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Cavlovic v. J.C. Penney Corp., Inc.

United States District Court, D. Kansas

August 8, 2017

ANN CAVLOVIC, Plaintiff,



         This case is before the Court on Defendant J.C. Penney Corporation, Inc.'s (“J.C. Penney”) Motion for Review of Magistrate Judge's Order under FRCP 72(a) (Doc. 48). The motion is fully briefed and the Court is prepared to rule. As described more fully below, the Court denies Defendant's motion for review.

         A. Background

         On September 23, 2014, Plaintiff Ann Cavlovic used her J.C. Penney credit card to purchase a pair of earrings from a J.C. Penney store in Kansas. She alleges that J.C. Penney offered two stackable discounts that brought the purchase price down from an advertised sticker price of $524.98 to $171.66 (after tax and discounts). Plaintiff received additional purchase incentives in the form of 158 J.C. Penney Rewards points, which she later redeemed. When she arrived home, Plaintiff discovered a price tag in the box of earrings for $225, which had been crossed out. Plaintiff alleges that J.C. Penney's advertisements about original and sale prices are fraudulent and deceptive. The Complaint asserts Kansas state law claims for violations of the Kansas Consumer Protection Act (“KCPA”), and unjust enrichment.

         On April 21, 2017, Defendant asked this Court to compel individual, non-class arbitration, and stay any further proceedings in this case, based on arbitration provisions in two separate agreements, one governing the J.C. Penney credit card that she used in the transaction at issue, and the other governing the rewards program under which she received points in the transaction. In its briefing, Defendant argued that the controlling arbitration provision was contained in Plaintiff's 2006 credit card agreement, as amended by a 2008 notice of change of terms sent to Plaintiff along with her April 28, 2008 billing statement (“2008 Agreement”). The 2008 Agreement contained a broad agreement to arbitrate, including “any past, present, or future legal dispute or claim of any kind, including statutory and common law claims and claims for equitable relief, that relates in any way to your account, card or the relationships that arise from your account, this agreement or any prior agreement or account.”[1] Defendant submitted this 2008 Agreement along with an affidavit from Martha Koehler, the Manager of Litigation Support for Synchrony Bank, which provided the credit card program at issue in this case. Ms. Koehler reviewed the Bank's business records and attested that changes in terms were mailed along with Plaintiff's monthly billing statement on October 28, 2008, and September 28, 2009.[2]

         Plaintiff responded to the motion to compel by arguing that the 2008 Agreement did not control, and pointed to 2016 and 2017 versions of J.C. Penney credit card agreements her counsel had found on the Internet. Plaintiff argued that these agreements govern the dispute and contain arbitration clauses that are narrower in scope, and thus do not apply to Plaintiff's claims.

         This Court referred the motion to Magistrate Judge Teresa J. James for disposition. After the reply was filed, in which Defendant continued to argue that the 2008 Agreement governs the arbitrability question, Judge James issued a notice of evidentiary hearing. The notice provided:

The purpose of the hearing will be to hear testimony from Martha Koehler re the business records of Synchrony Bank (as broadly defined in Ms. Koehler's 4/20/2017 Affidavit) regarding Plaintiff's JCPenney credit card. Specifically, the Court will hear testimony concerning whether any Change in Terms notices and/or amended credit card agreements were sent to Plaintiff other than those referenced in the 4/20/2017 Affidavit.[3]

         On June 30, 2017, Defendant filed a Notice with the Supplemental Declaration of Koehler.[4] She attested that in preparing for the evidentiary hearing, she consulted with the technology and compliance groups at the Bank to ensure that no other changes in terms had been mailed to Plaintiff. She explained that typically, changes in terms are sent along with the customer's billing statement, and that as a result, if a customer did not carry a balance, the change in terms would not be sent until the next time the customer received a billing statement. But Ms. Koehler learned that in 2012, the Bank deviated from this practice, and instead sent a separate direct mailing to all J.C. Penney customers whose accounts carried no balance but were eligible to receive a change in terms, including Plaintiff's account.[5] Ms. Koehler attests that the 2016 and 2017 agreements submitted by Plaintiff were not provided to Plaintiff because they only applied to new J.C. Penney credit accounts opened in 2016 or 2017.

         On July 14, 2017, Judge James ruled on the motion to compel arbitration. She concluded that the 2012 Agreement governed the dispute. She further found that the 2012 Agreement was identical in all relevant respects to the 2016 Agreement discussed by Plaintiff in the response. She concluded that under the 2012 Agreement, Plaintiff's claims are not subject to arbitration because: (1) Defendant failed to meet its burden to demonstrate that the arbitration provision in the 2012 Agreement required Plaintiff to arbitrate the claims in this case; (2) Defendant has not demonstrated it has a right to make a demand for arbitration under the 2012 Agreement; and (3) Plaintiff's claims do not fall within the scope of Plaintiff's Rewards Program Terms and Conditions.

         B. Discussion

         On July 25, 2017, Defendant filed the instant motion for review of Judge James' decision, and asked the undersigned to expedite this review in order to preserve its right to appeal her order to the extent it requires an Order on review. The Court granted this request and expedited briefing.

         Fed. R. Civ. P. 72 allows a party to provide specific, written objections to a magistrate judge's order. With respect to a magistrate judge's order relating to nondispositive pretrial matters, the district court does not conduct a de novo review; rather, the court applies a more deferential standard by which the moving party must show that the magistrate judge's order is “clearly erroneous or contrary to the law.”[6] “The clearly erroneous standard ‘requires that the reviewing court affirm unless it on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'”[7] To the extent Defendant raises new arguments in the motion for review that were not articulated in the briefing before Judge James, they are waived.[8]

         Defendant's points of error regarding the 2012 Agreement in the motion for review are new. Defendant did not produce, much less acknowledge as controlling, the 2012 Agreement until after the briefing closed on the motion to compel arbitration. In fact, the only reason the 2012 Agreement came to light was because Judge James ordered an evidentiary hearing to determine whether Defendant or the Bank sent any other agreements to Plaintiff. In its Notice of Supplemental Declaration, filed after Judge James ordered that evidentiary hearing, Defendant did not take the position that the 2012 Agreement was controlling. Instead, Defendant stated “these revisions do not change the substantive analysis on the arbitrability of Ms. Cavlovic's claims.”[9] While the failure to locate this agreement prior to filing its motion to compel arbitration may have been an oversight due to the “unique circumstance” of the 2012 changes in terms, [10] Defendant has waived the ability to raise new arguments about the appropriate interpretation of the 2012 Agreement in this motion for review, which is ...

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