Court Compels Discovery in Amex Class Action

SAN DIEGO, Calif. (CN) - A federal judge ordered discovery in a class action alleging that American Express makes unsolicited calls to customers' cellphones - even though the matter is set to go to arbitration.

Karin O'Brien sued American Express over calls she claims the credit card company made to her cellphone without her express prior consent, in violation of the federal Telephone Consumer Protection Act. O'Brien brought a class action before the court, but American Express argued that she is required to arbitrate her claims on an individual basis under the terms of her cardholder agreement.

O'Brien seeks discovery on the development of the arbitration clause in the agreement to determine if it is unconscionable. American Express opposes any discovery, arguing that the formation of the arbitration clause is not at issue in the case. The company also argues that O'Brien's unconscionability argument has been preempted by the Supreme Court's decision in AT&T Mobility LLC v. Concepcion, that discovery for a class action is inappropriate and that what she seeks is already public information and should be in her possession.

U.S. Magistrate Judge Bernard Skomal wrote that while discovery rules are broad in civil actions, the Federal Arbitration Act limits the scope of discovery permitted with a motion to compel arbitration.

"The FAA provides for discovery in connection with a motion to compel arbitration only if 'the making of the arbitration agreement or the failure, neglect or refusal to perform the same be an issue," Skomal wrote, citing Simula Inc. v. Autoliv Inc.,'" Skomal wrote.

But American Express's argument that O'Brien -- who has been an AmEx customer since 1988 -- accepted the terms of the cardholder agreement and its arbitration clause when she used the card didn't hold water with Skomal.

"Plaintiff, due to the complexity of the decades-long relationship between the parties and the volumes of documents involved, seeks discovery related to the formation and amendment of the agreement. Plaintiff requests discovery on 'the manner, method and means by which AEC cardholders were notified of amendments to their card member agreements' and 'communications by and between plaintiff and AEC.' The finds this discovery is relevant to the formation or making of the agreement and grants plaintiff's request to take this limited discovery," Skomal ruled.

With regard to O'Brien's request to take discovery for an unconscionability defense, Skomal looked at both California law and Utah law since the cardholder agreement contains a Utah choice-of-law provision.

California law "provides that 'when it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination,'" Skomal wrote, citing the law.

"Under this provision, courts have permitted a party opposing a motion to compel arbitration to obtain discovery relevant to the issue of unconscionability," he continued.

Utah's law is very similar to California law according to Skomal, reinforcing his decision to allow discovery to ascertain unconscionability.

However, the magistrate did not agree to O'Brien's entire list for discovery, denying several of them because either they do not pertain to unconscionability, are duplicative or are not germane to her case against American Express. He also admonished both sides "to make every effort to resolve all disputes without court intervention."

Discovery must be completed by July 9, and O'Brien's response to American Express's motion to compel arbitration is due July 23. A hearing on the motion is set for Aug. 10.

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