Failure of Proof of Online Consumer Arbitration Agreement

Does an arbitration agreement included in a credit cardholder agreement cover claims made under the Fair Debt Collection Practices Act arising from collection of resulting credit card debt? In the Eleventh Circuit’s July 5, 2016 decision in Bazemore v. Jefferson Capital Systems, LLC, 2016 WL 3608961, the district court had held that the collection claim, brought as a putative class action against the debt holder, fell outside the scope of the cardholder agreement’s arbitration provision.  But the Eleventh Circuit declined to reach this question, holding instead that the evidence was insufficient to support a finding that an arbitration agreement had been formed in the first place.  The court’s opinion was authored by Judge Lewis A. Kaplan, visiting from the Southern District of New York.

The court first determined that state law, here Georgia law, governed whether an enforceable agreement to arbitrate exists. Under Georgia law, it became the defendant’s burden to establish that an agreement existed.  The court deemed the declaration from the defendant’s employee “woefully inadequate” on this score.  Although the declaration stated that the employee was able to ascertain that the plaintiff had applied for a credit card over the Internet, there was no documentary proof of this assertion and no indication of the terms governing her account.  There also is no evidence concerning what if any “clickwrap” agreement appeared on the plaintiff’s computer screen when she applied for the card.

The declarant also asserted that a “Welcome Kit” that included a cardholder agreement “would have been sent” to plaintiff within 10 days of the online application.  But the declaration did not state that the declarant had any personal knowledge that a Welcome Kit was in fact sent to the plaintiff or that he verified, by review of records, that it had been sent.  Finally, the declaration failed to show that the Welcome Kit included an arbitration provision anyway.  During what must have been an uncomfortable oral argument, counsel for the defendant conceded that it did not have an exact copy of what was sent to the plaintiff.

Notably, the plaintiff did not herself submit a declaration denying that she received the Welcome Kit. But the court noted that it was the defendant’s burden under Georgia law to prove the existence and terms of the contract it wished to enforce.  The court characterized as superseded an earlier line of cases that imposed a duty on a party opposing arbitration to deny the agreement unequivocally, with accompanying proof.

The court distinguished cases in which unsigned service contracts, including credit card contracts, have been enforced where a party demonstrates his or her assent to the terms by using the service provided. Those cases were distinguishable, the court reasoned, because in each case competent evidence was presented of what contract was sent to the plaintiff and an actual copy of the contract sought to be enforced.

The court noted that it had not addressed in a published opinion the standard for determining whether a trial is necessary to determine the existence of an arbitration agreement, but noted that several other circuits have likened the standard to the one for summary judgment. The court concurred that a ”summary judgment-like standard” is appropriate and found that the defendant had not raised any genuine issue of fact concerning the existence of an agreement that would require a trial.

This is not the only recent case in which a defendant has had difficulty proving the existence and terms of an arbitration agreement entered into online. E.g., Sgouros v. TransUnion Corp., 817 F.3d 1029 (7th Cir. 2016) (box that plaintiff clicked failed to indicate that he was entering into an agreement).  These carefully drafted agreements are of little value to companies who do not pay close attention to the step-by-step mechanics of enforcement.  Few plaintiffs are willing to simply take a defendant’s word for it.

Posted by Tom Byrne.

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