ND Cal. Declines to Enforce Arbitration Clause

Say you sign up for a department store credit card, and that credit agreement has an arbitration clause.  Then you buy merchandise at the store, using the credit card, and later want to sue because you believe the merchandise was marketed in a fraudulent manner.  Does the arbitration clause bar your suit?  According to one court at least, the answer is no.

Judge Thelton E. Henderson of the Northern District of California recently declined to enforce an arbitration clause within a Banana Republic Visa card agreement. The plaintiff had purchased merchandise at a Banana Republic affiliate (a Gap store) and alleged that the Gap had marketed the merchandise unlawfully.  The Gap moved to dismiss based on the arbitration clause.

Plaintiff argued that The Gap was not privy to the arbitration agreement and so could not enforce it.  Defendant responded that it was a third party beneficiary of the agreement, giving it the right to enforce it.

Judge Henderson sided with the plaintiff:

Here, while the parties’ agreement could be read to make Defendants third-party beneficiaries, the agreement itself is ambiguous. … Further, it is unclear to the Court how Plaintiff’s claims are “related to” her credit card agreement when Plaintiff’s claims are unrelated to her method of payment; in other words, her claims against Defendants would not be affected had Plaintiff made the purchase with a different credit card or payment method.

In addition, the court noted that The Gap had a forum selection clause on its website requiring disputes to be resolved “exclusively by the state and/or federal courts of the State of California, County of San Francisco and/or the Northern District of California.” The court concluded that the forum selection clause imputed “the reasonable expectation that [the parties] superseding, displacing, or waiving” the arbitration clause, even assuming it would otherwise apply.

The case is Munning v. The Gap, Inc., 2016 WL 6393550 (N.D. Cal. Oct. 28, 2016).