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A federal district court in Pennsylvania has compelled arbitration of a consumer's claims against a bank and credit card company, noting that the mere pendency of legislative action that would invalidate the arbitration agreements at issue did not warrant ignoring present federal law favoring their enforcement.
In Grimm v. First National Bank of Pennsylvania, Civ. A. Nos. 08-785, 08-816, 2008 WL 4279855 (W.D. Pa. Sept. 16, 2008), Grimm held accounts with First National (the Bank) and with Chase. After disputes arose with both regarding withdrawals and charges on these accounts, Grimm sued both parties. The Bank and Chase moved to compel arbitration of Grimm's claims, the former in accordance with an arbitration agreement on the Bank account contracts and the latter in accordance with an arbitration agreement in the cardmember contract.
The Court first rejected Grimm's contention that the Bank's arbitration agreement violated the Pennsylvania Plain Language Consumer Contract Act, noting that the Act expressly does not apply to "documents used by financial institutions." 73 Pa. Stat. § 2204(b)(5).
The Court then rejected Grimm's arguments that the Bank's arbitration agreement was unconscionable. Because the agreement was "in bold, capitalized, and… noticeable upon reading the contract," the Court did not find it procedurally unconscionable. The Court also stated that Grimm's contention that he did not read the agreement was "without merit" and irrelevant to the issue of procedural unconscionability.
As to the Bank agreement's alleged substantive unconscionability, the Court determined that the parties were not of "unequal bargaining power" as alleged by Grimm, in that Grimm "could have chosen to open said accounts with a different financial institution."
Grimm also argued that the Bank had waived its right to arbitrate by removing the matter to federal court and failing to elect arbitration within a year of the initial court filing, but the Court found the Bank had in fact moved to compel arbitration within 11 days of the case's removal to federal court.
Finally, the Court rejected Grimm's contention that the introduction of the Arbitration Fairness Act of 2007 in Congress cut against enforcement of the arbitration agreement because, if enacted, the Act would invalidate the agreement at issue. S. 1782, 110th Cong. (2007); H.R. 3010, 110th Cong. (2007). The Court stated it "is required to abide by federal law, and not ongoing legislative deliberations on an Act that may or may not be passed." In addition, the Court noted that its own "mandatory Alternative Dispute Resolution Policies and Procedures support [its] willingness to enforce arbitration provisions where they exist."
As Grimm made substantially the same arguments against enforcement of the arbitration agreement with Chase, the Court summarily rejected Grimm's arguments against enforcement of this agreement as well. Accordingly, the Court granted both the Bank's and Chase's motions to compel arbitration.
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