Novic v. Credit One Bank, N.A., No. 17-2168 (4th Cir. Jan 4, 2019) [click for opinion]
Charleene Novic had entered into a credit agreement to obtain a credit card with Credit One Bank, N.A. ("Credit One"). The Cardholder Agreement contained an arbitration provision with a clause delegating authority to the arbitrator: "Claims subject to arbitration include . . . disputes related to . . . the application, enforceability or interpretation of this Agreement, including this arbitration provision."
After Novic accrued a past-due balance on her credit card, Credit One assigned Novic's account to a debt collector. The debt collector filed suit in state court. Novic ultimately prevailed in the state court action, successfully arguing that the debt was the result of fraudulent charges.
Novic then initiated a Fair Credit Reporting Act ("FCRA") lawsuit in Maryland state court against Credit One, alleging that Credit One failed to conduct a reasonable investigation into her claim of fraudulent charges. Credit One removed the FCRA action to federal district court and sought to compel arbitration. The district court denied the motion to compel, concluding that Credit One had lost its right to compel arbitration after assigning Novic's account for collection. Credit One appealed.
The Fourth Circuit vacated the district court's decision and remanded the case to be stayed pending arbitration. The Fourth Circuit explained that parties may, as part of an arbitration agreement, consent to arbitrate the "gateway" issue of arbitrability. The parties' agreement must include "clear and unmistakable" language providing the arbitrator with the power to determine his or her own jurisdiction. This standard is "exacting." With regard to the delegation clause at issue, the Fourth Circuit found that it "unambiguously require[d] arbitration of any issues concerning the 'enforceability' of the arbitration provisions entered into by the respective parties." Hence, the arbitrator, rather than the district court, was to decide both the "gateway" question of arbitrability and the merits of the parties' dispute. Additionally, because Novic failed to challenge the delegation clause specifically, the Fourth Circuit held that the district court had erred in denying Credit One's motion to compel arbitration.