Compelling an Arb on Authorized User? No Way! Poulson

David A. Szwak

Compelling an Arb on Authorized User? No Way! Poulson

Postby David A. Szwak » Tue Nov 29, 2005 2:38 pm

Poulson v. Trans Union, et al
ED Texas
Ruling in Open Court: 11/28/2005

Judge Davis denied Citibank's motion to compel arbitration.

Ex-Husband had Sears account since 1979. Married plaintiff in 1986. Apparently Ex added plaintiff as authorized user, unbeknownst to plaintiff. She never knew it, never used card, never had card in her ID, etc. Divorced in 1990. In 1991, she learned of AU reporting by Citibank on her reports of Ex's account. Demanded removal. Citi said too bad, you are not primary. Ex claimed he demanded removal. In 2004, account went derog and still on her report. She wrote disputes to CRAs and Citi. Verified as reported and stayed on file until after suit filed in 2005.

Citi moved to compel arb. Denied.

David A. Szwak

Postby David A. Szwak » Tue Nov 29, 2005 9:22 pm

Marshall Division

Versus Civil Action No.
Defendants. JUDGE DAVIS


Plaintiff respectfully opposed Citibank’s motion to compel arbitration and that matter has been briefed and now opposes Citibank’s motion to stay, as follows:
Citibank filed a motion to compel arbitration in this case. This case involves false credit reportings about plaintiff as Citibank seeks to collect a delinquent account against plaintiff’s ex-husband. The account at issue was opened by her husband before marriage to plaintiff. Plaintiff has not used that account and has never consented to being involved with the account. Despite proper disputes and failed and unreasonable 15 U.S.C. 1681s-2[b] reinvestigations, Citibank has steadfastly tried to use credit reportings to collect the account from plaintiff.
Plaintiff would be remise not to bring another case to the court’s attention. In a very similar case, Maranto v. Citifinancial, CV-05-0359, United States District Court, Western District of Louisiana, Shreveport Division, the same attorneys involved and representing the same respective sides, in an identity theft case, Citifinancial filed the same motion to compel arbitration and, on November 18, 2005, last Friday, Magistrate-Judge Hornsby rendered a Report and Recommendation denying the motion citing reasons in the R&R. See attached hard copy being sent via mail. The Magistrate-Judge reset discovery deadlines as Citifinancial had refused to cooperate in discovery pending the decision on its late-filed motion to compel arbitration.
In this case, like Maranto, Citibank has refused to provide deposition available dates or information about where the Fed.R.Civ.Proc. 30[b][6] deposition of Citibank can be taken. Numerous requests, over months, have been conveyed by plaintiff’s counsel to Citibank’s counsel. In fact, Citibank has indicated to counsel its unwillingness to participate in the court-ordered mediation pending decision on its arbitration motion. Citibank has systematically stonewalled discovery however Citibank did see fit to attend and fully question plaintiff at her deposition taken over a two day span by the defendants. All the while discovery cannot advance with Citibank because Citibank believes that filing a motion to compel arbitration gives them the right to ignore discovery requests made to them.
Plaintiff submits that defendant’s motion should be denied in all respects.

Respectfully submitted,

Bodenheimer, Jones, Szwak & _, LLP

S/ David A. Szwak
By: ___________________________________
David A. Szwak, LBR #21157, TA
416 Travis Street, Suite 1404
Mid South Tower
Shreveport, Louisiana 71101
[318] 424-1400
FAX 221-6555

I HEREBY CERTIFY that a true and correct copy of the foregoing has been mailed, by first class mail, properly addressed, with prepaid postage affixed, to opposing counsel of record, on this the 22nd day of November, 2005.

S/ David A. Szwak
David A. Szwak

David A. Szwak

Postby David A. Szwak » Tue Nov 29, 2005 9:28 pm

Marshall Division


Versus Civil Action No.


Plaintiff respectfully opposes defendants’ [Citibank USA, N.A.’s and Sears Roebuck & Co.’s, Motion to Compel Arbitration and to Stay Proceedings, as follows:
Plaintiff’s ex-husband, William Henry Eckert, Jr., had a number of credit card accounts and other indebtedness prior to his marriage to plaintiff. Plaintiff married William Henry Eckert, Jr., on August 23, 1986. Following marriage, William Henry Eckert, Jr., had plaintiff shown as an authorized user on his credit accounts but plaintiff did not ever assume a role as cardholder or guarantor on the accounts. Plaintiff divorced William Henry Eckert, Jr., on December 28, 2000, in Tamart County, Texas.
In early January, 2001, plaintiff contacted each of Mr. Eckert’s creditors and demanded that her name be completely removed from the records as she had no liability for any charges or future charges and did not use the accounts. Plaintiff specifically notified USAA and Discover. In October, 2001, plaintiff made the same demand upon Sears/Citibank. Sears/Citibank told plaintiff that since she was not the “primary” party on the accounts that she could not make any change to the account information. Plaintiff demanded that Mr. Eckert inform his creditors of her demands and he claimed that he complied and directed Sears/Citibank, among others to do so.
In late May, 2004, plaintiff learned that Mr. Eckert had amassed large credit card debt on his accounts and those accounts and balances were being reported on plaintiff’s credit reports. Plaintiff had received a May 19, 2004, True Credit tri-merge [3-in-1] report. On May 19, 2004, plaintiff obtained a True Credit tri-merge credit report and found multiple errors and account belonging solely to her ex-husband, Mr. Eckert. In the May 19, 2004 credit report. Plaintiff found the Sears/Citibank account no. 5121071811734825 opened by Mr. Eckert in September, 1979. The account reporting by Sears/Citibank suggested that plaintiff was somehow liable on the subject accounts.
In June, 2004, plaintiff wrote a detailed dispute letter to each national credit reporting agency, Experian, Equifax/CSC, and Trans Union, contesting the inclusion of Mr. Eckert’s accounts on plaintiff’s credit reports and other errors. On June 21, 2004, plaintiff received her Experian credit report and noted the subject Sears/Citibank account no. 5121071811734825, Discover account no. 6011000586502456, reporting now with a past due balance and historical late pays, and the USAA (Mastercard) account no. 549123700970****. On or about June 21, 2004, plaintiff also received her Equifax/CSC credit report and that report also listed the subject Sears/Citibank account no. 5121071811734825. On June 23, 2004, plaintiff sent detailed dispute letters to Experian, Trans Union and Equifax/CSC, outlining a number of errors including the reportings by Sears/Citibank. She specifically contested the reporting by Sears/Citibank, as inaccurate and damaging.
On July 6, 2004, Trans Union responded to plaintiff and suggested that plaintiff was a co-signor on the subject Sears/Citibank account, which of course was false information alleged;y supplied yet again by Sears/Citibank.. On July 17, 2004, Trans Union claimed to have communicated with Sears/Citibank and Sears/Citibank had verified its reportings despite notice of plaintiff’s disputes to Trans Union, which Trans Union allegedly discussed with Sears/Citibank. The actual Trans Union report shows verification of the wrong Sears/Citibank account no. 5121071886017163, which was plaintiff’s legitimate account and was never contested.
For reasons yet unknown, Sears/Citibank altered the subject account number from Sears/Citibank account nunber 5121071811734825 opened by Mr. Eckert in September, 1979, to number 5121071811734825. This subject Sears/Citibank account was opened in September, 1979, by Mr. Eckert alone and plaintiff has never had any liability on the account.
In mid-2001, plaintiff wrote Citibank and Sears to contest their credit reporting of Sears/Citibank account no. 5121071811734825 on her credit reports. On October 11, 2001, Sears/Citibank responded by agreeing with her contentions and alleged advising the national credit reporting agencies to correct its reportings. Despite these assurances the Sears/Citibank account re-appeared on plaintiff’s credit reports as discussed above. As of July 17, 2004, Trans Union listed the erroneous Sears/Citibank account.
On or about July 22, 2004, Experian wrote plaintiff and supplied her a copy of her credit report. Experian reviewed her disputes regarding the contested Sears/Citibank account and Experian claimed to delete the subject Sears/Citibank account. On July 27, 2004, following Trans Union’s error in reinvestigation regarding the Sears/Citibank account, plaintiff wrote Trans Union again to contest the Sears/Citibank account reporting.
As of June 21, 2004, the inaccurate Sears/Citibank account was contained in the CSC/Equifax credit file on plaintiff. On August 7, 2004, Trans Union wrote plaintiff to advise that Trans Union now deleted the contested Sears/Citibank account reporting from her credit file.
In October, 2004, Plaintiff’s Equifax/CSC credit report persisted in reporting the contested Sears/Citibank account with a large balance, and attributing it to plaintiff. The erroneous Sears/Citibank account was listed as 60+ days delinquent which is also very derogatory. On October 13, 2004, plaintiff wrote Sears/Citibank to again contest the subject Sears/Citibank account. On October 29, 2004, Sears/Citibank responded claiming it had removed plaintiff’s name from the account as of June 22, 2004. This contention is however, contrary to the continue credit reporting and verifications over plaintiff’s disputes properly lodged per 15 U.S.C 1681s-2(b) and contrary to the re-reportings by Sears/Citibank’ authorized mouthpieces, the credit reporting agencies. Those agencies, by contract and specific grants of information and authority, re-report information at the behest of their furnishers, including Sears/Citibank.
On November 6, 2004, plaintiff received a letter from Sears/Citibank regarding the subject account wherein Sears/Citibank claimed that it was removing plaintiff’s name from the subject account.
On December 16, 2004, plaintiff obtained another tri-merge credit report from True Credit. The report also showed that Equifax/CSC persisted in reporting the Sears/Citibank account, with a large balance, and attributing it to plaintiff, as well. The Sears/Citibank account shows a historical one time 30+ days late, but it appears the pay status reporting on that account were frozen. It still represents a false and inaccurate reporting as to the plaintiff. On January 5, 2005, plaintiff again wrote Experian and Trans Union and Equifax/CSC and contested the reporting by Sears/Citibank, account no. 5121071811734825. Plaintiff again demanded removal of these items from her credit report. Of course, as stated before, plaintiff’s legitimate Sears/Citibank account was never disputed. The contested Sears/Citibank account was allegedly removed from plaintiff’s CSC/Equifax credit file in August, 2004, however the later reports show that did not occur.
As of January 26, 2005, plaintiff finally had received a Trans Union credit report free of the contested Sears/Citibank reporting. On February 2, 2005, CSC/Equifax responded and sent plaintiff a copy of her credit report. CSC/Equifax stated that it deleted the Sears/Citibank account as well. No reason was provided though removal is consistent with plaintiff’s repeated disputes.
Following suit filing, CSC/Equifax produced a credit report to plaintiff showing that the subject, contested Sears/Citibank account, with negative status, had once again been replaced into her credit reports.
Plaintiff has sustained a variety of damages based upon defendants’ actions, inactions and violations. Her damages are well documented in the complaint and discovery exchanged between the parties.
Defendants’ Contentions
Defendants claim a few things: [1] that plaintiff somehow bound herself to the terms and conditions of her ex-husband’s pre-existing credit card contract with defendants, Sears/Citibank; [2] that the possibility that her ex-husband added plaintiff as an authorized user on his pre-existing account somehow made her subject to the terms and conditions of his account contract; and [3] apparently defendants believe that, assuming plaintiff’s own Sears account contract contained an arbitration clause, regarding any dispute between her and Sears as to that [her legitimate account] then that [assumed for argument’s sake; not that any evidence exists of that] arbitration clause would make her have to litigate the claims hereunder which relate to the credit reportings of Sears/Citibank on her ex-husband’s account [an admittedly totally unrelated account and contract from plaintiff’s Sears credit card account, long since closed].
Issue 1: Can a Consumer Be Bound By An Arbitration Clause Where There is No Consent?
The obvious answer is no. However, good reasons exist for that result. An identity theft victim cannot be bound by an arbitration clause in an imposted credit application. Can you imagine a defendant arguing that? Well, they have tried it. In the only known case on point, Discover Financial Services filed a motion to compel arbitration against an identity theft victim, James Riley, in consolidated actions captioned Riley v.GMAC, cause no. 1:01-CV-00869-WS-D [U.S.D.C. S.D. Ala. 12/16/02]. On December 16, 2002, docket entry #106, Judge Granade entered an unreported Order denying Discover’s Motion to Compel Arbitration, and Motion to Stay Discovery. Judge Granade found that the victim did not consent to any such arbitration clause and arbitration cannot be enforced absent an agreement to arbitrate. See attached. Undersigned counsel represented Riley in that action.
The interesting point is that Discover tried to argue that because Riley had his own legitimate Discover account and that application/contract contained an arbitration clause, that somehow the court should apply that arbitration clause to a dispute and lawsuit involving the imposted credit application and account. It seems obvious that an impostor cannot provide the victim’s assent to an arbitration clause. William Eckert, the only contractually liable party on his Sears [later Sears/Citibank account after the buy-out] account, cannot provide assent for his now ex-wife, who married him after the creation of his account. If William Eckert requested that plaintiff be an authorized user on his separate pre-existing credit account then there is no law which makes plaintiff bound by his contract terms. William Eckert is the cardholder and the contractually obligated party alone. Plaintiff never asked to be involved with his account.
As this Honorable Court is aware, generally, in adjudicating a motion to compel arbitration under the Federal Arbitration Act, courts conduct a two-step inquiry. The first step is to determine whether the parties agreed to arbitrate the dispute. Webb v. Investacorp, Inc., 89 F.3d 252, 258 [5th Cir.1996]; Greene v. Chase Manhattan Automotive Finance Corp., Not Reported in F.Supp.2d, 2003 WestLaw 22872102 [U.S.D.C. E.D. La. 2003]. In this analysis, the Court must determine "whether there is a valid agreement to arbitrate between the parties" and "whether the dispute in question falls within the scope of that arbitration agreement." Id. [citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 [1985]]. To determine whether the parties agreed to arbitrate the dispute, "courts generally ... should apply ordinary state-law principles that govern the formation of contracts." Id. [citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 [1995]]. There is no doubt that plaintiff never consented to any terms or conditions of William Eckert’s account and contract.
Again, the threshold inquiry is whether there exists a valid agreement to arbitrate. Webb, 89 F.3d, at 258. Under either the Federal Arbitration Act or the Texas Arbitration Act, Texas state contract law is applied in deciding whether a party agreed to be bound to an arbitration
agreement. Labor Ready Cent. III, L.P. v. Gonzalez, 64 S.W.3d 519 [Tex. App. - Corpus Christi 2001]; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); J.M, Davidson, Inc. v. Webster, 49 S.W.3d, at 512; Tenet Healthcare Ltd. v. Cooper, 960 S.W.2d 386, 387-88 (Tex. App. - Houston [14th Dist.] 1998], writ dismissed w.o.j. Under Texas law, in determining whether to compel arbitration we must first determine whether a valid, enforceable arbitration contract exists. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999); In re H.E. Butt Grocery Co., 17 S.W.3d 360, 366-67 [Tex. App. - Houston [14th Dist.] 2000], orig. proceeding. Under Texas law, parties enter into a binding contract when the following elements exist: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. J.M, Davidson, Inc. v. Webster, 49 S.W.3d, at 512. Consideration is a fundamental element of any valid contract. Id. A contract that lacks consideration lacks mutuality of obligation. Federal Sign v. Tex. Southern Univ., 951 S.W.2d 401, 408-09 (Tex. 1997). Under Louisiana law, as addressed in Greene, a contract is an agreement by two or more parties in which obligations are created, modified, or extinguished. La.C.C. art.1906. The Louisiana Civil Code requires four elements for the confection of a valid contract: [1] the parties must possess the capacity to contract; [2] the parties must freely give their mutual consent; [3] there must be a certain and lawful object for the contract; and [4] there must be lawful cause. La.C.C. arts.1918, 1927, 1971, 1966; Greene v. Chase Manhattan Automotive Finance Corp., Not Reported in F.Supp.2d, 2003 WestLaw 22872102 [U.S.D.C. E.D. La. 2003].
In this case, there is no agreement whatsoever between plaintiff and defendants, Sears/Citibank, with respect to William Eckert’s account.
In a case completely on point with Poulson’s facts, Barker v. Trans Union LLC, Not Reported in F.Supp.2d, 2004 WestLaw 783357 [U.S.D.C. N.D. Ill. 2004], plaintiff sued defendants, Trans Union LLC and MBNA, alleging violations of the Fair Credit Reporting Act, 15 U.S.C. 1681, et seq. Plaintiff Barker's now ex-husband had an MBNA credit card account in his own name. Without her knowledge or agreement, after marriage, plaintiff was added to the account as an authorized user of the account. After learning in 2003 that negative credit information regarding plaintiff was being reported regarding this account, plaintiff informed credit reporting agency Trans Union that she disputed the report. Trans Union failed to properly reinvestigate, responded to plaintiff's dispute and continued to report the negative credit information. MBNA failed to properly reinvestigate and responded following Trans Union informing MBNA that plaintiff disputed the negative credit information. MBNA moved to stay Barker’s claims and lawsuit based on an arbitration provision that purportedly was part of the agreement for the ex-husband’s credit card account. Plaintiff denied that she participated in adding her name to her now ex-husband’s account, denied that she received the documents or card purportedly mailed to her, and denied ever using the credit card for the account. The parties disputed whether plaintiff herself telephonically requested to be added to the account as well as whether she actually received any of the documents MBNA contends were sent to her. The Barker court noted that “[Q]uestions regarding the existence of an arbitration agreement are generally for the court to decide. Sphere Drake Insurance Ltd. v. All American Insurance Co., 256 F.3d 587, 591 [7th Cir. 2001]; Matterhorn, 763 F.2d, at 868; Viets v. Andersen, 2003 WestLaw 21525062, *7 [U.S.D.C. S.D. Ind. 2003]; Lee v. Deloitte & Touche, LLP, 2002 WestLaw 31433421, *2 [U.S..C. N.D. Ill. 2002]. This authority includes the question of whether one of the parties actually entered into the contract. Sphere Drake, 256 F.3d, at 590-91; Chastain v. Robinson-Humphrey Co., 957 F.2d 851, 854-56 [11th Cir.1992]; Carbajal v. Household Bank, FSB, 2003 WestLaw 22159473 *6, n.6 [U.S.D.C. N.D. Ill. 2003]. Thus, the issue of whether plaintiff actually agreed to be added to the MBNA account is for the court to decide in the first instance. If plaintiff was not properly added to the account, plaintiff cannot be required to arbitrate her claim against MBNA.” The court denied MBNA’s motion.
In Lawrence v. Household Bank [SB], N.A., 343 F.Supp.2d 1101 [U.S.D.C. M.D. Ala. 2004], the court stated: “There is an exception to the Prima Paint rule, however, for "cases where not merely the enforceability, but the initial formation or existence of a contract, including a disputed arbitration clause, is legitimately called into question, and must be decided by the court." Rainbow Investments, Inc. v. Super 8 Motels, Inc., 973 F.Supp. 1387, 1390 [M.D.Ala.1997] [Thompson, C.J.]. Cases in which there is no signed contract and in which one party denies the existence of an agreement fall into this category. The Eleventh Circuit has explained: "Under normal circumstances, an arbitration provision within a contract admittedly signed by the contractual parties is sufficient to require the district court to send any controversies to arbitration. Under such circumstances, the parties have at least presumptively agreed to arbitrate any disputes, including those disputes about the validity of the contract in general. Because the making of the arbitration agreement itself is rarely in issue when the parties have signed a contract containing an arbitration provision, the district court usually must compel arbitration immediately after one of the contractual parties so requests. "The calculus changes when it is undisputed that the party seeking to avoid arbitration has not signed any contract requiring arbitration. In such a case, that party is challenging the very existence of any agreement, including the existence of an agreement to arbitrate. Under these circumstances, there is no presumptively valid general contract which would trigger the district court's duty to compel arbitration pursuant to the Act. If a party has not signed an agreement containing arbitration language, such a party may not have agreed to submit grievances to arbitration at all. Therefore, before sending any such grievances to arbitration, the district court itself must first decide whether or not the non-signing party can nonetheless be bound by the contractual language." Chastain v. The Robinson-Humphrey Co., 957 F.2d 851, 854 [11th Cir.1992] [citations and footnotes omitted]. In resolving these "gateway issues," the court applies ordinary state common law governing the formation of contracts. Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford University, 489 U.S. 468, 475-76, 109 S.Ct. 1248, 1254, 103 L.Ed.2d 488 [1989]; see also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 n. 9, 115 S.Ct. 1212, 1219 n. 9, 131 L.Ed.2d 76 [1995]. [emphasis added.].” The Lawrence facts differ greatly from this case but the analysis is the same.
Oddly, Defendant Citibank has historically and repeatedly tried to push the envelope in arguing for arbitration. Defendant Citibank has claimed that pleading that an identity theft victim fits within the TILA definition of “cardholder” binds the victim to the terms and clauses in the fraudulent application. A review of TILA shows that a "cardholder" is generally defined as the person whose identity is listed on the credit application made to the issuer. In the only case directly on point, the court held that an identity theft victim “is a cardholder” yet not responsible for the account. Baker v. Citibank [South Dakota] N.A., 13 F.Supp.2d 1037 [U.S.D.C. S.D. Cal.1998] [same defendant conglomerate as in this case]. [[FN- “The parties have not cited, nor has the Court's independent research revealed, any California or federal case that has construed the meaning of "cardholder" in this context. One Michigan case, however, provides guidance by analogy. In Michigan v. Collins, 158 Mich.App. 508, 405 N.W.2d 182 [1987], an imposter obtained a credit card in the name of Theresa Holland. A Michigan statute criminalized using a credit card without the consent of the cardholder. The statute defined a cardholder as "the person or organization who requests a credit card and to whom ... a credit card is subsequently issued...." Id. 405 N.W.2d, at 183 [quoting Mich.Comp.Laws. §750.157m[b]. The defendant argued that because Theresa Holland had not requested the credit card, she was not a cardholder within the meaning of the statute. The court rejected this argument, stating: ... In our opinion, defendant construes the statute far too narrowly. The statute is designed to protect ... the person in whose name a card is issued.... In the instant case, the credit card was issued pursuant to solicitation from one whom the issuer believed to be Theresa Holland. Construed in this manner, Holland was a cardholder. Construed narrowly, as defendant urges, the statute affords no protection to the real cardholder ... where persons representing themselves to be someone else request and receive a credit card. We do not believe that the Legislature intended to exclude from the act's operation fraudulent users who obtained unrequested cards.... Id. 405 N.W.2d, at 184. The Court finds this reasoning persuasive. Citibank's narrow interpretation boils down to the argument that if a consumer did not physically receive a card, the consumer is not a cardholder. Citibank's interpretation would remove the protections of the SCCA from an entire group of innocent consumers. This would be so even though the credit cards bear their names, use their social security numbers, and, if left unpaid, could damage their credit ratings. This is an odd interpretation indeed, and it circumvents the statute's obvious purpose of protecting consumers. [emphasis added.].”]]
Regardless, the cardholder is not liable for fraud perpetrated through the use his identifiers. First Nat. Bank of Commerce v. Ordoyne, 528 So.2d 1068 [La. App. 5 Cir. 1988], w.d., 532 So.2d 179 [La. 1988]; Union Oil Co. v. Lull, 349 P.2d 243 [Or. 1960]. The Truth-In-Lending Act defines "cardholder" as "any person to whom a credit card is issued or any person who has agreed with the card-issuer to pay obligations arising from the issuance of a credit card to another person." 15 U.S.C. 1602[m]; American Airlines, Inc. v. Remis Industries, Inc., 494 F.2d 196 [2nd Cir.[N.Y.]1974]. As plead and shown, Defendants Sears/Citibank allegedly issued an authorized user status in plaintiff’s identity. [[FN- Interestingly, the Texas Penal Code, in reference to credit card fraud defines “Cardholder" as “the person named on the face of the debit card to whom or for whose benefit the card is issued. Tex. Pen.Code Ann. §32.31[a][1] [Vernon 1998]; In re C.P., 998 S.W.2d 703 [Tex. App. - Waco 1999]. Numerous other jurisdictions follow this same definition. See, ex., Hill v. Com., Not Reported in S.E.2d, 2002 WestLaw 799835, [Va. App. 2002]; State v. Rawlins, 166 N.C.App. 160, 601 S.E.2d 267 [N.C. App. 2004]; Thomas v. State, 176 Ga. App. 771, 337 S.E.2d 344 [Ga. App. 1985]; State v. Ulmer, 21 Ariz.App. 378, 519 P.2d 867, [Ariz. App. Div. 1 1974].]]
Of course, the Truth-In-Lending Act is a broad Act encompassing regulations of various aspects of consumer credit. The Truth-in-Lending Act must be liberally construed to effectuate the remedial purpose of protecting consumers from inaccurate or unfair credit reporting, billing and credit card transactions. Litschitz v. American Express Co., 560 F.Supp. 458 [U.S.D.C. Pa. 1983]. Courts have held that TILA, being a remedial statute, must be strictly construed against the lender and in favor of the consumer. Grant v. Imperial Motors, 539 F.2d 506, 510 [5th Cir.1976]; N.C. Freed Co., Inc. v. Board of Governors of Federal Reserve System, 473 F.2d 1210, 1214 [2d Cir.1973], cert. denied, 414 U.S. 827, 94 S.Ct. 48, 38 L.Ed.2d 61 [1973] [TILA is remedial in nature, designed by Congress to remedy predatory creditor practices, and must be construed in a liberal fashion]; Trombly v. State Credit Adjustment Bureau, Inc., 1984 U.S. Dist. Lexis 24874 [U.S.D.C. Conn. 1984] [plaintiffs need only establish one example of non-compliance in order to recover under any provision of 15 U.S.C. 1601 et. seq.]. Courts have applied the same liberal construction when considering the awarding of actual damages. Id.
Issue 2: Can Defendant Claim That Plaintiff’s Legitimate Account Contract Terms and Conditions Be Applied to a Lawsuit Arising Over an Imposted Account or an Account of Another Consumer?
As stated above, the only known case on point where defendant tried this end run was in Riley v.GMAC, cause no. 1:01-CV-00869-WS-D [U.S.D.C. S.D. Ala. 12/16/02]. On December 16, 2002, docket entry #106, Judge Granade entered an unreported Order denying Discover’s Motion to Compel Arbitration, and Motion to Stay Discovery. Judge Granade found that the victim did not consent to any such arbitration clause and arbitration cannot be enforced absent an agreement to arbitrate. Discover tried to argue that because Riley had his own legitimate Discover account and that application/contract contained an arbitration clause, that somehow the court should apply that arbitration clause to a dispute and lawsuit involving the imposted credit application and account.
Issue 3: Is an Authorized User Liable For Charges Made on the Principal’s Account?
According to Citibank’s pleading in another case, the answer is “no.” In Li v. Citibank USA, Not Reported in F.Supp.2d, 2001 WestLaw 34379613 [U.S.D.C. W.D. Wis. 2001], Citibank [same defendant as here], argued: “Defendant contends that plaintiff Li lacks standing to bring this action because he is not a "cardholder" but only an "authorized user," arguing that an authorized user is not liable for repayment of the account. [emphasis added.].”
Further supporting the position that an authorized user is not liable is the decision [and case cited therein] in Matter of Laursen, 214 B.R. 378 [Bkrtcy. D. Neb.1997], which stated: “First, I conclude that Mr. Laursen is not contractually liable for the credit card debt. The credit card is in the name of Patti Laursen, and she made all the charges and took the cash advances on the account. Although, Mr. Laursen directed Ms. Laursen to make the charges and cash withdrawals, he did not sign the credit card agreement and he did not sign any of the credit card charge invoices. There is simply no privity of contract between Mr. Laursen and the Bank and he has no contractual liability to the Bank. See In re Houfek, 126 B.R. 530 (Bankr.S.D.Ohio 1991). The Bank did not offer evidence from which I conclude that Ms. Laursen acted as an agent of Mr. Laursen in obtaining the credit card or in incurring the debt. The Bank has not established that Ms. Laursen had actual, implied, or apparent authority to act as Mr. Laursen's agent in obtaining the card or in incurring charges on the credit card account. Because the Bank has not demonstrated a principal-agency relationship, contractual liability of Mr. Laursen cannot be predicated upon the activities of Ms. Laursen. Courts have been hesitant to find contractual liability on the part of individuals other than the person who applies for and receives the credit card. Individuals that the cardholder designate as having authority to make purchases on a credit card are often referred to as "authorized users" of a credit card. Decisional law indicates that even authorized users are not regarded as contractually liable for charges they make on the account. See Sears Roebuck & Co. v. Ragucci, 203 N.J.Super. 82, 495 A.2d 923 (1985); Cleveland Trust Co. v. Snyder, 55 Ohio App.2d 168, 380 N.E.2d 354 (1978). [emphasis added.].” In accord: Sears Roebuck & Co. v. Stover, 32 Ohio Misc.2d 1, 513 N.E.2d 361 (Ohio Mun.1987) [Store brought action against credit card account principal's daughter to recover money upon credit card holder's death. The Court held that the account principal's daughter, an authorized user, did not become liable to the store on a unjust enrichment theory or any other merely by signing the sales tickets for purchases she made using her father's credit card.], and Blaisdell Lumber Co., Inc. v. Horton, 242 N.J.Super. 98, 575 A.2d 1386, [N.J. Super. A.D. 1990].
Plainly, both Sears and Citibank are aware that authorized users are not liable for charges made on the principal’s account given extensive litigation by both Sears and Citibank in the issues at hand and the consistent adverse results attained to their positions.
Defendants’ arguments, inter alia, that payments were made from a joint checking account between plaintiff and Eckert somehow create liability for Eckert’s account are specious. In First Nat. Bank of Findlay v. Fulk, 57 Ohio App.3d 44, 566 N.E.2d 1270 [Ohio App.1989], the court considered similar facts and arguments by the lender. The court found that the authorized user is not liable for charges made on the account and, regardless of whether a joint account was used to pay for the bills, it did not convert the authorized user into a liable party on the account.
Defendants’ Lofty Submissions Are Hollow
Leaving aside defendants’ lawyers’ arguments in brief, the lofty submission of case opinions and two declarations are devoid of support for a stay or arbitration. The declarations are made without personal knowledge, is undated, and not made under oath. The declaration by Gromadzki attests that plaintiff had her own legitimate Sears credit account. Oddly, the declarant failed to state the account number so as to emphasize the fact that plaintiff’s legitimate account has nothing to do with this lawsuit. Plaintiff’s legitimate account [like all of her legitimate accounts] have no negative credit references. By claiming that it mailed an alleged Opt-In notice to plaintiff [when Citibank acquired the Sears portfolio, it mailed an “Opt In” to all Sears account holders claiming that an arbitration clause would now be foisted] and defendants believe that mailing would make plaintiff subject to arbitration on William Eckert’s account. In fact, like undersigned counsel, plaintiff chose to close her Sears account and not do business with Citibank. Plaintiff never even consented to the Opt-In Arb asserted by defendants. Close scrutiny of what Gromadzski and Moilanen really say shows that defendants cannot even show that plaintiff consented to the arbitration clause as to her legitimate Sears account [which she closed and never used again after Citibank took over Sears credit portfolio], let alone the William Eckert account. [[FN - July 15, 2003, Press Release: “Citigroup to Acquire Sears Credit Card Business; Companies to Enter Long-Term Marketing and Servicing Alliance Citigroup to pay a 10% premium for Sears’ credit card portfolio Citigroup to Become Largest Private Label Card Provider in U.S. and Reaffirms Position as Number One Provider of Card Products Worldwide.”]] Defendants do not allege or even show that plaintiff used her legitimate Sears account after January 10, 2004. Par. 10, Gromadzski Declaration. Therefore she did not implicitly agree either. It is may be academic only, but there is no possible arbitration clause to apply to plaintiff.
The Moilanen declaration is equally void of pertinence. The exhibits and records submitted by defendants do not support the application of any arbitration clause. The mound of court opinions involve cases which are very different on their facts. None of those cases are even close to the facts in this case. Sadly, defendants have wasted time in bringing this baseless motion.
Defendant’s motion should be denied.

Respectfully submitted,

Bodenheimer, Jones, Szwak & _, LLP

By: ___________________________________
David A. Szwak, La.BR #21157, TA
416 Travis Street, Suite 1404
Mid South Tower
Shreveport, Louisiana 71101
[318] 424-1400
FAX 221-6555
Counsel for Plaintiff

I hereby certify that a copy of the above and foregoing has been served upon all counsel of record by placing a copy of same in the United States Mail, properly addressed and first class postage pre-paid on this the ____ day of ________________, 2005.

_________________________________________ OF COUNSEL

David A. Szwak

Postby David A. Szwak » Mon Jan 02, 2006 5:36 pm

Slip Copy, 2005 WL 3543083 (E.D.Tex.)
Only the Westlaw citation is currently available.

United States District Court,
E.D. Texas, Marshall Division.
Diana D. POULSON Plaintiff
TRANS UNION LLC, CSC Credit Services, Inc., Equifax Information Services, LLD,
Experian Information Solutions, Inc., Discover Financial Services, Inc., USAA
Credit Card Bank Aka USAA Credit Card Services, Sears, Roebuck & Co., Inc., and
Citibank USA, NA Defendants
No. 2:05-CV-75.
Dec. 22, 2005.
David Anthony Szwak, Bodenheimer Jones Szwak & _, Shreveport, LA, for Plaintiff.
Jeffrey Wayne Moles, Van Harold Beckwith, Chad Michael Pinson, Baker Botts, Lucinda Warnett Andrew, Jones Day, Gregg D. Stevens, McGlinchey Stafford, Dallas, TX, Rickey Lawrence Faulkner, Rickey L. Faulkner, P.C., Longview, TX, Camille W Averett, Kilpatrick Stockton, Atlanta, GA, C. Ed Harrell, Hughes Watters & Askanase, Houston, TX, Virgil Jay Youngblood, Henslee Fowler Hepworth & Schwartz, Tyler, TX, Brian H. Newman, Buchalter Nemer Fields & Younger, Los Angeles, CA, Ronald Kevin Rhyne, Henslee Fowler Hepworth & Schwartz, Tyler, TX, Gabriel Alan Crowson, McGlinchey Stafford PLLC, Baton Rouge, LA, for Defendants.


*1 Before the Court are Defendant Citibank USA, National Association's Motion to Stay Litigation in Favor of Arbitration (Docket No. 59) and Defendant Sears, Roebuck, and Co.'s Joinder in Citibank's Motion to Stay Litigation in Favor of Arbitration (Docket No. 61). Having considered the parties' written submissions and oral arguments, the Court DENIES the motions.

Diana Poulson brings this suit complaining that Defendants misreported her account status resulting in a negative credit report. Specifically, she claims Defendants have wrongly included information relevant to her ex-husband's Sears credit card, issued by Citibank, on her credit report and this information negatively impacts her credit report.
When Poulson married William Henry Eckert, Jr. on August 23, 1986 he had a Sears credit card issued by Sears National Bank. During their marriage, Eckert named Poulson as an authorized user on several credit accounts that he had opened prior to their marriage, including his Sears account ("Eckert account") but she never became a cardholder or guarantor on the account. During the time in question, Poulson also had her own Sears credit card ("Poulson account"). Poulson and Eckert divorced on December 28, 2000, and Eckert was supposed to have removed Poulson as an authorized user on his Sears account, but he apparently did not. Poulson alleges that she contacted Sears in October 2001 demanding that she be removed from the records as she had no liability for any charges or future charges and did not use the Eckert Sears account, but was told that since she was not the "primary" party on the Eckert Sears account she could not make any change to the account information. She further alleges that she asked her ex-husband to have her removed from the account, and he said he would do so. Poulson claims that in late May 2004 she first learned that Eckert had amassed large credit card debt on his Sears card account and that account had been reported on her credit report. This suit followed involving not only the Sears cards, but a number of other cards, which Poulson alleges were handled in a similar manner thus damaging her credit. All of the allegations of improper reporting relate to Eckert's cards and not Poulson's.
Citibank seeks to compel Poulson to arbitration arguing that in November 2003, Citibank purchased both the Eckert and Poulson Sears accounts from Sears National Bank, and at the time of purchase sent all Sears card account holders notice that Citibank was changing the accounts' terms to include an arbitration agreement: "All claims relating to your account, a prior related account, or our relationship are subject to arbitration...." The change-in-terms notice included an opt-out provision, which required account holders to mail the opt-out statement to Citibank in order to not be bound by the new terms. Citibank does not contend that Poulson is bound by the arbitration agreement relating to the Eckert Sears account from which Poulson's claims arise, but makes the novel argument that the notice it allegedly sent to Poulson regarding her own Sears card account binds her to arbitrate the dispute before the Court relating to her ex-husband's Eckert Sears card account.
*2 Regarding Poulson's Sears-Citibank account, Citibank contends that it did not receive an opt out notice from her, but Poulson claims that she attempted to close her account when she received notice that Citibank was purchasing the account. There is no evidence that Poulson used her Sears-Citibank card after that point in time, much less her ex-husband's Sears-Citibank card.

Arbitration is a matter of contract, and courts may require a party to submit its dispute to arbitration only if the party has expressly agreed to do so. Personal Security & Safety Sys. Inc. v. Motorola Inc., 297 F.3d 388, 392 (5th Cir.2002). To determine whether the parties have agreed to arbitrate the dispute, a court must first determine whether there is a valid agreement to arbitrate between the parties and then determine whether the parties' dispute falls within the scope of the arbitration agreement. Id. Ordinary state law principles that govern contract formation apply to the determination of whether the parties have a valid arbitration agreement. Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir.2002). In determining whether a dispute falls within the scope of the arbitration agreement, ambiguities are resolved in favor of arbitration, but this does not apply to determining whether a valid arbitration agreement exists. Id.

Before determining whether Poulson's claims relate to her relationship with Citibank and are thus subject to arbitration under the arbitration provision, the Court must first determine whether Poulson and Citibank ever had a valid agreement to arbitrate their disputes. Although Poulson's claims concern the Eckert account, Citibank does not argue that Poulson is bound by an arbitration clause related to the Eckert account. Instead, Citibank argues that through the Poulson account, Poulson agreed to arbitrate all disputes relating to her relationship with Citibank, including the disputes arising out of the Eckert account. Poulson disputes that she ever entered into such an arbitration agreement.
Citibank claims that Poulson accepted the arbitration provision because she did not send a notice opting out of the agreement when Citibank sent her the change in terms. Citibank's argument is premised on its ability to change the account terms at will by notifying the account holder. Thus, the Court must first determine whether Citibank had the right to modify Poulson's account terms to include the arbitration provision by sending an opt-out notice. Citibank, however, has has failed to produce Poulson's agreement with Sears and therefore cannot show that Poulson's original agreement with Sears allowed Citibank, as Sears's assignee, to modify the terms of the agreement by sending such a notice. Thus, Citibank has no proof that it had the right to attempt to add the arbitration provision to the terms of Poulson's account in this manner. Because Citibank has not shown that it had the right to change Poulson's account terms by sending a notice and requiring an opt-out letter, Poulson's alleged failure to opt out of the arbitration provision does not suffice as consent to arbitrate.
*3 Therefore, Citibank must show that Poulson consented to arbitration by some other means. [FN1] In the context of stand-alone arbitrations agreements, binding promises are required by both sides as consideration to create the contract. In re AdvancePCH Health L .P., 172 S.W.3d 603, 607 (Tex.2005). If the arbitration agreement is part of an underlying contract, the rest of the parties' agreement provides the consideration. Id. Poulson claims that when she received the notice of the change in terms, she contacted Citibank to close the account. Poulson has no evidence of this, and Citibank claims to have no record of this. But Poulson did cease using the card after she allegedly attempted to close the account, which stands as strong circumstantial evidence that she attempted to close the account. If Poulson attempted to close the account in response to a change in terms, she clearly did not accept Citibank's offer to change the terms. Since she attempted to close the account, maintenance of the account could not serve as consideration for the arbitration provision. Cf. id. ("Having used PCS's services and network to obtain reimbursements for 10 years, the pharmacies cannot claim their agreement to arbitrate was without consideration."). Citibank has no evidence of a binding promise by Poulson to be bound by the arbitration agreement.

FN1. The Court's determination of whether Poulson agreed to modify the Sears agreement is hindered by not having that agreement. Presumably, Poulson's original agreement with Sears contained a choice-of-law clause stating which state's law apply to contractual disputes. Citibank has not produced that agreement, and the Court cannot determine whether Poulson and Sears agreed that a particular state's law should govern the interpretation of the original agreement. The Court will apply Texas law.

Citibank has not carried its burden in showing Poulson is bound by the arbitration provision. Citibank has not shown that it had the right to modify the terms of the account in the manner that it attempted; nor has Citibank shown that Poulson otherwise agreed to modify the account terms to include an arbitration agreement. Since there was no valid agreement to arbitrate, the Court does not need to reach the second prong of the analysis and determine whether the dispute falls within the terms of the arbitration provision.

Citibank has not shown that Poulson is bound by a valid arbitration agreement. Accordingly, the Court DENIES Citibank's motion to stay and Sears's joinder in that motion.
Poulson v. Trans Union LLC
Slip Copy, 2005 WL 3543083 (E.D.Tex.)

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