Jason Lloyd, an individual, on behalf of himself and all others similarly situated v. Mbna America Bank, N.a.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 01-1752
_______________
JASON LLOYD,
an individual, on behalf of
himself and all others similarly situated,
Appellant
v.
MBNA AMERICA BANK, N.A.;
DOES 1 THRU 100, INCLUSIVE
Appeal from the United States District Court
for the District of Delaware
(D.C. Civil No. 00-cv-00109)
Chief District Judge: Sue L. Robinson
Submitted pursuant to LAR 34.1(a)
December 4, 2001
Before: ALITO, RENDELL, and AMBRO, Circuit Judges
(Opinion filed January 7, 2002)
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MEMORANDUM OPINION
_____________________
AMBRO, Circuit Judge
In this appeal we decide whether the District Court properly granted the motion to
dismiss of Appellee MBNA America Bank, N.A. ("MBNA"). We affirm.
I.
The facts of this case are known to both parties and were recited in the District
Court’s well reasoned memorandum opinion and order. We will not repeat them here.
Jason Lloyd brought an action under the Truth in Lending Act ("TILA") on behalf of
himself and those similarly situated alleging that payments were not credited on the date
they were received by MBNA. It moved to dismiss or in the alternative to stay the action
in favor of individual binding arbitration pursuant to 3 of the Federal Arbitration Act
("FAA"), 9 U.S.C. 3, based on an arbitration provision in Lloyd’s credit agreement.
The District Court granted MBNA’s motion to dismiss in favor of binding arbitration,
and Lloyd appealed.
The District Court had jurisdiction under 28 U.S.C. 1331. We have jurisdiction
pursuant to 28 U.S.C. 1291. Our standard of review of a grant of a motion to dismiss
in favor of binding arbitration is plenary. Harris v. Green Tree Fin. Corp., 183 F.3d 173,

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176 (3d Cir. 1999).
II.
The presence of an enforceable arbitration provision generally means that a court
does not possess jurisdiction over the case and must refer it to arbitration pursuant to 4
of the FAA. Id. at 179. The question we must answer is whether the arbitration
provision present in this case is enforceable. Lloyd offers a series of objections, each of
which we will address in turn.
First Lloyd posits that California, not Delaware, law governs this case. In his
complaint before the District Court, however, he maintained that Delaware law
governed; in fact, he asserted a claim for relief under Delaware law. He maintains,
however, that the issue of choice of law is not waivable, citing Parkway Baking Co. v.
Friehofer Baking Co., 255 F.2d 641, 646 (3d Cir. 1958). We note that Parkway Baking
applied Pennsylvania, rather than Delaware, choice of law analysis. Furthermore, the
party objecting to the application of Pennsylvania law in that case merely failed to raise
the issue in the trial court. Lloyd, in contrast, affirmatively asserted at trial that the la
of Delaware governed.
It was logical for Lloyd to argue before the District Court that Delaware law
applied, given that the credit agreement specified that it was governed by that law. While
6 Del. C. 2708 permits parties to agree that their contracts be governed by Delaware
law without regard to conflicts of law principles, this provision does not apply to
contracts "involving less than $100,000." 6 Del. C. 2708(a), (c). We therefore conduct
a conflicts of law analysis.
That analysis applies the "most significant relationship" test to determine which
state’s law to apply. Edelist v. MBNA America Bank, C.A. No. 01-C-01-195-JOH, 2001
WL 946500, at *5 (Del. Super. Aug. 9, 2001). "Delaware courts will honor specific
choice of law provisions so long as there is some material linkage between the chosen
jurisdiction and the transaction." Id. (citations omitted). Because that linkage exists, we
conclude that the choice of Delaware law is enforceable. Moreover, what the purported
nationwide class shares in common is a relationship with MBNA. Because Delaware is
MBNA’s state of incorporation and principal place of business, the forum with the most
significant contacts with the class is Delaware, not California. This is recognized by the
agreement itself, which provided that the place of contracting was Delaware.
Having determined that Delaware law governs, we proceed to Lloyd’s other
objections. The first is that the agreement is unconscionable because it purports to bar
classwide relief. Again, Lloyd did not raise this argument in the District Court, arguing
instead that the agreement was unconscionable as an adhesion contract. On the merits
this argument fails because of our holding in Johnson v. West Suburban Bank, 225 F.3d
366 (3d Cir. 2000). There we held that the right to a class action under the TILA was
"merely a procedural one, arising under Fed. R. Civ. P. 23, that may be waived by
agreeing to an arbitration clause." Id. at 369. If the right to a class action under the
TILA is "merely procedural," and "may be waived," an arbitration agreement barring
classwide relief for claims brought under the TILA is not unconscionable.
Next Lloyd argues that MBNA could not "retroactively amend" the credit
agreement to apply to claims in existence at the time of the effective date of the
amendment. The credit agreement provided that MBNA could amend the agreement by
complying with the notification requirements of Delaware law, which permits the
addition of terms providing for arbitration. 5 Del. C. 952(a). We do not agree with
Lloyd that MBNA failed to comply with the provision that "[a]ny notice of an
amendment sent by the bank may be included in the same envelope with a periodic
statement or as part of the periodic statement or in other materials sent to the borrower."
Id. The use of the word "may" ipso facto makes this provision not mandatory. Thus
MBNA’s separate mailing of the notice of amendment complied with Delaware’s notice
requirements.
As the District Court held, courts apply a "presumption of arbitrability" when
construing the scope of arbitration clauses. Mem. Op. at 7 (citing Battaglia v.
McKendry, 233 F.3d 720, 725 (3d Cir. 2000)). The arbitration clause in this case
covered "[a]ny claim or dispute . . . by either [Lloyd] or [MBNA] . . . arising from or
relating in any way to this Agreement." Lloyd did not exercise the opt-out right that the
notice of amendment provided. He is therefore bound by the terms of the amended
agreement.

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Finally, Lloyd argues that the arbitration provision is unenforceable because it
does not ensure that he can vindicate his rights under the TILA. He contends that,
because his claim will likely amount to less than one hundred dollars the fact that he may
have to pay for arbitration fees, although capped at the level of court costs in a state court
with jurisdiction, effectively precludes the pursuit of a claim. As the District Court
observed, the plaintiff bears the burden of proving that the claim is not suited to
arbitration. Mem. Op. at 5-6 (citing Green Tree Fin. Corp.-Al. v. Randolph , 531 U.S.
79, 92, 121 S. Ct. 513, 522 (2000)). MBNA has agreed to advance the arbitration costs
if requested, and the arbitrator will determine which party will ultimately pay the fees. It
may be true that, as Lloyd argues, absent the arbitration provision an attorney might
represent a class on a contingent fee basis, and that no attorney would bring an
arbitration claim for such a small sum as one hundred dollars for a contingent fee. But
Johnson makes clear that the TILA does not provide an unwaivable right to a class
action. 225 F.3d at 369. Lloyd may not attempt to end-run that holding by couching his
claim in terms of unvindicated rights.
* * * * *
For the foregoing reasons, the judgment of the District Court granting MBNA’s
motion to dismiss is affirmed.
________________________
TO THE CLERK:
Please file the foregoing Memorandum Opinion.
/s/ Thomas L. Ambro
Circuit Judge

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