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Malinda A. Carlson et al v. Raymour and Flanigan Furniture

March 23, 2011


The opinion of the court was delivered by: Honorable Richard J. Arcara United States District Judge



Pending before the Court is a motion (Dkt. No. 10) by defendants Raymour and Flanigan Furniture Company and Raymours Furniture Company, Inc. to compel arbitration of plaintiffs' claims against them under a third-party arbitration agreement, and to stay this case pending the outcome of that arbitration. Defendants make their motion pursuant to 9 U.S.C. §§ 3 and 4, which are part of the Federal Arbitration Act, 9 U.S.C. §§ 1--16. Defendants are not parties to the arbitration agreement that they want enforced, and are not an agent of any such party. Nonetheless, defendants contend that plaintiffs' allegations of undisclosed variations in pricing are inextricably intertwined with that agreement, such that plaintiffs should be equitably estopped from avoiding arbitration. Plaintiffs contend that their allegations concern the advertising and negotiations for the furniture purchase itself, and not the maintenance of the store credit card connected to the arbitration agreement, thus making the credit card's arbitration agreement inapplicable to this case. The Court held oral argument on January 20, 2011 and received supplemental briefing from the parties on February 3, 2011. For the reasons below, the Court finds that it lacks subject-matter jurisdiction over plaintiff's claims and dismisses the complaint without reaching the merits of the pending motion.


A. Plaintiffs' Furniture Purchase

This case concerns allegations that defendants fail to tell customers in advance that they prefer cash purchases and that they negotiate lower sales prices for them than for purchases made through a "0% interest" credit promotion. Defendants collectively operate a furniture retail store called "Raymour & Flanagan." Defendants operate over 90 retail locations in seven northeastern states, including New York, and have a principal place of business in Liverpool, New York. Plaintiffs Malinda A. Carlson and Philip A. Wolf are residents of Buffalo, New York.

The impetus for this case was a furniture purchase that plaintiffs made on June 8, 2009, along with the advertising that induced that purchase. On June 8, 2009, plaintiffs purchased several items of furniture at a Raymour & Flanagan retail store in Erie County, New York. Plaintiffs decided to shop at Raymour & Flanagan in response to advertising and promotions from defendants that promised "NO MONEY DOWN, NO INTEREST 'TIL 2014*." According to plaintiffs, defendants have advertised "0% interest" sales regularly, with fine print such as the following accompanying those advertisements:

Special terms until January 1, 2014, apply to purchases charged with approved credit to the Raymour & Flanigan card issued by Wells Fargo Financial National Bank. The minimum monthly payment will be 1/50th of the amount financed . . . .There will be no interest charged during the promotional period . . . . (Dkt. No. 1 ¶ 9 (emphasis and ellipses in the original)). Upon arriving at Raymour & Flanagan, plaintiffs shopped for and selected various items of furniture with the help of an employee of defendants. Furniture prices at Raymour & Flanagan are negotiable, and during price negotiations, plaintiffs indicated to an employee of defendants that they wanted to take advantage of the no-interest sales promotion. Upon hearing this information, and before giving plaintiffs any final price, defendants had plaintiffs complete two credit applications, a primary one and a secondary, conditional one. The primary application was an application for a Raymour & Flanagan store credit card that would be issued by Wells Fargo Financial National Bank ("Wells Fargo"). Defendants submitted that application instantly to Wells Fargo for approval. Because plaintiffs happened to be approved, the Wells Fargo application and its associated terms (see below) constituted the only credit agreement that ever took effect here. Had Wells Fargo rejected plaintiffs, plaintiffs might have been able to obtain credit anyway through the conditional application, an application for credit directly from defendants. (See Dkt. No. 10-3 at 24 ("In the event your account is approved by Raymour & Flanagan Furniture, the following terms and conditions apply.").) There is no evidence that Wells Fargo required customers to receive approval for a credit card before negotiation of the final price. There also is no evidence that Wells Fargo knew that defendants were requiring completion of credit-card applications before announcing what the final price of any merchandise would be.

Negotiations for the furniture purchase concluded once plaintiff received approval for a store credit card from Wells Fargo. With approval established, defendants drew up and gave plaintiffs three sales invoices showing final prices for the items of furniture that plaintiffs wanted to purchase. The lower left corner of each sales invoice contained a disclaimer that read, "If financed, this transaction is under your credit card agreement with Wells Fargo Financial National Bank (WFFNB)." (Dkt. No. 18-2 at 11, 13, 15.) The back of each sales invoice noted that all sales are final and that "[n]o additional conditions or terms will be binding on Raymour & Flanagan unless they are in writing and written on the face of this agreement." (Id. at 12, 14, 16.) Plaintiffs signed the sales invoices and thereby completed their purchase.

B. Credit Card Agreement with Wells Fargo

The store credit card for which plaintiffs applied was governed by an agreement with Wells Fargo titled the Credit Card Account Agreement ("Wells Fargo Agreement"). The Wells Fargo Agreement was between only plaintiffs and Wells Fargo. (See Dkt. No. 18-2 at 5 ("The word 'account' refers to the credit card account you [plaintiffs] have with us [Wells Fargo].").) The Wells Fargo Agreement did not designate Raymour & Flanagan as an agent of Wells Fargo for any purpose; in fact, defendants confirmed at oral argument that they are not agents of Wells Fargo. The Wells Fargo Agreement designates Raymour & Flanagan only as a "retailer." Wells Fargo concedes in the Wells Fargo Agreement that it cannot make any retailer accept the credit card for payment. (See id. ("We are not responsible for the refusal of anyone to honor your card.").) So long as a credit card user who charged a no-interest purchase paid the monthly balance in full, Wells Fargo explicitly would not charge any fees for maintaining the credit card. (See id. at 6 ("NO INTEREST. If a sales slip says there is no interest, it means that there is no finance charge on the special subaccount containing the items sold on that sales slip until the no interest special terms end. You may avoid finance charges on a no interest special subaccount by paying the balance of that special subaccount in full before the no interest special terms end.").)*fn1 The rest of the Wells Fargo Agreement contains terms pertaining to interest rates, monthly payment due dates, minimum balances, and cash advances.

The Wells Fargo Agreement contains an arbitration agreement within it. The arbitration agreement is between plaintiffs and Wells Fargo and subjects to arbitration claims "arising out of or relating to your Credit Card Account Agreement, or any prior or future dealings between us." (Id. at 8.) The arbitration agreement on its face does not address any "prior or future dealings" between customers and retailers.

C. Discovery of Defendants' Alleged Conduct

Plaintiffs' relationship with defendants deteriorated once they realized that defendants secretly reduced the room for price negotiation when plaintiffs would not pay cash. According to plaintiffs, if they had paid cash then they would have negotiated a final price first and then paid that price. Defendants allegedly would have offered a lower price for the furniture in exchange for the immediate compensation of the cash payment. Because plaintiffs chose instead to pay with credit, defendants ...

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