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Watch Out for the Exclusions to Arbitration

A recent case in the District of New Jersey provides a good reminder to be mindful of exclusions to mandatory arbitration provisions. In Webster v. OneMain Financial, Inc., No. CV 18-2711 (JBS/AMD), 2018 WL 6322617 (D.N.J. Dec. 4, 2018), the plaintiff filed suit alleging FCRA violations against OneMain. The plaintiff alleged approximately $5,000 in damages, including punitive damages, costs, interest, and attorneys’ fees. OneMain moved to compel arbitration and the plaintiff opposed the motion.

The arbitration agreement at issue contained a small claims exception to arbitration. This provision provided that neither party could be required to arbitrate matters “where all parties collectively (including multiple named parties) seek monetary relief in the aggregate of $15,000.00 or less in total relief[.]” Id. at *3. As the moving party, OneMain had the burden of showing that there was no genuine dispute of material fact regarding the applicability of the arbitration provision, such that OneMain was entitled to arbitration as a matter of law. Id. OneMain argued that even though the plaintiff had only claimed $5,194 in damages, the plaintiff’s recovery could theoretically exceed $15,000, and thus, the plaintiff should be compelled to arbitrate her dispute.

The Court disagreed; OneMain failed to meet its burden because there was a dispute of material fact regarding whether the amount of monetary recovery sought fell within the small claims exception. Id. at *4. At this point in the litigation, the plaintiff had never made any demand in excess of $5,194, and thus the Court ruled that the plaintiff was not required to arbitrate. The Court explained, however, that the small claims exception did not mean that the plaintiff’s recovery was capped at $15,000. Recovery at trial could exceed this amount, as there was nothing in the arbitration provision imposing such a cap. Id.

 However, the Court did not completely shut the door on the possibility of arbitration. The Court denied OneMain’s motion to compel arbitration without prejudice, allowing for a renewed motion in the event of a change in circumstances or positions.

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