A.D., a minor, individually and on behalf of all others similarly situated, Plaintiff-Appellant,
Credit One Bank, N.A., Defendant-Appellee.
November 29, 2017
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 1:14-cv-10106 -
Matthew F. Kennelly, Judge.
Wood, Chief Judge, and Ripple and Kanne, Circuit Judges.
RIPPLE, CIRCUIT JUDGE
by and through her mother, Judith Serrano, brought this
putative class action under the Telephone Consumer Protection
Act. She seeks compensation for telephone calls placed by
Credit One Bank, N.A. ("Credit One") to her
telephone number in an effort to collect a debt that she did
not owe. After discovery, Credit One moved to compel
arbitration and to defeat A.D.'s motion for class
certification based on a cardholder agreement between Credit
One and Ms. Serrano. The district court granted Credit
One's motion to compel arbitration but certified for
interlocutory appeal the question whether A.D. is bound by
the cardholder agreement. We granted A.D.'s request for
permission to appeal. See 28 U.S.C. §
1292(b). We now reverse the district court's
grant of Credit One's motion to compel arbitration and
remand for further proceedings consistent with this opinion.
A.D. is not bound by the terms of the cardholder agreement to
arbitrate with Credit One, and she has not directly benefited
from the cardholder agreement such that equitable principles
convince us to apply the arbitration clause against her.
1991, Congress amended the Communications Act of 1934 to
address "the advent of automated devices that dial up to
1, 000 phone numbers an hour and play prerecorded sales
pitches." Moser v. FCC, 46 F.3d 970, 972 (9th
Cir. 1995). The amending statute, the Telephone Consumer
Protection Act ("TCPA"), makes it unlawful to use
an "automatic telephone dialing system or an artificial
or prerecorded voice" to call a cell phone without
"the prior express consent of the called party." 47
U.S.C. § 227(b)(1)(A). An individual who provides her
cell phone number to a creditor through a credit application
"reasonably evidences prior express consent … to
be contacted at that number regarding the debt."
Rules & Regulations Implementing the Tel. Consumer
Prot. Act of 1991, 23 FCC Rcd. 559, 564 (FCC 2008). A
creditor relying on the "prior express consent"
exception to the TCPA has the burden of showing that "it
obtained the necessary prior express consent."
Id. at 565.
TCPA provides a private right of action for individuals to
claim that their rights under the TCPA have been violated.
See 47 U.S.C. § 227(b)(3). Successful
plaintiffs may recover the greater of the amount of (1)
actual damages or (2) $500 for each violation, meaning each
phone call. Id.
Serrano opened a credit card account with Credit One in 2003.
In 2010, she used A.D.'s cell phone to access her Credit
One account by calling Credit One and providing her account
number and the last four digits of her social security
number. Using caller ID capture software, Credit One attached
A.D.'s cell phone number to Ms. Serrano's account.
Serrano later fell behind on her credit card payments, and
Credit One began calling the telephone numbers previously
stored with her account in an attempt to collect the debt. In
her complaint, A.D. alleges that, in the course of this
collection process, Credit One repeatedly called her about
her mother's debt. Specifically, A.D. alleges that she
received a good number of calls from Credit One in October
and November 2014.
opening her account with Credit One, Ms. Serrano had signed a
standard cardholder agreement. This agreement included, among
other terms, an arbitration clause and class action waiver,
Agreement to Arbitrate:
You and we agree that either you or we may, without the
other's consent, require that any controversy or dispute
between you and us (all of which are called
"Claims"), be submitted to mandatory, binding
arbitration. This arbitration provision is made pursuant to a
transaction involving interstate commerce, and shall be
governed by, and enforceable under, the Federal Arbitration
Act (the "FAA"), 9 U.S.C. § 1 et seq., and (to
the extent State law is applicable), the State law governing
Claims subject to arbitration include not only Claims made
directly by you, but also Claims made by anyone connected
with you or claiming through you, such as a co-applicant or
authorized user of your account, your agent, representative
or heirs, or a trustee in bankruptcy.
If you or we require arbitration of a particular Claim,
neither you, we, nor any other person may pursue the Claim in
any litigation, whether as a class action, private attorney
general action, other representative action or
A.D. first filed this action, Credit One was not aware that
it had a cardholder agreement with her mother. A.D. did not
state in her complaint that her mother was the probable
target of Credit One's phone calls (although she was
listed as A.D.'s guardian ad litem in the
complaint). After eighteen months of discovery, and after
reviewing its own records, Credit One finally realized that
its caller ID capture system had added A.D.'s phone
number to its database when Ms. Serrano used A.D.'s phone
to access her account. At that point, Credit One sought to
compel arbitration with A.D. based on the arbitration clause
in Ms. Serrano's cardholder agreement.
only evidence that A.D. ever used Ms. Serrano's Credit
One credit card was Ms. Serrano's deposition testimony
that, on at least one occasion, Ms. Serrano had preordered
smoothie drinks for her daughter and herself from a stand in
the local mall and had sent A.D. to pick them up. She had
instructed A.D. to pay for the smoothies with her Credit One
card. This transaction occurred in 2014, when A.D. was
fourteen years old.
district court ruled with Credit One that A.D. was bound by
the cardholder agreement's arbitration clause. In its
view, even though A.D. had not signed the cardholder
agreement, she must be considered an "Authorized
User" under its terms. Therefore, continued the court,
she is bound by the arbitration clause under the "direct
benefits estoppel" theory. Under this theory, explained
the court, a person should not receive a benefit under a
contract while, at the same time, repudiating a disadvantage
under the contract. The court then reasoned that the
cardholder agreement had allowed A.D., when picking up the
drinks ordered by her mother, to represent to the store that
Credit One would pay for the purchase. She therefore had
benefited from the ...