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A California appellate court upheld an arbitration agreement added to a credit card contract via a bill stuffer because the amendment also included instructions for opting out of the proposed changes.
In Citibank (South Dakota), N.A. v. Walker, No. A117770, 2008 WL 4175125 ( Cal. Ct. App. Sept. 11, 2008), Citibank issued a credit card to Walker. Some time later, Citibank mailed Walker a change-of-terms document along with his monthly billing statement. The change-of-terms document added an arbitration agreement and class waiver to the credit card contract. The document also included instructions for opting out of the proposed amendments. Walker did not opt out.
When Walker defaulted on his credit card payments, Citibank initiated arbitration before the National Arbitration Forum (FORUM) for the unpaid balance. The arbitrator found in favor of Citibank, and the trial court confirmed the award.
On appeal, Walker argued that the class action waiver was unconscionable. The Court dismissed this argument as generic and unpersuasive. The Court also noted that class waivers are not categorically unconscionable under California law.
Walker also argued that the unilateral change of terms using a “bill stuffer” was unconscionable based on Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005). The Court found Walker’s reliance on Discover Bank misplaced because the case does not stand for the proposition that “bill stuffer” amendments are per se unconscionable.
Rather, the focus is placed on the take it or leave it nature of the contract, and as the Court noted, Citibank provided Walker with instructions for opting out of the proposed amendments. Absent any evidence that Citibank pressured Walker not to exercise his right to opt-out, there was no reason to conclude that the amendments were provided on a take it or leave it basis. The Court thus affirmed the order confirming the arbitration award.
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