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Bluestem Brands, Inc. v. Shade

Supreme Court of West Virginia

October 6, 2017

BLUESTEM BRANDS, INC. d/b/a Fingerhut, Third-Party Defendant Below, Petitioner
v.
DARLENE SHADE, Third-Party Plaintiff Below, Respondent

          Submitted: September 19, 2017

         Appeal from the Circuit Court of Berkeley County, West Virginia The Honorable Gray Silver, III, Judge Civil Action No. 15-C-370

          M. David Griffith, Jr., Esq. Joseph K. Merical, Esq. Thomas Combs & Spann, PLLC Charleston, West Virginia and Aaron D. Van Oort, Esq. Erin L. Hoffman, Esq. Jeffrey P. Justman, Esq. Faegre Baker Daniels LLP Minneapolis, Minnesota Pro Hac Vice Attorneys for Petitioner

          Jonathan R. Marshall, Esq. Bailey & Glasser, LLP Charleston, West Virginia and Andrew C. Skinner, Esq. Skinner Law Firm Charles Town, West Virginia Attorneys for Respondent

         SYLLABUS

         1. "When an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo." Syl. Pt. 1, W.Va. CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., 238 W.Va. 465, 796 S.E.2d 574 (2017).

         2. "When a trial court is required to rule upon a motion to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-307 (2006), the authority of the trial court is limited to determining the threshold issues of (1) whether a valid arbitration agreement exists between the parties; and (2) whether the claims averred by the plaintiff fall within the substantive scope of that arbitration agreement." Syl. Pt. 2, State ex rel. TD Ameritrade, Inc. v. Kaufman, 225 W.Va. 250, 692 S.E.2d 293 (2010).

         3. "A meeting of the minds of the parties is a sine qua non of all contracts." Syl. Pt. 1, Martin v. Ewing, 112 W.Va. 332, 164 S.E. 859 (1932).

         4. A non-signatory to a written agreement requiring arbitration may utilize the estoppel theory to compel arbitration against an unwilling signatory when the signatory's claims make reference to, presume the existence of, or otherwise rely on the written agreement. Such claims sufficiently arise out of and relate to the written agreement as to require arbitration.

          OPINION

          WORKMAN, JUSTICE

         This is an appeal from the July 21, 2016, order of the Circuit Court of Berkeley County denying the motion of petitioner Bluestem Brands, Inc. d/b/a Fingerhut (hereinafter "Bluestem") to compel arbitration and dismiss the third-party complaint. The circuit court found that the arbitration agreement was not binding on respondent Darlene Shade (hereinafter "Ms. Shade"), in part, because 1) Ms. Shade did not assent to arbitration given that she did not receive a copy of the most recent credit card agreement containing arbitration language; and 2) Bluestem's credit partners-and not Bluestem- were party to any potentially applicable credit agreement requiring arbitration.

         Upon careful review of the briefs, the appendix record, the arguments of the parties, and the applicable legal authority, we conclude that, although the most recent amendments to the credit agreement lack mutual assent and therefore cannot be utilized to compel arbitration of this matter, the 2010 version of the credit agreement contains a properly formed agreement to arbitration and encompasses the claims asserted by Ms. Shade. We find further that Bluestem, as a non-signatory to the agreement, may utilize the theory of equitable estoppel to compel arbitration under the agreement. Therefore, the circuit court erred in denying Bluestem's motion to compel arbitration.

         I. FACTS AND PROCEDURAL HISTORY

         Bluestem, doing business as "Fingerhut, " is a retailer of a variety of consumer goods by way of catalog and internet shopping channels; Bluestem partners with various banks to offer credit to its customers for "Fingerhut" purchases. Ms. Shade made her first "Fingerhut" purchase in 2006. She made this purchase utilizing the credit offered to customers through Bluestem's then-credit partner, CIT Bank. Ms. Shade applied for and was approved this credit by phone. Thereafter, Ms. Shade was sent a welcome packet which included a written credit agreement entitled "CIT Bank Fingerhut Credit Account Agreement." The agreement contained no arbitration provision, but did have a "change-of-terms" provision allowing for future amendments. In 2007, the credit agreement was amended to include an arbitration agreement, along with an "opt-out" provision. This agreement was sent to her with her monthly statement and she admits receiving it. She did not opt out of the arbitration agreement and continued to use the account to make additional purchases.

         In 2010, Bluestem switched credit partners to MetaBank. Ms. Shade was sent a notification of the change, along with a new credit agreement, which contained essentially the same arbitration agreement and opt-out provision. Ms. Shade likewise admits receiving this agreement. The new agreement indicated it would become effective "from the first time a transaction is posted to your account." She thereafter made thirty-four purchases.

         In 2012, Bluestem changed credit partners again and sent Ms. Shade a notification that its credit partner had switched to WebBank; the notice contained an 800-number to call if she had any questions about her "Account." The notice made no mention of a new credit agreement and no new agreement was included with this notice.[1]Ms. Shade claims that she never thereafter received a new agreement, nor does Bluestem provide any evidence that she was ever provided with this agreement. The 2012 credit agreement was purportedly amended one additional time in 2013 and notice of the amended agreement, which made no changes to the arbitration provision, was sent to Ms. Shade. Ms. Shade likewise denies receiving this agreement in full and, like the 2012 agreement, Bluestem provides no proof that it was sent to her. Ms. Shade made her final purchase, purportedly subject to the 2013 agreement, on March 20, 2013.

         Shortly thereafter, Ms. Shade's account allegedly went delinquent in the amount of $3, 351.52; collection efforts were initiated by a debt collector, which filed the instant action against her. Ms. Shade then brought a third-party complaint against Bluestem, but none of the credit partners, alleging that the finance charges and interest rate charged for her purchases were in violation of the West Virginia Consumer Credit and Protection Act, West Virginia Code §§ 46A-1-101 et seq. Ms. Shade further alleges that Bluestem-and not any of the various credit partners-is actually the entity extending credit and is therefore participating in a "rent-a-bank scheme" whereby it evades licensure and regulation in the State.

         Bluestem moved to compel arbitration and dismiss the third-party complaint, which motion was denied by the circuit court. The circuit court found that 1) Ms. Shade never received the 2012 or 2013 credit card agreement and therefore could not be compelled to arbitrate pursuant to it; and 2) Bluestem was not a party to any of the prior arbitration agreements; therefore, there was no arbitration agreement with Bluestem to be enforced.[2] This appeal followed.

         II. STANDARD OF REVIEW

         This Court has held that "[w]hen an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo." Syl. Pt. 1, W.Va. CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., 238 W.Va. 465, 796 S.E.2d 574 ...


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