Declaration by Credit Card Company Regarding Vendor’s Mailing of Card Agreement Insufficient to Enforce Arbitration Provision Against Cardholder, District Court Finds

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A recent decision by the U.S. District Court for the District of Columbia underscores the significance of issues of proof when trying to enforce arbitration agreements. The case is Proctor v. First Premier Corp., No. 1:20-cv-02162-BAH, 2021 U.S. Dist. LEXIS 6502 (D.D.C. Jan. 13, 2021).

Plaintiff Charnita Proctor sued First Premier Corp. (FPC) for alleged violations of the Fair Credit Reporting Act (FCRA) in relation to its reporting of a credit card account issued to the plaintiff. FPC moved to enforce the credit card agreement’s arbitration provision, which the plaintiff opposed.

To opt out of the arbitration provision, the agreement provided that the cardholder must provide FPC with written notice no later than 30 days after the account was first opened, and if FPC did not receive written notice within that time frame, the cardholder’s rights to opt out would terminate, resulting in an agreement to the arbitration provision. FPC used a vendor to mail the agreement to consumers in the first place, a fact that would have key significance to FPC’s motion to compel arbitration.

In support of its motion, FPC submitted a declaration from a FPC employee stating (1) that the declaration was based on the employee’s “personal knowledge of the general business practices of FPC with respect to its credit card accounts”; (2) that the information in the declaration was “true and correct to the best of the employee’s, knowledge, information and belief”; and (3) that the information was based on the employee’s “personal knowledge or review of FPC’s records” or “upon information provided by persons working under her direction and supervision.” Notably, the declaration did not state that it was based on personal knowledge or review of the vendor’s records or business practices; instead, it was based on knowledge of the company’s own practices.

As to the mailing of the agreement, the declaration stated that FPC, “in the normal course of business and regular business practices,” directed its vendor to mail to the plaintiff the applicable contract, credit card, and account disclosures containing the terms and conditions governing the account. Attached to the declaration was an exemplar credit card agreement containing the terms and conditions governing the account that “would have been sent” to the plaintiff when the credit card was sent to her. The declaration also stated that FPC had not received written notice of the plaintiff’s intent to opt out of the arbitration provision.

In opposing FPC’s motion, the plaintiff argued that no contract existed between her and FPC because she never received the credit card agreement, and that FPC’s declaration was inadmissible to prove that there was a contract.

Although the court found that FPC’s declaration was generally admissible as being based on the employee’s personal knowledge and the business records of FPC, the court found that it was not sufficient to establish that the vendor mailed the credit card agreement to the plaintiff. The court found that that the declaration was insufficient in this respect even though it contained a statement, with a supporting business record, that the plaintiff had used the card, which, according to FPC, established that she must have received the agreement. The court noted, however, that there was still a “key link” missing from “the logical chain that would permit the inference that the plaintiff was mailed the credit card agreement” because the vendor could have mailed the card without including the agreement. The court also found that the declaration’s statement that the exemplar credit card agreement “would have been sent” to the plaintiff when she received her credit card contained no information based on sufficient personal knowledge that an agreement was in fact mailed to the plaintiff.

The court did explain that “FPC need not have provided a declaration from the person that actually put the agreement in the mail.” Rather, however, “FPC could have provided a statement based on sufficient personal knowledge concerning its vendor’s ordinary business practices in carrying out directions from FPC in mailing credit card materials,” or “a business record demonstrating that the credit card agreement had been mailed.” One possible implication of the ruling was that the court wanted to see, but did not receive, evidence from a witness qualified to speak as to the vendor’s processes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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