In Mancuso v. MDG USA Inc., the Third Circuit Court of Appeals considered defendant MDG’s appeal of an order denying its motion to compel arbitration of the plaintiff’s lawsuit alleging violations of state and federal fair credit laws. The plaintiff purchased a laptop computer from MDG and signed a financing agreement requiring monthly payments on his account. A dispute arose regarding the remaining balance on the account, and after the plaintiff directed his bank to stop payment on the monthly charges to the account, MDG reported the plaintiff to credit agencies.
The plaintiff then filed a state court action in Pennsylvania alleging violations of state and federal fair credit laws. MDG removed the case to federal court and filed a motion to compel arbitration pursuant to the arbitration clause included in the financing agreement, which covered “any past, present, or future claim, dispute, or controversy … relating to or arising out of” the agreement. The plaintiff admitted he signed the financing agreement and his claims arose from the agreement, but argued that the agreement was “unenforceable because of fraud and unconscionability.” The district court denied MDG’s motion to compel without prejudice. The court concluded that it was not apparent from the face of the complaint whether the plaintiff’s claims were subject to arbitration and ordered limited discovery related to that issue.
In reversing the district court’s decision, the Third Circuit first noted that because the plaintiff did not dispute he had a valid contract with MDG, the court’s review was limited to “whether the arbitration clause itself — not the rest of the contract — is enforceable.” The court then rejected the arguments raised by the plaintiff in challenging the enforceability of the arbitration clause. The court concluded that the arbitration clause was not “hidden and minimized” and further noted that the plaintiff did not contend he was unaware of the clause when he signed the financing agreement. Further, the court rejected the plaintiff’s contention that the arbitration clause was confusing because of a numbering error, noting that the error was in the arbitration clause itself, which means that for the plaintiff to have even noticed the error, he would have to have read the arbitration clause. The court also rejected the plaintiff’s argument that the financing agreement was unconscionable because he could not alter its terms, noting that the arbitration provision was not procedurally unconscionable because it allowed the plaintiff to send MDG an “arbitration opt out notice.” The court then held that the plaintiff did not raise “a colorable legal issue of fraud, unconscionability, or unenforceability of the arbitration clause” and his claims were subject to the arbitration provision. The court reversed the district court’s denial of MDG’s motion to compel arbitration and directed the court to enter an order compelling arbitration of the plaintiff’s claims.
Mancuso v. MDG USA, Inc., No. 23-1963 (3d Cir. Feb. 7, 2024).
