Nature of the Case
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Facts
P obtained a credit card from D in April 1986. When plaintiff's credit card was issued, the agreement did not contain an arbitration clause. D subsequently added the arbitration clause in July 1999. The arbitration clause precluded both sides from participating in class-wide arbitration, consolidating claims, or arbitrating claims as a representative or in a private attorney general capacity. The arbitration agreement also stated that it will be governed by the Federal Arbitration Act (FAA). Cardholders were notified that if they did not wish to accept the new arbitration clause, they must notify D of their objections and cease using their accounts. Their continued use of an account would be deemed to constitute acceptance of the new terms. P did not notify D of any objection to the arbitration clause or cease using his account before the stated deadline. On August 15, 2001, P filed a putative class action complaint alleging breach of contract and violation of the Delaware Consumer Fraud Act. P claimed that D breached its cardholder agreement by imposing a late fee of approximately $29 on payments that were received on the payment due date, but after D's undisclosed 1:00 p.m. 'cut-off time.' D also allegedly imposed a periodic finance charge (thereby disallowing a grace period) on new purchases when payments were received on the payment due date, but after 1:00 p.m. D moved to compel arbitration and to dismiss the class action pursuant to the arbitration agreement's class action waiver. P claimed that the class action waiver was unconscionable and unenforceable under California law. D argued that the FAA requires the enforcement of the express provisions of an arbitration clause, including class action waivers. After D's motion to compel arbitration was granted, the Fourth District Court of Appeal decided Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094 [118 Cal. Rptr. 2d 862] (Szetela), which held that a virtually identical class action waiver was unconscionable. P moved for reconsideration of that portion of the order enforcing the class action waiver. The trial court struck the class action waiver clause from the agreement, ordered P to arbitrate his claims individually, and left open the possibility that P may succeed in certifying an arbitration class under California law. D then filed a writ petition seeking reinstatement of the lower court's original order enforcing the arbitration clause in its entirety by compelling P to arbitrate on an individual basis and precluding him from participating in class litigation or class arbitration. The Court of Appeal granted D's writ. It held that any California rule prohibiting class action waivers was preempted by the FAA and that Szetela had failed to adequately analyze the federal preemption issue. The California Supreme Court granted certiorari.
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