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Moss v. BMO Harris Bank, N.A.

United States District Court, E.D. New York

June 9, 2014


Page 282

For Plaintiffs: Darren T. Kaplan, Chitwood Harley Harnes LLP, Great Neck, NY; Jeffrey Ostrow, Kopelowitz Ostrow P.A., Fort Lauderdale, FL; Hassan Zavareei and Jeffrey D. Kaliel, Tycko & Zavareei LLP, Washington, DC; Norman Siegel and Stephen N. Six, Stueve Siegel Hanson LLP, Kansas City, MO.

For Defendant BMO: Therese Craparo, Debra Bogo-Ernst, Kevin Ranlett, Lucia Nale, and Matthew Sostrin, Mayer Brown LLP, Chicago, IL.

For Defendant First Premier: David Todd Feuerstein, Herrick, Feinstein LLP, New York, NY, and John C. Elkman, Bryan Freeman, and James P. McCarthy, Lindquist & Vennum, Minneapolis, MN.

For Defendant Bay Cities: Eric Rieder, Ann W. Ferebee, Courtney Janae Peterson, and Michael P. Carey, Bryan Cave LLP, Atlanta, GA.


Page 283


JOSEPH F. BIANCO, United States District Judge.

Plaintiffs Deborah Moss and William Hillick bring this action alleging violations of the Racketeer Influenced and Corrupt Organizations Act,[1] 18 U.S.C. § 1962, on behalf of themselves and a prospective class which they define as " [a]ll natural persons within the state of New York whose accounts were debited via an ACH entry originated by either BMO Harris Bank, N.A., First Premier Bank, or Bay Cities Bank as an ODFI on behalf of an Illegal Online Payday Lender in repayment of a loan which was illegal under New York law." (Am. Compl. ¶ 109.)

In short, this action involves civil RICO claims based on defendants' alleged role in facilitating high-interest payday loans,[2] which have been outlawed in several states but remain available from online lenders. (Am. Compl. ¶ ¶ 4-5.) The two named plaintiffs are parties to five loan agreements with various online lenders (" the lenders" ), and each agreement contains an arbitration clause. None of the arbitration clauses explicitly mentions defendants by name, nor are defendants signatories to any of the loan agreements. In other words, plaintiffs have elected not to sue their contractual counter-parties, the lenders, but instead have sued defendants, who facilitated the funds transfers connected with plaintiff's loans.

Although defendants are not parties to the loan agreements, the agreements reflect their involvement in the loans in two ways. Each agreement contains a provision describing the function that defendants ultimately performed: an authorization section in which plaintiffs permitted the lender to initiate electronic funds transfers from plaintiffs' bank accounts. In addition, the arbitration provisions in each agreement state that plaintiffs must arbitrate not only with the lenders, but also with the lenders' " agents" and " servicers." Defendants argue that they are agents and servicers within the meaning of the arbitration provisions, and that therefore plaintiffs should be estopped from avoiding arbitration with them. Plaintiffs argue that the arbitration provisions did not place them on notice that they were consenting to arbitrate with defendants.

For the reasons discussed below, the Court concludes that defendants may enforce the arbitration provisions against plaintiffs, because the broad arbitration provisions and the specific authorizations of electronic funds transfers made it foreseeable

Page 284

that entities like defendants, who are involved in those transfers, would be among the third parties with whom plaintiffs agreed to arbitrate. Accordingly, the motions to compel arbitration are granted, and this case is stayed. The Court does not reach the motions to dismiss at this juncture.[3]

I. Background

A. Factual Background

The following facts are taken from the complaint. The Court assumes these facts to be true for the purpose of deciding this motion, and construes them in the light most favorable to plaintiffs, the non-moving party.

This case arises out of five online payday loans. Moss applied for and received three such loans: one for $350 on June 17, 2010, one for $400 on October 15, 2010, and one for $1,000 on May 8, 2013. (Am. Compl. ¶ ¶ 87, 90, 94.) Hillick applied for two online payday loans: one for $550 on September 5, 2012, and one for $750 on June 1, 2013. (Id. ¶ ¶ 99, 104.) Each of these loans was made pursuant to a written agreement containing an arbitration provision and an authorization for the lender to initiate electronic funds transfers.[4] Those provisions are discussed in more detail below. Plaintiffs ...

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