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Contracts Keyed to Ayres
Beneficial National Bank, U.S.A. v. Payton
Facts
Defendant obtained a credit card from Beneficial and signed a cardholder agreement. One of the terms of that agreement allowed Beneficial to change the cardholder agreement with regards to existing balances and future purchases so long as they followed certain notice requirements. The next year, Beneficial sent notice to all cardholders alerting them of a change to the cardholder agreement that would make arbitration mandatory in case of a dispute. The provision would become part of the cardholder agreement unless a cardholder rejected the change within a specified period of time. Defendant did not reject the change. Later, Defendant’s account was transferred to Household. Defendant was notified of the transfer and provided with the Household cardholder agreement, which also contained a mandatory arbitration clause. Defendant continued to use the card. Two years later, Defendant sued Plaintiffs in state court in a fraudulent misrepresentation claim. Plaintiffs then sued in federal district court, seeking to compel arbitration as required by the cardholder agreements under § 4 of the Federal Arbitration Act. Defendant argued that the arbitration provisions had not become part of his cardholder agreement and moved to dismiss the federal claim for lack of subject matter jurisdiction. Plaintiffs argued that Defendant had agreed to allow Beneficial to change the terms of the cardholder agreement and that Defendant’s continued use of the card after the transfer to Household and notification of Households’ arbitration clause meant that the provisions were part of both agreements and Defendant was bound by both.
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