SFMS Announces Important Consumer Rights Victory In California Court Of Appeals

Shepherd, Finkelman, Miller & Shah, LLC (“SFMS”) is pleased to announce that it has prevailed on behalf of its client, Dale Firchow, as well as a proposed class of all California consumers who were holders of VISA and MasterCard credit cards issued by Ford and Citibank between February 1993 and December 31, 1997, in the appeal filed by Citibank in the Court of Appeals of the State of California. In the action, Mr. Firchow alleges three statutory claims, a claim for breach of contract and a claim for unjust enrichment as a result of Citibank’s premature cancellation of a rebate program associated with the Ford/Citibank credit cards.

Citibank filed a motion to compel arbitration in the action on an individual rather than class action basis based on an arbitration clause and class action waiver purported to have taken effect in October 2001. In October 2005, Judge West of the Superior Court of California found the waiver to be unconscionable and contrary to California public policy.

In a unanimous decision authored by Presiding Justice Perluss, the California Court of Appeals, upheld the trial court’s decision and reached the following conclusions:

• California law applied to the question of the enforceability of the class action waiver provision.

• “[T]he class action waiver provision in Citibank’s credit card agreement is unconscionable and may not be enforced.”

• “[E]nforcement of the class action waiver provision in the arbitration agreement would offend this state’s fundamental public policy. . .”

• California law is not preempted by the FAA when interpreting the class action waiver provision.

• “The determination the class action waiver is unconscionable does not necessarily mean the entire arbitration agreement is void and the motion to compel properly denied.”

• “[T]he trial court properly exercised its discretion in refusing to enforce the arbitration agreement in its entirety.”

SFMS believes that the Court of Appeals ruling in this case represents a significant victory for consumers in the State of California. SFMS congratulates James Miller and James Shah for their excellent work on this case, as well as all of the other attorneys and legal assistants who played a role in obtaining this victory. SFMS also congratulates Lee Gordon and Steve Berman, co-counsel in this action, for their significant contributions.