CPW has previously covered the significance of arbitration clauses in the context of data privacy litigation. While an arbitration agreement does not allow a defendant to avoid a lawsuit outright, it does provide an escape mechanism from public scrutiny and the costs associated with litigation. Whether an arbitration agreement applies to a dispute is a commonly litigated issue in data privacy class actions. A recent New Jersey District Court decision is a reminder that courts are willing and ready to enforce arbitration agreements in many consumer privacy disputes.
Plaintiff filed an action under the Fair Credit Reporting Act (“FCRA”) against several furnishers, alleging each Defendant gave inaccurate information to other named Defendants, which they in turn allegedly both used to create false credit reports. The FCRA is a frequently litigated data privacy statute. [Note: for more on the FCRA and what it requires check out this overview]. One of the then Defendants filed a motion to compel arbitration arguing that the Court should not reach the merits of Plaintiff’s claims because they were subject to an enforceable Arbitration Agreement contained in a Card Member Agreement.
Plaintiff unsuccessfully argued that the Arbitration Clause was broad and “no reasonable person would have understood themselves to be signing away their right to litigate virtually any claim regardless of its relation to the underlying agreement, and unlimited in time, simply by virtue of using a credit card.” The Court rejected this argument and cited three New Jersey District Court cases that upheld similarly worded arbitration agreements. The Court specifically noted that the Arbitration Clause at issue ha limits and explicitly included claims “relating to any other Account you have had or had with us.” Thus, the Court found that there was a valid arbitration clause between Plaintiff and Defendant.
Plaintiff also unsuccessfully argued that even if there was a valid agreement to arbitrate that the FCRA is not within the scope of the Arbitration Agreement because it does not specifically mention the FCRA or credit reporting. Although the Court acknowledged that the Arbitration Agreement does not mention credit reporting or the FCRA, the Court found that the Arbitration Agreement is not required to specifically refer to the causes of action which are subject to arbitration. Instead, “in assessing whether a particular dispute falls within the scope of an arbitration clause, [the court focuses] on the factual underpinnings of the claim rather than the legal theory alleged in the complaint.” Finally, the Court readily dismissed Plaintiff’s argument that the Arbitration Clause was unconscionable because the credit card was issued pursuant to the Card Member Agreement that contains a broad Arbitration Clause.
Ultimately, since the Court found that Plaintiff’s claims against Discover are within the scope of the Arbitration Clause, the Defendant will still need to address Plaintiffs’ claims in arbitration; but, successfully avoided public scrutiny and litigation costs.