Puleo v. Chase Bank USA, N.A.

Chase Bank USA, N.A. (Chase) (defendant) issued credit cards to Francis and Trish Puleo (plaintiffs) pursuant to a cardmember agreement. The agreement contained an arbitration clause that included a class-action waiver provision barring class-action lawsuits and class arbitrations, such that the Puleos were required to submit any disputes to arbitration on an individual basis rather than as representatives of a class. The agreement also had a severability clause, meaning that if one portion of the agreement was invalid, the remaining portions were still enforceable. After Chase imposed retroactive interest-rate increases on account balances, the Puleos filed a class-action lawsuit in state court. The case was removed to federal court. Chase moved to compel arbitration and dismiss the case. In opposition, the Puleos did not object to arbitration but argued that the class-action waiver provision was unconscionable and thus unenforceable. The Puleos asked the court to compel class arbitration so that the arbitrator could decide whether the class-action waiver provision was valid. The court granted Chase’s motion, concluding that the enforceability of the class-action waiver provision was a question for the court to decide and that the entirety of the arbitration, including the class-action waiver provision, was enforceable. The Puleos appealed, arguing (1) that it was improper for the court to decide the issue of unconscionability because this was a procedural dispute not a question of arbitrability, (2) that the severability clause required the court to first consider whether the class-action waiver provision should be severed from the rest of the agreement, and (3) that even if an arbitrability question existed, the parties intended for an arbitrator to decide the question of arbitrability.