delaware statute authorizes amendments to credit card agreements. In 5 Delaware Code § 952(a), the state legislature stipulated that
[u]nless the agreement governing a revolving credit plan otherwise provides, a bank may at any time and from time to time amend such agreement in any respect, whether or not the amendment or the subject of the amendment was originally contemplated or addressed by the parties or is integral to the relationship between the parties. Without limiting the foregoing, such amendment may change terms by the addition of new terms or by the deletion or modification of existing terms, whether relating to plan benefits or features, the rate or rates of periodic interest, the manner of calculating periodic interest or outstanding unpaid indebtedness, variable schedules or formulas, interest charges, fees, collateral requirements, methods for obtaining or repaying extensions of credit, attorney's fees, plan termination, the manner for amending the terms of the agreement, arbitration or other alternative dispute resolution mechanisms, or other matters of any kind whatsoever. . . . An agreement governing a revolving credit plan may be amended pursuant to this section regardless of whether the plan is active or inactive or whether additional borrowings are available thereunder. . . . Any notice of an amendment sent by the bank may be included in the same envelope with a periodic statement or as part of the periodic statement or in other materials sent to the borrower.
Id.
Fields states that the first two sentences of the above-quoted statutory language were not a part of § 952 until after an April 9, 1999 statutory amendment. She seems to argue that this portion of the statute was written only to govern a bank's contracts with new cardholders, not to govern contracts with existing ones. Because the initiation of her relationship with Discover pre-dated the April 9, 1999 amendment, Fields urges us to find that the statutory language is inapplicable to her.
We find nothing in the statutory language that supports Fields' position. Fields does not explain why the legislature would permit banks to add terms not originally contemplated to the agreements of cardholders who initiated their relationship with Discover after April 1999 but would not permit banks to add such terms to the agreements of cardholders who initiated their relationship with Discover before April 1999. Moreover, although the pre-April 1999 version of § 952 did not include the first two sentences of the post-April 1999 version, it did contain the following sentence: "[A] bank may at any time and from time to time amend the terms of such agreement in any respect." See Annotations to 5 Delaware Code § 952(a). This broad language clearly permitted Discover to amend its Cardmember Agreements to include the right to add new terms. Because both the earlier and amended versions of § 952(a) permitted Discover to add new terms to its Cardmember Agreements, we must reject Fields' argument that the 1999 statutory amendment came too late to affect her agreement with Discover.
Fields also appears to argue that the statutory phrase "unless the agreement governing a revolving credit plan otherwise provides" exempts her Cardmember Agreement from the amended version of § 952(a). She asserts that because her "original Cardmember Agreement did not provide a way to change the manner for amending the "Change of Terms" . . . any amendment, with notice to the consumer or otherwise, would be ineffective." Pl.'s Response at 13.
Again, we must reject Fields' contention. The statutory phrase on which she relies does not assist her. Specifically, the original Cardmember Agreement between Discover and Fields does not "otherwise provide," — that is, it does not include language precluding Discover from adding new terms.
Additionally, interpreting the statutory language in the manner Fields urges would lead to an untenable result. In particular, the statute stipulates that contract terms not originally contemplated or addressed by the parties may be added. Under Fields' interpretation, Discover would be able to add new terms if the original Cardmember Agreements did not make any mention of Discover retaining the right to change or add to the terms of the agreement, but if Discover included in the original agreement a provision retaining the right to change the terms of the agreement, then it would be prohibited from adding new terms because, according to Fields, the phrase "change of terms" cannot be read to include the phrase "add new terms." We find it inconceivable that the Delaware legislature would have enacted a statute that placed a bank that fails to make any provision for future amendment of its Cardmember Agreements in a better position than a bank anticipating the potential need for such amendments. Fields' argument is clearly without merit.
Next, Fields insists that even if we sanction Discover's addition of new terms in her Cardmember Agreement, still Discover's motion to compel should fail. According to Fields, Discover has not demonstrated that she received notice of the relevant amendments to the Cardmember Agreement; Fields argues that the declaration of Ashoke Dutt (Dutt), executive vice president of business development and international banking for Discover, is insufficient to prove notice. Fields claims that Dutt's declaration is inadequate because Dutt does not state that he actually mailed the notice; because Dutt did not work for Discover in 1999; because he did not provide the address to which Fields' notice allegedly was sent; and because he did not outline Discover's routine practices in sending notice.
The Dutt declaration addresses the issue of notice as it pertains to Discover's addition of the 1999 arbitration provision. Because the later-filed Matysik declaration, discussed infra in the text, addresses notice as it relates to the addition of both the arbitration and the change of terms provisions, our discussion here is applicable to both notices.
In reply, Discover dismantles Fields' argument by two distinct means. First, Discover argues that the Dutt declaration is perfectly appropriate and adequate to demonstrate notice. Second, Discover submits the affidavit of Dan Matysik (Matysik), wherein Matysik overcomes Fields' perceived obstacles to notice. Matysik states that he worked for Discover during the relevant time frame; he provides the address to which Fields' notice was sent; and he outlines Discover's routine practices for ensuring that cardholders receive notice of amendments to the Cardmember Agreement. And, although Matysik did not state that he personally mailed Fields' notice, Delaware case law tell us, as we discuss infra, that his averments are sufficient to establish that Discover forwarded the appropriate notice to Fields both for the 1999 change of terms provision and for the 1999 arbitration provision. Significantly, Matysik states that Fields submitted a payment to Discover in response to the mailings that contained the notices relevant to this action. Matysik Decl. ¶¶ 11, 21.
Because Discover offers the declaration of Matysik we need not consider its contentions that Dutt was a proper person to speak on behalf of Discover and that Dutt's declaration established all that is necessary for proving notice.
In Edelist v. MBNA America Bank, 2001 WL 946500 (Del.Super.Ct. Aug. 9, 2001), the court rejected plaintiff's allegation that he did not receive notice of a proposed amendment. "His claim is a mere assertion of counsel," the court reasoned. "That is contrasted with MBNA's affidavit from [Deborah] Fisher[, senior vice president of MBNA]." Id. at *7. The Delaware court concluded that Fisher's affidavit was sufficient to demonstrate that the plaintiff "(1) was sent and received notice of the amendment and (2) did not exercise the opt-out provision." Id. This reasoning is directly applicable to the case sub judice. Discover has submitted Matysik's declaration, which establishes that Fields was sent and received notice and that she did not exercise the opt-out provision. Fields has offered only her lawyer's arguments in an attempt to stave off arbitration and dismissal. Such unsupported assertions are inadequate to counter Discover's evidence. See also Pick v. Discover Fin. Servs., Inc., 2001 WL 1180278, *4 (D.Del. Sept. 28, 2001) (holding that "defendant's mailing procedures and plaintiff's payment of his July 20, 1999 bill are sufficient evidence to satisfy defendant's burden of demonstrating adequate notice to plaintiff.").
In sum, we reject Fields' argument that Discover's evidence was insufficient to create a rebuttable presumption of delivery. Rather, we find that Discover created such a presumption and that Fields failed to rebut same. We turn now to consider Fields' allegations that Discover and Howe waived their right to arbitrate.
The arbitration provision in the governing Cardmember Agreement provides that
[i]n the event of any past, present or future claim or dispute (whether based upon contract, tort, statute, common law or equity) between you and us arising from or relating to your Account, any prior account you have had with us, your application, the relationships which result from your Account or the enforceability or scope of this arbitration provision, of the Agreement or of any prior agreement, you or we may elect to resolve the claim or dispute by binding arbitration.
IF EITHER YOU OR WE ELECT ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM. PRE-HEARING DISCOVERY RIGHTS AND POST-HEARING APPEAL RIGHTS WILL BE LIMITED. NEITHER YOU NOR WE SHALL BE ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN ARBITRATION BY OR AGAINST OTHER CARDMEMBERS WITH RESPECT TO OTHER ACCOUNTS, OR ARBITRATE ANY CLAIMS AS A REPRESENTATIVE OR MEMBER OF A CLASS OR IN A PRIVATE ATTORNEY GENERAL CAPACITY. Even if all parties have opted to litigate a claim in court, you or we may elect arbitration with respect to any claim made by a new party or any new claims later asserted in that lawsuit, and nothing undertaken therein shall constitute a waiver of any rights under this arbitration provision.
Matysik Decl., Ex. C.
According to Fields, Discover waived its right to seek arbitration when Discover initiated its collection action against her in state court. She argues that the conduct for which she now seeks recovery was committed by defendants in state court and that defendants "agreed, by their voluntary filing of the state Court action, to have the issue addressed by a Court, as opposed to having the issues arbitrated." Pl.'s Resp. Br. at 16. Fields' contention cannot be sanctioned.
The language of the arbitration provision demonstrates that the claims Fields lodged in this Court are plainly subject to arbitration. Undoubtedly, the claims represent disputes relating to Fields' Discover account. Additionally, the tort and other claims Fields pursues in federal court are not the same claims Discover lodged in state court. The fact that the present action arose because of Discover's allegedly improper conduct in the course of that state court proceeding does not render this cause one and the same as Discover's state court case. The state court case is a collection action — a case initiated by Discover; the federal court case is an action for alleged violation of federal and state laws — a case initiated by Fields. Furthermore, even if the cases were one and the same, still the governing Cardmember Agreement would permit arbitration. The arbitration provision stipulates that any new claim later asserted in a lawsuit is subject to arbitration and "nothing undertaken therein shall constitute a waiver of any rights under this arbitration provision." See supra at 13. Additionally, the arbitration provision stipulates that it "shall survive . . . any legal proceedings by us to collect a debt owed by you. . . ." Matysik Decl., Ex. C. This language clearly dooms Fields' waiver argument against Discover. We turn to discuss Fields' assertion that defendant Howe has waived the right to arbitration.
In Howe's brief in support of his motion to compel, he argues that, as Discover's attorney and agent, he is subject to the arbitration agreement between Discover and Fields. Fields apparently concedes that the arbitration provision covers Howe, as she does not challenge Howe's argument. Fields merely contends in a footnote that "Defendant Howard Howe waived his right to arbitrate this controversy." Pl.s' Resp. Br. at 1 n. 1. Fields cites a few cases in her footnote "argument," but she fails to explain in what way those cases support her waiver contention. Fields provides us only with the timing of events leading to Howe's motion to compel: Fields notes that Discover first filed its motion to compel arbitration; Howe thereafter filed his answer to Fields' complaint; and Howe later filed his motion to compel arbitration. Fields' meager argument is insufficient to demonstrate that Howe waived his right to arbitrate.
In any event, Howe did not expressly waive his right to arbitrate and his actions do not amount to implicit waiver. To determine whether one implicitly has waived a right to arbitrate, a court considers whether "based on all the circumstances, the [party against whom the waiver is to be enforced] has acted inconsistently with the right to arbitrate." Grumhaus, 223 F.3d 648, 650-51 (7th Cir. 2000) (citation omitted). Howe explains that his attorney initially was unsure about whether the arbitration agreement applied to Howe. Howe's Reply Br. at 5 (citing Ex.A, Kaiser Aff. ¶¶ 6-7). While still researching the issue, Howe's answer became due and Howe, rather than asking for an additional extension of time to file his answer, filed same, including the right to arbitrate as an affirmative defense. Howe's Reply Br. at 5. Eight days later Howe moved to compel arbitration. Id. These facts do not suggest that Howe acted inconsistently with his right to arbitrate. Therefore, Fields' unsupported allegations of waiver must fail.
Next, we turn to Fields' argument that she is entitled to discovery prior to the issuance of a decision on defendants' motions to compel and motions to dismiss. Fields insists that discovery may prove that arbitration of this matter would involve prohibitive costs and would result in a biased decision. In Green Tree Financial Corp. — Ala. v. Randolph, 531 U.S. 79 (2000), the United States Supreme Court considered whether an agreement "to arbitrate is unenforceable because it says nothing about the costs of arbitration, and thus fails to provide Randolph protection from potentially substantial costs of pursuing her federal statutory claims in the arbitral forum." Id. at 89.
The Court found that
[i]t may well be that the existence of large arbitration costs could preclude a litigant such as Randolph from effectively vindicating her federal statutory rights in the arbitral forum. But the record does not show that Randolph will bear such costs if she goes to arbitration. Indeed, it contains hardly any information on the matter. As the Court of Appeals recognized, "we lack . . . information about how claimants fare under Green Tree's arbitration clause."
Id. at 90-91 (quoting Randolph v. Green Tree Fin. Corp. — Ala., 178 F.3d 1149, 1158 (11th Cir. 1999)).
The Court ruled that Randolph, as the party resisting arbitration, carried the burden of proving that arbitration would be prohibitively expensive. Id. at 92. Because Randolph lacked evidence in support of her argument, the Court concluded, her argument was too speculative to justify invalidation of the arbitration agreement. Id. at 91. Since Green Tree, the issue of the cost of arbitration has come before other courts. The court in Phillips v. Associates Home Equity Services, Inc., 179 F. Supp.2d 840 (N.D.Ill. 2001), discussing Green Tree, concluded that plaintiff Phillips had "come forward with evidence that the costs associated with arbitration would effectively preclude her from pursuing her TILA claims." Id. at 846. The court denied defendants' motion to compel, noting its willingness to reconsider its ruling if defendants agreed to bear the costs associated with arbitration. Id. at 847.
In Livingston v. Associates Finance, Inc., 2001 WL 709465 (N.D.Ill. June 25, 2001), the magistrate judge found that in Green Tree the Supreme Court "implicitly indicated that discovery would be the appropriate vehicle to make particularized findings regarding excessive costs." Id. at *2. The Livingston court continued:
Furthermore, it seems axiomatic that, if the Supreme Court places a burden of proof on a party, then that party must be given an opportunity to pursue discovery related to the issue that it has the burden to prove. While Defendants argue that Plaintiffs have all the information related to costs that they need (i.e. the arbitration agreement itself and the AAA Commercial Rules), the Supreme Court noted in Green Tree that such generic information is not enough to satisfy the party's burden of proof to prove excessive costs.
Id. The Livingston court recommended that plaintiffs be permitted to conduct discovery "to uncover information about the specific costs they are likely to entail." Id. at 4. The costs included "not just the administrative fee, but . . . all fees associated with arbitration, including (but not limited to) the arbitrator's fees and expenses." Id. at 2.
In the present case, the arbitration provision stipulates that
[a]t your written request, we will advance any arbitration filing, administrative and hearing fees which you would be required to pay to pursue a claim or dispute as a result of our electing to arbitrate that claim or dispute. The arbitrator will decide who will ultimately be responsible for paying those fees. In no event will you be required to reimburse us for any arbitration filing, administrative, or hearing fees in an amount greater than what your and our combined court costs would have been if the claims had been resolved in a state court with jurisdiction.
Matysik Decl., Ex. C.
Discover contends that the language of this provision undermines Fields' argument about prohibitive expense. In particular, Discover points to the section of the provision stating that "the costs of arbitration to Ms. Fields can not [sic] be greater than the parties' combined costs of litigating Ms. Fields' claims in court. . . ." Discover's Reply Br. at 13. Discover is correct that these provisions undermine Fields' contentions about the prohibitive expense of arbitration given Discover's contractual agreement to bear much if not all of the financial burden. Even so, Discover has failed to explain how it knows what the combined costs of litigating Fields' claims in court would be or how it might arrive at such figure. And although the Cardmember Agreement stipulates that the rules either of JAMS/Endispute or of National Arbitration Forum (NAF) will govern arbitration, we neither have been provided with a copy of such rules nor have we been informed as to their content. We are convinced that Fields should be permitted an opportunity to conduct limited discovery into the specific costs she is likely to incur should her case be arbitrated. Appropriate discovery potentially costly in its own right, we are moved to say, includes information regarding the arbitration costs associated with similar claims Discover previously has arbitrated. Following this discovery, the court will be able to make an informed decision on whether the costs associated with arbitration would be prohibitive.
The final issue for our consideration is the potential for bias in an arbitral forum. According to plaintiff, NAF may have a bias in favor of financial services companies, and she wishes to conduct discovery in order to flush out any such problem. However, as Discover points out, the arbitration agreement gives the party filing the arbitration claim the option of selecting as the arbitrator either JAMS/Endispute or NAF. Because Fields has lodged the claims in the present action, it is she who will select the arbitrator. Although Fields has challenged the neutrality of NAF, she has not included JAMS/Endispute in her allegations of bias. Thus, JAMS/Endispute remains a viable, unbiased arbitrator who can conduct the arbitration for Fields and Discover should arbitration of this matter ultimately be sanctioned. Consequently, we deny Fields' request to conduct discovery into NAF's alleged bias.
In sum, we find that Discover properly amended its Cardmember Agreement; that Fields had notice of Discover's amendments; that neither Discover nor Howe waived the right to arbitrate; and that Fields is not entitled to conduct discovery into NAF's alleged potential bias. We, however, also find that Fields is entitled to conduct limited discovery in order to determine the specific costs she likely will incur in arbitration. Thus, we grant in part and deny in part defendants' motions to compel, and for now at least we must deny their motions to dismiss. Following the conclusion of the discovery permitted herein, defendants may file renewed motions to compel and/or dismiss. Fields, then, may respond to such motions with the benefit of relevant discovery. All further briefing on such motions is limited to the issue of prohibitive arbitration costs.
In order to move this case along, we hereby direct that Fields' discovery shall be undertaken and completed within sixty (60) days from the date of this order, that defendants shall file their renewed motions within thirty (30) days thereafter and in no event later than June 12, 2002, that responsive briefing by plaintiff shall be filed within twenty (20) days after the renewed motions(s), and a final reply within fifteen (15) days after plaintiff's response.
It so is ordered.