In an unpublished opinion, the Third Circuit affirmed a decision denying a defendant bank's motion to dismiss a consumer complaint in favor of arbitration when the contract containing the arbitration clause was not referenced in or attached to the complaint, agreeing that the plaintiff should be allowed to engage in limited discovery on the issue of the validity of the arbitration agreement.
The plaintiff, a customer of the defendant bank, sued alleging that the defendant's overdraft protection program violated federal law and breached a contract with the plaintiff. According to the defendant, it had three contracts with the plaintiff: an account agreement, an overdraft protection agreement, and a service agreement related to electronic money transfers. The plaintiff alleged the existence of the account and overdraft protection agreements, but her complaint did not mention the service agreement, and the plaintiff filed a declaration stating that she had no recollection of seeing or agreeing to the service agreement. The account agreement did not contain an arbitration agreement and the overdraft protection agreement was not part of the record, such that the disputed service agreement was the only source of any provision purportedly requiring plaintiff to arbitrate the dispute.
The defendant argued that the trial court had "usurped the role of the arbitrator," because, under the terms of the arbitration agreement, questions over the validity of the contract were for the arbitrator to decide. The Third Circuit disagreed, however, finding that the trial judge had not decided that the contract was invalid, but instead simply allowed limited discovery on the issue of arbitrability. Citing its earlier decision in Guidotti v. Legal Helpers Debt Resolution, LLC, the Third Circuit found that where "the parties' agreement to arbitrate the dispute is not clear on the face of the complaint (or incorporated documents)," a motion to dismiss in favor of arbitration should be decided using a summary judgment standard. Because the service agreement – the only operative contract containing an arbitration clause – was not referenced in or attached the complaint, the existence of such a duty was not clear on the face of that complaint, and the plaintiff was entitled to limited discovery on the validity of and applicability of that agreement.
Horton v. FedChoice Federal Credit Union, No. 16-3960 (3d Cir. Apr. 25, 2017)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
