Tuesday, March 26, 2013

Beneficial National Bank, U.S.A v. Obie Payton case brief

Beneficial National Bank, U.S.A v. Obie Payton case brief summary

214 F.Supp.2d 679

In plaintiff credit card companies' action to compel arbitration of its dispute with defendant credit card holder under § 4 of the Federal Arbitration Act, 9 U.S.C.S. § 4, the credit card holder moved to dismiss for lack of subject matter jurisdiction.

OVERVIEW: The credit card holder sued the credit card companies in state court alleging that his purchase of a home satellite system, financed through a credit card account, was induced by fraud. The companies filed suit in federal court to compel arbitration of the dispute pursuant to an arbitration agreement that was part of the cardholder agreement.

The court denied the holder's motion to dismiss, even though he had moved in his state court action to limit his damages to less than $ 75,000, the requisite amount for diversity jurisdiction, because the court had diversity jurisdiction at the time the instant action was filed.

-The court ordered that the dispute be submitted to arbitration.
-The cardholder agreement permitted the credit card company to change the agreement's terms, which it did by adding the arbitration clause.
-The holder failed to reject the clause.
-Even though the clause contained no retroactive language, it was sufficiently broad to cover the parties' dispute, as it recited that it applied to "any claim, dispute, or controversy arising from or relating to this agreement or the relationships which result from this agreement."

-If an arbitration clause contains retroactive time-specific language, e.g., a phrase reading "this agreement applies to all transactions occurring before or after this agreement," then the court may apply the arbitration provision to events relating to past events.
-Or, if the arbitration clause contains language stating that it applies to "all transactions between us" or "all business with us," then the court may apply the arbitration clause retroactively.

OUTCOME: The credit card holder's motion to dismiss the credit card companies' action for lack of subject matter jurisdiction was denied. The court ordered that the parties' dispute be submitted to arbitration under the FAA, and ordered that the litigation be stayed pending arbitration.

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