Opinion
00 Civ. 5406 (JGK)
June 19, 2001
OPINION AND ORDER
Plaintiff Andrea Hale ("Hale") brings this action against First USA Bank, N.A. ("First USA") under the Truth In Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"), and state contract law. The plaintiff alleges that First USA made inadequate or misleading disclosures to her in connection with her First USA credit card account. First USA now moves pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), to dismiss or stay this action and to compel arbitration of the plaintiff's claims.
I.
The following facts are drawn from the plaintiff's complaint and from the affidavit of Donna M. Barrett sworn to September 29, 2000 ("Barrett Aff."), submitted by First USA and are not in dispute except where specifically noted. The plaintiff, a New York resident, is the holder of a credit card issued by First USA, a national association charted under the laws of the United States. (Compl. ¶¶ 6-7.) The credit card application that the plaintiff signed in August 1998 provided that the plaintiff agreed to use the credit card "subject to the terms and conditions of the First USA Cardmember Agreement that will be sent with the card." (Barrett Aff. ¶ 4 Ex. A.) In or about September 1998, First USA sent the plaintiff a First USA VISA card as well as her First USA Cardmember Agreement (the "Agreement"). (Barrett Aff. ¶ 6.) The initial paragraph of the Agreement provides that the Agreement establishes the terms of the plaintiff's credit card account ("Account") and that "[a]ny use of [the plaintiff's] card or Account confirms [the plaintiff's] acceptance of the terms and conditions of this Agreement." (Barrett Aff. ¶ 7 Ex. B.) The plaintiff does not dispute that she used her credit card and Account and thus accepted the Agreement.
Among its terms and conditions, the Agreement includes an arbitration clause, which states:
Arbitration: Any claim, dispute or controversy ("Claim") by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or your Account, including Claims regarding the applicability of this arbitration clause or the validity of the entire Agreement, shall be resolved by binding arbitration by the National Arbitration Forum, under the Code of Procedure in effect at the time the Claim is filed. . . . This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1-16. . . .
This arbitration agreement applies to all Claims now in existence or that may arise in the future except for Claims by or against any unaffiliated third party to whom ownership of your Account may be assigned after default (unless the party elects to arbitrate). Nothing in this Agreement shall be construed to prevent any party's use of (or advancement of any Claims, defenses, or offsets in) bankruptcy or repossession, replevin, judicial foreclosure or any other prejudgment or provisional remedy relating to any collateral, security or property interests for contractual debts now or hereafter owed by either party to the other under this Agreement.
IN THE ABSENCE OF THIS ARBITRATION AGREEMENT YOU AND WE MAY OTHERWISE HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE CLAIMS THROUGH A COURT, AND/OR TO PARTICIPATE OR BE REPRESENTED IN LITIGATION FILED IN COURT BY OTHERS, BUT EXCEPT AS OTHERWISE PROVIDED ABOVE, ALL CLAIMS MUST NOW BE RESOLVED THROUGH ARBITRATION.
(Barrett Aff. ¶ 8 Ex. B.) The Agreement also contains a choice of law provision, which states that the Agreement and the plaintiff's Account will be governed by Delaware state law and, as applicable, federal law. (Barrett Aff. Ex. B.)
On or about July 23, 1999, First USA sent the plaintiff an offer that provided, for a limited time, a 2.99% annual percentage rate ("APR") "for all purchases and balance transfers, effective until the first day of [the plaintiff's] billing cycle that includes June 1, 2000," following which the APR on all purchases and balance transfers would be increased to 12.90% variable (the "Offer"). (Compl. ¶ 17 Ex. A.) The plaintiff was eligible for and received the Offer. (Compl. ¶ 6.) However, the plaintiff alleges that according to her Account statement for the billing cycle, which ended on June 23rd, 2000, First USA charged its customers who qualified for the Offer an APR of 14.40% on their balances, rather than an APR of 12.90%. (Compl. ¶ 18 Ex. B.)
On July 20, 2000, the plaintiff filed a complaint instituting this action on behalf of herself and a purported class of First USA's credit cardholders. The Complaint asserts two causes of action. First, the plaintiff asserts that First USA has violated its disclosure obligations under TILA and its implementing regulations. Second, the plaintiff asserts a claim for breach of contract under state law.
II.
The defendant's petition to compel arbitration is governed by the FAA, which provides that written agreements to arbitrate disputes in contracts involving commerce, "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA creates a "body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the [FAA]." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24(1983); see also Olyroyd v. Elmira Savings Bank, FSB, 134 F.3d 72, 75 (2d Cir. 1998). In accordance with the FAA, a district court may stay proceedings if it finds a valid arbitration agreement and may compel arbitration when a party does not abide by an arbitration agreement. See 9 U.S.C. § 3 4; see also Aerotel. Ltd. v. RSL Comm., Ltd., 99 F. Supp.2d 368, 372 (S.D.N.Y. 2000).
When considering a motion to compel arbitration under the FAA, a court must resolve four issues:
first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable; it must then decide whether to stay the balance of the proceedings pending arbitration.Olyroyd, 134 F.3d at 75-76 (citing Genseco, Inc. v. T. Kakiucho Co., 815 F.2d 840, 844 (2d Cir. 1987) (citation omitted)). "There is a strong federal policy favoring arbitration as an alternative means of dispute resolution." Olyroyd, 134 F.3d at 76 (citation omitted); see also Hartford Accident and Indemnity Co. v. Swiss Reinsurance America Corp., 246 F.3d 219, 226 (2d Cir. 2001). In accordance with that policy, courts should "construe arbitration clauses as broadly as possible," Olyroyd, 134 F.3d at 76 (citation and quotation omitted), and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone, 460 U.S. at 24-25; see also Hartford Accident and Indemnity, 246 F.3d at 226; Collins Aikman Products Co. v. Building Systems. Inc., 58 F.3d 16, 19 (2d Cir. 1995).
The plaintiff in this case does not dispute that she agreed to arbitrate nor does she dispute that her claims are within the scope of the broad arbitration clause contained in the Agreement. Rather, the plaintiff asserts three arguments as to why the arbitration clause should not be enforced. First, the plaintiff argues that the fees to arbitrate in the National Arbitration Forum ("NAF") under the NAF Code of Procedure (the "NAF Code") create an unreasonable barrier to the plaintiff's assertion of her TILA claims. Second, the plaintiff contends that the arbitration clause is unconscionable and oppressive and is consequently unenforceable. Third, the plaintiff asserts that the class action remedy is integral to the TILA enforcement scheme and that the unavailability of class actions in arbitration renders the arbitration clause unenforceable with respect to TILA claims. None of these arguments is a bar to arbitration.
III. A.
The plaintiff first argues that the initial fees the plaintiff must pay to arbitrate before the NAF under the NAF Code create an unreasonable barrier to the plaintiff's assertion of her TILA claims. Specifically, the plaintiff asserts that under the NAF Code's Fee Schedule, a consumer, such as the plaintiff, wishing to file a "Consumer Small Claim" with the NAF must pay a filing fee of $49 and a hearing fee of $75 for an in-person participatory hearing for a total of $124. (See NAF Code, App. C, attached as Ex. 2 to Pl.'s Memorandum in Opposition.) The plaintiff argues that in the context of a typical TILA claim, such as in this case, where the amount in controversy is small, the fees required to arbitrate are unreasonable and have the effect of deterring TILA claims.
The plaintiff's assertion that the fees she would have to pay for arbitration in the NAF could effectively deny her access to arbitration is without merit. In Green Tree Financial Corp. v. Randolph, 120 S.Ct. 513(2000), the Supreme Court recently recognized that "the existence of large arbitration costs could preclude a litigant . . . from effectively vindicating her federal statutory rights in the arbitrable forum." Green Tree, 121 S.Ct. at 522; see also Howard v. Anderson, 36 F. Supp.2d 183, 186 (S.D.N.Y. 1999) (finding that in evaluating an arbitration filing fee the question for the court is whether the plaintiff "is without recourse to arbitration because she is unable to afford the filing fee"). The Court went on to hold, however, that "where . . . a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs." Id.; see also Llyod v. MBNA America Bank, N.A., No Civ. A. 00-109-SLR, 2001 WL 194300, at * 3 (D. Del. Feb. 22, 2001). Although the Supreme Court suggested that some showing of individualized prohibitive expense is necessary to invalidate an arbitration agreement on this ground, the Court did not decide "[h]ow detailed the showing of prohibitive expense must be before the party seeking arbitration must come forward with contrary evidence." Green Tree, 121 S. Ct. at 522-23. Cf. Bradford v. Rockwell Semiconductor Systems, Inc., 238 F.3d 549, 556-57 (4th Cir. 2001) (relying on Green Tree in concluding that the issue of whether a fee-splitting provision in an arbitration agreement renders the agreement unenforceable should be decided through a case-by-case analysis, rather than a broad per se rule).
In Green Tree, the Supreme Court reversed the decision of the Court of Appeals for the Eleventh Circuit in Randolph v. Green Tree Fin. Corp., 178 F.3d 1149 (11th Cir. 1999), relied on heavily by the plaintiff. In that case, a consumer brought a putative class action under TILA against a mobile home finance company. Randolph, 178 F.3d at 1151-52. The Court of Appeals for the Eleventh Circuit held that an arbitration provision in an agreement between the parties was unenforceable because it was silent on the issues of arbitration filing fees and costs and thus "Randolph might be required to bear substantial costs of the arbitration even if she were to prevail on her TILA claim."Id. at 1158. The Supreme Court, however, concluded that, in light of the "liberal federal policy favoring arbitration agreements," the arbitration agreement's silence with respect to filing fees and costs was insufficient to render the agreement unenforceable because the "`risk' that Randolph will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement." Green Tree, 121 S.Ct. at 522.
In this case, the plaintiff has failed to demonstrate an inability to pay the $124 arbitration fees or any prohibitive financial hardship such that it deterred the plaintiff from vindicating her rights under TILA through arbitration. See Bradford, 238 F.3d at 558; Arakawa v. Japan Network Group, 56 F. Supp.2d 349, 355 (S.D.N.Y. 1999). To the contrary, the arbitration fees are plainly not the reason that the plaintiff did not choose to arbitrate her TILA claim because the $150 filing fee she paid to institute this lawsuit is greater than the total amount of the arbitration fees she would be required to pay under the NAF Code. See 28 U.S.C. § 1914. In addition, the NAF Code's Fee Schedule provides that an individual who is indigent and cannot afford to pay a fee may request a waiver of fees including the filing, administrative, hearing, and other fees. (NAF Code, Rule 45.A App. C.) The NAF Code also states that the "prevailing Party may recover fees paid in the arbitration. . . ." (NAF Code, Rule 44.E, see also NAF Code, Rule 37.C App. C.) Thus, numerous courts have found the NAF to be an adequate and fair arbitral forum and have upheld arbitration provisions requiring arbitration in the NAF and in arbitral fora with similar or higher fees.See, e.g., Bank One v. Coates, 125 F. Supp.2d 819, 835 (S.D.Miss. 2001);Smith v. Equifirst Corp., 117 F. Supp.2d 557, 563-64 (S.D.Miss. 2000);Marsh v. First USA Bank, N.A., 103 F. Supp.2d 909, 925-26 (N.D. Tx. 2000); Arakawa, 56 F. Supp.2d at 354-355.
In Green Tree, Justice Ginsburg, in a separate opinion concurring in part and dissenting in part, cited the NAF Code provisions that limit small claim consumer fees to between $49 and $175 as a "model for fair cost and fee allocation." Green Tree, 121 S.Ct. at 524 n. 2 (Ginsburg, J., concurring in part and dissenting in part).
Accordingly, the plaintiff has not. established that the arbitration clause contained in the Agreement should not be enforced because the fees she would have to pay for arbitration in the NAF could effectively deny her access to arbitration.
B.
The plaintiff next contends that the arbitration clause is unconscionable and oppressive because the clause is one-sided. Specifically, she takes issue with the carve-outs contained in the Agreement, which state:
This arbitration agreement applies to all Claims now in existence or that may arise in the future except for Claims by or against any unaffiliated third party to whom ownership of your Account may be assigned after default (unless the party elects to arbitrate). Nothing in this Agreement shall be construed to prevent any party's use of (or advancement of any Claims, defenses, or offsets in) bankruptcy or repossession, replevin, judicial foreclosure or any other prejudgment or provisional remedy relating to any collateral, security or property interests for contractual debts now or hereafter owed by either party to the other under this Agreement.
(Barrett Aff. ¶ 8 Ex. B.) The plaintiff asserts that, although the arbitration clause on its face appears to obligate both parties to arbitrate disputes, these specific "carve-outs" for certain judicial remedies render the arbitration clause so one-sided as to be unconscionable and oppressive.
Under the FAA, 9 U.S.C. § 2, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreement." Doctor's Assoc., Inc. v. Casarotto, 517 U.S. 681, 687(1996). In determining whether a generally applicable contract defense may invalidate an arbitration agreement, a court looks to state law. See Perry v. Thomas, 482 U.S. 483, 492 n. 9(1987). The parties do not dispute that the choice of law provision in the Agreement is valid and that Delaware law applies.
Under Delaware contract law, if a court determines as a matter of law that a contract or a clause of a contract is unconscionable at the time the contract was made, it may refuse to enforce the contract, sever the unconscionable portion, or modify the application of any unconscionable clause. See Del. C. Ann. tit. 6, § 2302. To render void a contractual provision on the basis of unconscionability, a court must find that the party with superior bargaining power used it to take unfair advantage of the other party. Graham v. State Farm Mut. Automobile Ins. Co., 565 A.2d 908, 912 (Del. 1989). Thus, for a contract provision to be deemed unconscionable, its terms must be "so one-sided as to be oppressive." Id. (internal quotations and citations omitted). A finding of unconscionability may be appropriate where an arbitration mechanism set forth in a contract is unfairly structured. Id. However, "mere disparity between the bargaining power of the parties to a contract will not support a finding of unconscionability." Id. (citing Tulowitzki v. Atlantic Richfield Co., 396 A.2d 956, 960(1978)).
There is no merit to the plaintiff's argument that the arbitration clause is invalid because it is so one-sided as to be unconscionable. As the plaintiff made clear at argument, the plaintiff does not argue that the arbitration agreement should be invalidated because of a lack of "mutuality." "The doctrine of `mutuality of obligation' requires a valid contract to be based on an exchange of reciprocal promises." Doctor's Assoc., Inc. v. Distajo, 66 F.3d 438, 451 (2d Cir. 1995) (citing 1A Arthur L. Corbin, Corbin on Contracts § 152, at 3(1963)); see also Harris v. Green Tree Fin. Corp., 183 F.3d 173, 179-80 (3d Cir. 1999). Modern contract law has largely rejected the doctrine "as a general principal in contract law, as well as in the arbitration context," and so long as a contract is supported by sufficient consideration, "there is no additional requirement of . . . `mutuality of obligation.'" Distajo, 66 F.3d at 451 (quoting Restatement (Second) of Contracts § 79(1979));see also Harris, 183 F.3d at 180; Dimick v. First USA Bank, N.A., Civ. No. 99-2550, at 5-6 (D.N.J. Jan. 14, 2000). Delaware law fully adheres to this modern trend. that a mutuality of obligation defense "cannot be interposed where . . . the contract is supported by adequate consideration." Williams Nat. Gas Co. v. Amoco Prod. Co., Civ. A. No. 11040, 1991 WL 58387, at *12 (Del.Ch. Apr. 16, 1991); Wolf v. Crosby, 377 A.2d 22, 27 (Del.Ch. 1977); Simm Assoc., Inc. v. PNC Nat'l Bank, No. 98C-02-219-WTQ, 1998 WL 96764, at *5 (Del.Super.Ct. Oct. 8, 1998);see also Frerichs v. Credential Servs. Int'l, No. 98 C 3684, at 12 (N.D.Ill. Sept. 30, 1999).
Here, the plaintiff received adequate consideration from First USA in the form of a credit card, an Account and the continuing offer of credit, thus there is no requirement that the arbitration clause be supported by independent mutual obligations. See Frerichs, No. 98 C 3684, at 13 (rejecting similar challenge to a First USA Cardmember Agreement containing a substantially similar arbitration clause); see also Distajo, 66 F.3d at 451-52 (rejecting mutuality of obligation challenge to an arbitration clause that preserved certain judicial remedies for one party where there was adequate consideration); Harris, 183 F.3d at 180 (same).
Finally, the arbitration clause is in fact binding on both parties because both the plaintiff and First USA are required to submit all claims against each other to arbitration, subject only to specified exceptions or carve-outs.
There is nothing about the exceptions that renders the arbitration clause unconscionable and unenforceable. These are reasonable exceptions to the requirement of arbitration which cannot be viewed as so one-sided as to be unconscionable. The agreement does not prevent either party's use of bankruptcy, but that is likely to be a remedy used by the cardholder rather than First USA. If there is a bankruptcy proceeding, neither party is required to arbitrate any claim or defense in bankruptcy. The agreement is not binding on an asignee to whom ownership of the cardholder's account is assigned after default unless the assignee agrees to arbitrate. But neither the cardholder nor the assignee is required to arbitrate any claims against the other and thus this provision cannot be viewed as so unconscionable as to render the arbitration agreement unenforceable. Finally, the remaining provisional remedies that are excepted refer to collateral security or property interests that would apply to secured credit which was not involved in this case.
The plaintiff's reliance on Marsh v. First USA Bank. N.A., 103 F. Supp.2d 909, 925-26 (N.D. Tx. 2000) and Dimick v. First USA Bank, N.A., Civ. No. 99-2550, at 5-6 (D.N.J. Jan. 14, 2000) is misplaced. The arbitration clauses in both Marsh and Dimick contained "carve-outs" identical to the ones at issue here. (Declaration of Matthew P. Previn, dated December 20, 2000 ("Previn Decl.") ¶ 4.) The court in Marsh rejected an unconscionability argument and the court in Dimick rejected both an unconscionability argument and an argument that the arbitration clause lacked mutuality. See Marsh, 103 F. Supp.2d at 920; Dimick, Civ. No. 99-2550, at 5-7.
The arbitration clause contained in the Agreement is unlike the arbitration provisions found to be unconscionable in the Delaware cases cited by the plaintiff. See Worldwide Ins. Group v. Klopp, 603 A.2d 788, 790-91 (Del. 1992); Fritz v. Nationwide Mut. Ins. Co., Civ. A. No. 1369, 1990 WL 186448, at *4-5 (Del.Ch. 1990). In Worldwide, the Delaware Supreme Court held that an arbitration provision that permitted "either party to demand a trial de novo from the uninsured/underinsured arbitrators' decision only if the arbitrators' award exceed[ed] the financial responsibility limits of the State of Delaware" was contrary to public policy and was thus unenforceable. Worldwide, 603 A.2d at 789. The court concluded that the provision frustrated the public policy favoring arbitration and provided an "escape hatch" to the insurer for avoidance of high arbitration awards since, in general, the insurer would be the party dissatisfied with a high award. Id. at 790-91. In Fritz, the court concluded that an arbitration clause which provided that the insured was bound by any arbitration award while the insurer was only bound by an award if the insurer gave its written consent was one-sided and was unconscionable. Fritz, 1990 WL 186448, at *5-6. The court reasoned that the insurer could not "require compulsory binding arbitration than treat it as nonbinding to it" and that such terms unreasonably favored the insurer. Id. at *6.
In this case, both parties are required to pursue arbitration except in certain circumstances such as bankruptcy and assignment in which event arbitration is not required. The arbitration clause is not so one-sided as to be unconscionable. Unlike Worldwide and Fritz, there is nothing in the arbitration clause that permits First USA to demand a trial de novo where an arbitrator awards a large amount of damages nor can First USA choose to avoid an arbitration award by withholding its consent. Thus, because the arbitration clause contained in the Agreement is not unfair or oppressive, the arbitration provision is not unconscionable.
C.
Finally, the plaintiff asserts that the class action remedy is integral to the TILA enforcement scheme and that the unavailability of class actions in arbitration renders the arbitration clause unenforceable with respect to TILA claims.
In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the Supreme Court stated that "[i]t is now clear that statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA. @ Gilmer, 500 U.S. at 26. The Court then set out the standards for determining whether a federal statutory claim is subject to arbitration:
Although all statutory claims may not be appropriate for arbitration, A [h]aving made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for statutory rights at issue." . . . If such an intention exists, it will be discoverable in the text [of the statute], its legislative history, or an "inherent conflict" between arbitration and the [statute's] underlying purposes. Gilmer, 500 U.S. at 26 (citations omitted). The Court
in Gilmer held that a plaintiff=s age discrimination claim under the Age Discrimination in Employment Act of 1967 ("ADEA") was subject to compulsory arbitration pursuant to an arbitration agreement. See id. at 27-35. In concluding that compulsory arbitration was not inconsistent with the statutory framework and purposes of the ADEA, the Court rejected the plaintiff's argument that "arbitration procedures cannot adequately further the purposes of the ADEA because they do not provide for . . . class actions." The Court concluded that "even if the arbitration could not go forward as a class action or class action relief could not be granted by the arbitrator, the fact that the [ADEA] provides for the possibility of bringing a collective action does not mean that individual attempts at conciliation were intended to be barred." Id. at 32 (citation and quotation omitted).
Numerous courts applying the analysis in Gilmer have rejected the plaintiff's contention that Congress intended to create a non-waivable right to bring a TILA claim in the form of a class action and have concluded that compulsory arbitration under the FAA is not inherently inconsistent with the TILA enforcement scheme. See, e.g., Randolph v. Green Tree Fin. Corp., 244 F.3d 814, 817-18 (11th Cir. 2001); Johnson v. West Suburban Bank, 225 F.3d 366, 371-78 (3d Cir. 2000), cert. denied, 121 S.Ct. 1081(2001); Kennedy v. Conseco Fin Corp., NO. 00 C 4399, 2000 WL 1760943, at 2 (N.D.Ill. Nov. 30, 2000); Gray v. Conseco. Inc., SA CV 00-322DOC(EEX), 2000 WL 1480273, at *6 (C.D. Cal. Sept. 29, 2000);Marsh, 103 F. Supp.2d at 922-24; Sagal v. First USA Bank. N.A., 69 F. Supp.2d 627, 631-32 (D. Del. 1999), aff=d, ___ F.2d ___ (3d Cir. 2001). The Court agrees with these well-reasoned opinions. Therefore, the plaintiff=s TILA claims are arbitrable.
In arguing that that the unavailability of class actions in arbitration renders the arbitration clause unenforceable with respect to TILA claims, the plaintiff relies principally on Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp.2d 1087 (W.D. Mich. 2000). Lozada, however, is not binding on this Court and is at odds with the reasoning of nearly every other court that has considered the issue. Notably, the Lozada court relies principally on Johnson v. Tele-Cash. Inc., 82 F. Supp.2d 264, 268-71 (D. Del. 1999), the district court opinion that was reversed by the Court of Appeals for the Third Circuit in Johnson, 225 F.3d at 371-78. See Lozada 91 F. Supp.2d at 1104-05. Moreover, in Stout v. Byrider, 228 F.3d 709, 715 (6th Cir. 2000), cert. denied, 121 S.Ct. 1088(2001), the Court of Appeals for the Sixth Circuit rejected an argument that TILA claims were not arbitrable, although it did not specifically address the class action argument raised in this case.
In addition, the NAF Code expressly provides that A [a]rbitrators may grant any remedy or relief allowed by applicable substantive law and based on a Claim, Response, or request properly submitted by a Party under this Code." (NAF Code, Rule 20.D.) The NAF Code also provides for the award of attorneys= fees to a prevailing party. (NAF Code, Rule 44.E.) Thus, any relief available to the plaintiff under TILA in a judicial forum would also be available in arbitration in the NAF. See Johnson, 225 F.3d at 374 n. 2.
IV.
The FAA, 9 U.S.C. § 3, provides that a district court, upon determining that an action before it is subject to an enforceable arbitration provision, "shall . . . stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement. . . ." 9 U.S.C. § 3. Because all of the plaintiff's claims are subject to arbitration, no useful purpose will be served by granting a stay of these proceedings and thus this action is dismissed. See Seus v. John Nuveen CO., Inc., 146 F.3d 175, 178 (3d Cir. 1998) ("If all the claims involved in an action are arbitrable, the court may dismiss the action instead of staying it."); Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (same); see also Mahant v. Lehman Bros., No. 99 Civ. 4421, 2000 WL 1738399, at *3-4 (S.D.N.Y. Nov. 22, 2000); Eastern Fish Co. v. Pacific Shipping Co., Ltd, 105 F. Supp.2d 234, 241-42 n. 10 (S.D.N.Y. 2000); Aerotel, 99 F. Supp.2d at 374; Berger v. Cantor Fitzgerald Secs., 967 F. Supp. 91, 96 (S.D.N.Y. 1997).
At the argument of this motion, both parties made it clear that they took no position on whether this action should be dismissed or stayed if, as is the case here, all claims are dismissed because all are subject to arbitration.
CONCLUSION
For the foregoing reasons, the defendant's motion to compel arbitration pursuant to the FAA, 9 U.S.C. § 3, is granted. The plaintiff's claims are dismissed and the parties are directed to proceed to arbitration. The Clerk is directed to close this case.SO ORDERED.