A federal district court in Michigan has compelled arbitration of a cardholder dispute, holding that the Sixth Circuit's "knowing and voluntary waiver" analysis in Morrison v. Circuit City Stores is not applicable in the context of consumer credit disputes.

In Novak v. JP Morgan Chase Bank, NA, No. 06-14862, 2008 WL 907380 (E.D. Mich. Mar. 31, 2008), Novak brought an action against Chase for alleged violations of the Electronic Fund Transfer Act, conversion, and negligence. Chase subsequently moved to compel arbitration and abate the action.

Novak alleged that no agreement to arbitrate existed, claiming that the original 1980 credit contract with Chase did not include an arbitration agreement. The Court found, however, that subsequent contracts regarding the account included an arbitration agreement. Because the inconsistent provisions in the later contracts superceded those in the earlier contract, the arbitration agreements in the later contracts were effective.

Furthermore, Novak's predecessor in interest signed a deposit agreement in 2001 that specifically incorporated an arbitration agreement. Therefore, from at least 2001 onward, an arbitration agreement existed regarding the disputed account.

Novak alleged that the deposit agreement did not constitute a "knowing and voluntary waiver" of Novak's right to arbitrate claim as required by Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 668 (6th Cir. 2003). The Court rejected this argument, finding that the factors delineated in Morrison did not apply to arbitration agreements outside of the employment context.

Specifically, the Court noted that the second Morrison factor specifically referred to an employee's opportunity to consult legal counsel, and that Morrison drew its five factors from a case concerned with employers' superior bargaining position in employment negotiations. See Adams v. Phillip Morris, Inc., 67 F.3d 580, 583 (6th Cir. 1995); accord Bormann v. AT & T Comm'ns, 875 F.2d 399, 403 (2d Cir. 1989), cert. denied, 493 U.S. 924 (1989); Riley v. Am. Family Mut. Ins. Co., 881 F.2d 368, 372 (7th Cir. 1989).

The Court also determined that all claims were within the broad scope of the arbitration agreement. To the Court, no claim alleged by Novak could be maintained without referencing the Chase account that was the subject of the arbitration agreement. While it acknowledged that several different versions of the arbitration agreement were in effect from 2001 until Novak's complaint was filed in 2006, the Court found that all effective agreements contained broad language sufficient to encompass all of Novak's claims.

Finally, the Court found Chase did not waive its right to arbitrate through its minimal participation in litigation proceedings. Chase only filed two motions with the court – one of which was the motion to compel arbitration – and had asserted the arbitration agreement as an affirmative defense in its answer. While Chase had filed errata that necessitated an additional response, the Court did not find that this activity or additional burden constituted sufficient activity by Chase or prejudice to Novak to constitute a waiver of the right to arbitrate.