United States District Court, District of Columbia
James E. Boasberg United States District Judge
While a gym membership typically improves one’s physical well-being at a slight cost to one’s fiscal health, the case at hand concerns a fitness endeavor that had a far greater impact on the wallet than the waistline. This suit alleges that fitness companies and two banks conspired to defraud gym member Valerie McMullen by opening unauthorized lines of credit in her name and processing unauthorized charges against that credit. She thus brought this suit against seven named Defendants and various unidentified corporations and individuals, asserting seven counts that include violations of District of Columbia common law and the D.C. Consumer Protection Procedures Act.
In this Opinion, the Court adjudicates the Bank Defendants’ Motion to Compel Arbitration, their Motion to Dismiss the three counts asserted against them, and Plaintiff’s Motion for Leave to Amend her Complaint. Finding no basis to compel arbitration and no ground to deny leave to amend, the Court will permit the suit to proceed with the proposed amended complaint. And, concluding that the claims therein are largely not, unlike some gym memberships, an exercise in futility, the Court will deny the majority of the Motion to Dismiss.
The facts in this section are taken from the proposed Second Amended Complaint, which Plaintiff attaches to her Motion for Leave to Amend. Because the Court ultimately decides to grant that Motion, see infra Section III.B, it treats this as the operative pleading throughout this Opinion.
Although many of the facts of this case are subject to dispute, all parties seem to agree that the beginning of Plaintiff’s relationship with Defendants was fairly prosaic. In September 2010, she signed up for 50 personal-training sessions with One World Fitness, a D.C. gym, at a cost of $5, 040. See Second Amended Complaint (SAC), ¶ 15. One World represented that Plaintiff “could receive a refund at any time. . . upon request.” Id. Three months later, she renewed her membership with One World, purchasing 150 training sessions at a cost of $8, 050. Id., ¶ 16. She charged the first 50 sessions through Chase Health Advance credit card and paid for the additional 150 sessions with a credit card unrelated to this case. Id., ¶¶ 15-16. In September 2011, Plaintiff canceled her membership and requested a refund of $2, 210. Id., ¶ 17. One World informed her that she would receive this money within 90 days. Id.
In fact, according to McMullen, rather than canceling her membership and providing her the refund, Karim Stewart and Wayne Bullen, the primary owners of One World, obtained lines of credit with J.P. Morgan Chase and Synchrony Bank on her behalf, without her assent or knowledge. Id., ¶ 18. These credit lines together permitted charges of up to $8, 500, which Stewart and Bullen used in full, without authorization from McMullen and for services never provided. Id. These unauthorized actions - opening credit lines and making charges - lie at the heart of Plaintiff’s lawsuit. The Court will not dwell on the allegations specific to Stewart, Bullen, and their corporate alter egos - all of whom are named Defendants in this suit - but will instead focus on the facts pertaining to Chase and Synchrony, jointly referred to as the “Bank Defendants, ” since they have together filed the Motion to Dismiss at issue here. (Although Synchrony was previously known as GE Capital Retail Bank, see ECF No. 15 (Corporate Disclosure Statement), the Court will use its current name for ease of reference.)
In October 2011, after having canceled her One World membership, McMullen received a “CareCredit” credit card from Synchrony. SAC, ¶ 20. The credit card was accompanied by a financial statement indicating that a credit limit of $7, 500 had been issued to her, and that the entire $7, 500 had been billed and paid to “Bullen Wellness Washington DC” on September 21, 2011. Id. (Bullen Wellness is a chiropractor business in the District, also owned by Stewart and Bullen. Id. ¶ 11.) Shortly thereafter, McMullen called Synchrony to dispute the line of credit and the charges, but she was told “that the charge was authorized and payment due.” Id., ¶ 22. Synchrony nevertheless agreed to send her a form to dispute the charge - a form that Plaintiff says she never received. Id.
That same month, McMullen received a financial statement from Chase Health Advance, indicating that “Bullen Wellness Washington DC” had charged $1, 000, also on September 21, 2011, against a separate line of credit opened in her name. Id., ¶ 21. McMullen then telephoned Chase, which also failed to “process the dispute as requested by Ms. McMullen, or make any attempts to confirm the validity” of the charge. Id., ¶ 23.
In July 2012 and in March 2013, Plaintiff again called Synchrony to dispute the unauthorized line of credit and charges, and during the latter call she requested that the Bank “furnish a signed application requesting the line of credit, a promissory note, and a receipt or purchase authorization” for the $7, 500 charge. Id., ¶¶ 24-25. On January 14, 2014, Plaintiff called Synchrony a fourth time, once more requesting “a promissory note, application, contract, or any other documentary evidence in relation to the unauthorized line of credit and charge.” Id., ¶ 26. This time, Synchrony assured her that it would mail her such documents within seven business days. Id. But all McMullen received was a letter thanking her for her “recent inquiry regarding [her] CARECREDIT/GECRB account, ” indicating that Synchrony would “make every effort to resolve [her] inquiry in a timely manner, ” and promising to “send . . . a written response with the actions take [sic] on [her] account” after completing review thereof. Id. McMullen alleges that she never received any further response from Synchrony nor any “documentary proof of her alleged indebtedness” to it. Id.
While McMullen sought to dispute the unauthorized credit line and charges by telephone, she also sought the aid of the Attorney General for the District of Columbia, but such assistance proved unable to resolve the matter. Id., ¶¶ 19, 27. McMullen states that Synchrony had been notified “on multiple occasions” by the Attorney General that Stewart and Bullen’s charges were fraudulent, but “failed to take any corrective action, or at a minimum investigate the fraudulent conduct.” Id., ¶ 27. Instead, Synchrony charged McMullen interest on the unauthorized $7, 500 charge, in the amount of $4, 700. Id., ¶ 28. Eventually, “[w]ith the threat of a damaged credit score hanging over her head, Ms. McMullen proceeded to attempt to pay the debts, all the while continuing to dispute the charges.” Id., ¶ 29. By April 2014, she had paid Chase the full $1, 000 billed by Bullen Wellness, as well as more than $5, 000 of the unauthorized charges billed to the Synchrony account in her name. Id., ¶¶ 30-31. All the same, Synchrony “wrote off the false debt and reported the Unauthorized Charges . . . as a ‘Charge Off’[, ] thereby adversely impacting McMullen’s credit.” Id., ¶ 31. Plaintiff believes such “inaccurate reporting to the credit agencies has further caused [her] substantial damages.” Id.
On September 12, 2014, Plaintiff filed suit in the Superior Court for the District of Columbia. See ECF 1 (Notice of Removal) at 1. She named Stewart and Bullen, their fitness companies (One World Fitness, Bullen Wellness, and Washington Chiropractic), Synchrony, Chase, and a handful of unnamed individuals and corporate entities as Defendants. See id., Attach. 1 (Complaint), ¶¶ 1, 6-14. The Complaint raised a bevy of claims against these Defendants - viz., violations of the CPPA, civil conspiracy, common-law fraud, conversion, breach of contract, breach of good faith and fair dealing, vicarious liability, and punitive damages. See id., ¶¶ 36-83. McMullen later amended her Complaint to include class-action claims, seeking relief on behalf of a putative class of “all One World Fitness customers who received financing from the Bank Defendants.” Notice of Removal at 2. Defendant Chase then removed the suit to federal court pursuant to the diversity-removal provisions of the Class Action Fairness Act. Id. at 4-8. Plaintiff thereafter sought remand to state court, see ECF No. 12, but Judge John Bates, to whom the case was previously assigned, denied her motion, even after permitting additional jurisdictional discovery. See ECF Nos. 26, 52, 55.
With the matter of removal settled, Chase moved to dismiss the claims asserted against it - specifically, violations of the CPPA, fraud and conspiracy under D.C. common law, and punitive damages. See ECF No. 57 (MTD). Defendant Synchrony, meanwhile, filed a Motion to Compel Arbitration, see ECF No. 61 (MTC), and also joined Chase’s Motion to Dismiss. See ECF No. 63 (Notice of Joinder). The case was reassigned to this Court on October 22, 2015, see ECF No. 64, and, after briefing was completed on Defendants’ Motions, Plaintiff sought leave to amend her complaint a second time. See ECF No. 70 (MTA). The three Motions are now ripe for adjudication.
II. Legal Standard
A. Motion to Compel Arbitration
The Federal Arbitration Act “is a congressional declaration of a liberal federal policy favoring arbitration agreements.” Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983) (referencing 9 U.S.C. § 2). Suits brought “upon any issue referable to arbitration under an agreement in writing for such arbitration” must be stayed “until such arbitration has been had . . ., providing the applicant for the stay is not in default in proceeding with such arbitration” and the court has been “satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement.” 9 U.S.C. § 3.
When considering a motion to compel arbitration, “the appropriate standard of review for the district court is the same standard used in resolving summary judgment motions pursuant to Fed.R.Civ.P. 56(c).” Brown v. Dorsey & Whitney, LLP, 267 F.Supp.2d 61, 67 (D.D.C. 2003) (internal quotation marks and citation omitted); see also Aliron Int’l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008) (“The district court properly examined [defendant’s] motion to compel arbitration under the summary judgment standard of Federal Rule of Civil Procedure 56(c), as if it were a request for ‘summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.’”) (quotation marks and citation omitted). “As the party seeking to compel arbitration, Defendant must first come forward with evidence sufficient to demonstrate an enforceable agreement to arbitrate.” Hill v. Wackenhut Services Int’l, 865 F.Supp.2d 84, 89 (D.D.C. 2012) (citation omitted). The burden then shifts to Plaintiff “to raise a genuine issue of material fact as to the making of the agreement, using evidence comparable to that identified in Fed.R.Civ.P. 56.” Grosvenor v. Qwest Communications Intern., Inc., 2010 WL 3906253, at *5 (D. Colo. 2010). Arbitration should be compelled if “there is ‘no genuine issue of fact concerning the formation of the agreement’ to arbitrate.’” Kirleis v. Dicki, McCamey & Chilcote, PC, 560 F.3d 156, 159 (3d Cir. 2009) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980)).
To review the Rule 56 standard, a fact is “material” if it is capable of affecting the substantive outcome of the litigation. See Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is “genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Scott v. Harris, 550 U.S. 372, 380 (2007); Liberty Lobby, 477 U.S. at 248; Holcomb, 433 F.3d at 895. “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record.” Fed.R.Civ.P. 56(c)(1)(A). When a motion for summary judgment is under consideration, “the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Liberty Lobby, 477 U.S. at 255; see also Mastro v. PEPCO, 447 F.3d 843, 850 (D.C. Cir. 2006); Aka v. Washington Hosp. Ctr., 156 F.3d 1284, 1288 (D.C. Cir. 1998) (en banc). On a motion for summary judgment, the Court must “eschew making credibility determinations or weighing the evidence.” Czekalski v. Peters, 475 F.3d 360, 363 (D.C. Cir. 2007).
The nonmoving party’s opposition, however, must consist of more than mere unsupported allegations or denials and must be supported by affidavits, declarations, or other competent evidence, setting forth specific facts showing that there is a genuine issue for trial. See Fed.R.Civ.P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The nonmovant is required to provide evidence that would permit a reasonable jury to find in its favor. Laningham v. United States Navy, 813 F.2d 1236, 1242 (D.C. Cir. 1987). If the nonmovant’s evidence is “merely colorable” or “not significantly probative, ” summary judgment may be granted. Liberty Lobby, Inc., 477 U.S. at 249-50.
B. Motion to Dismiss
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of an action where a complaint fails “to state a claim upon which relief can be granted.” In evaluating Defendants’ Motion to Dismiss, the Court must “treat the complaint’s factual allegations as true . . . and must grant plaintiff ‘the benefit of all inferences that can be derived from the facts alleged.’” Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979)) (citation omitted); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1250 (D.C. Cir. 2005). The notice-pleading rules are “not meant to impose a great burden upon a plaintiff, ” Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 347 (2005), and she must thus be given every favorable inference that may be drawn from the allegations of fact. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 584 (2007).
Although “detailed factual allegations” are not necessary to withstand a Rule 12(b)(6) motion, id. at 555, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Plaintiff must put forth “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The Court need not accept as true “a legal conclusion couched as a factual allegation, ” nor an inference unsupported by the facts set forth in the Complaint. Trudeau v. Fed. Trade Comm’n, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986) (internal quotation marks omitted)). For a plaintiff to survive a 12(b)(6) motion even if “recovery is very remote and unlikely, ” moreover, the facts alleged in the complaint “must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555-56 (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
In evaluating the sufficiency of Plaintiff’s Complaint under Rule 12(b)(6), the Court may consider “the facts alleged in the complaint, any documents either attached to or incorporated in the complaint[, ] and matters of which [the court] may take judicial notice.” Equal Emp’t Opportunity Comm’n v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997). The Court may thus consider those materials on a motion to dismiss without treating the motion “as one for summary ...