1 UNITED STATES DISTRICT COURT 2 NORTHERN DISTRICT OF CALIFORNIA 3 4 HELEN PALMA, Case No. 24-cv-02618-JD

5 Plaintiff,

ORDER RE ARBITRATION AND

6 v. STAY

7 WELLS FARGO BANK, NATIONAL

ASSOCIATION,

8 Defendant.

9 10 As alleged in the complaint, defendant Wells Fargo obtained a judgment “several years 11 ago” against plaintiff Helen Palma for credit card debt. Dkt. No. 1-1 ¶ 11. In February 2023, 12 Wells Fargo withdrew money from Palma’s checking and savings accounts apparently to offset 13 her credit card balance owed to the bank. Id. ¶¶ 14-15. Palma alleges that this conduct violated 14 the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and a variety of California state statutory and 15 common law provisions. Palma sued in California state court on behalf of herself and a putative 16 class of Wells Fargo customers in California. 17 After removing the case to this Court on federal question jurisdiction, Dkt. No. 1, which 18 Palma did not challenge, Wells Fargo promptly moved to send the lawsuit to arbitration, Dkt. 19 No. 12. The grounds for arbitration are the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., 20 and an arbitration clause in a Deposit Account Agreement (DAA) signed by Palma when she 21 opened her checking and savings accounts. Dkt. No. 12 at 7. Palma objected to arbitration on two 22 grounds: (1) Wells Fargo waived any right to arbitration when it sued her several years ago to 23 collect on her unpaid credit balance; and (2) Palma seeks a public injunction, which the arbitration 24 clause is said to waive in contravention of California law. Dkt. No. 13 at 4 (citing McGill v. 25 Citibank, N.A., 2 Cal. 5th 945, 952 (2017)). 26 Because the waiver situation was not entirely clear in the parties’ briefing, the Court 27 directed each side to answer these questions: (1) was the prior debt collection action, which was 1 agreement? and (3) if not, why not?. Dkt. No. 23. The Court on its volition also asked whether a 2 specific provision in the DAA arbitration clause that said a party declining an arbitration demand 3 must pay the other side’s costs and expenses to compel arbitration might be unenforceable as 4 unconscionable. Id. To be clear, Palma did not raise this as an issue in any way; it was purely the 5 Court’s own inquiry after reviewing the DAA. 6 In response to the Court’s waiver questions, Wells Fargo stated the 2019 lawsuit was not 7 subject to arbitration because the credit debt dispute was governed by a Credit Card Agreement 8 (CCA) with Palma that expressly exempted collection actions from arbitration. Dkt. No. 24 at 1. 9 Palma answered the questions by acknowledging that the pending request to arbitrate is based on 10 the DAA, but stating that the DAA says “any” dispute between the bank and Palma was arbitrable, 11 going back to the 2019 lawsuit. Dkt. No. 25 at 2-3. Each side also expressed their views about 12 the Court’s costs and expenses inquiry. 13 The parties’ familiarity with the record is assumed. The case is ordered to arbitration on 14 the ensuing condition with respect to public injunctive relief, and stayed pending further order. 15 LEGAL STANDARDS 16 The Court has detailed the standards governing a motion to compel arbitration under the 17 FAA in several prior orders, which are incorporated here. See Blackstock v. Marin Luxury Cars 18 LLC, No. 22-cv-07052-JD, 2023 WL 5959426, at *1 (N.D. Cal. Sept. 12, 2023); Williams v. Eaze 19 Sols., Inc., 417 F. Supp. 3d 1233 (N.D. Cal. 2019). In pertinent part, the Court’s role under 20 Section 4 of the FAA “is limited to determining whether a valid arbitration agreement exists and, 21 if so, whether the agreement encompasses the dispute at issue.” Cornet v. Twitter, Inc., No. 22-cv- 22 06857-JD, 2023 WL 187498, at *1 (N.D. Cal. Jan. 13, 2023) (quoting Lifescan, Inc. v. Premier 23 Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004)). “If the party seeking to compel 24 arbitration establishes both factors, the district court ‘must order the parties to proceed to 25 arbitration only in accordance with the terms of their agreement.’” Id. (quoting Lifescan, 363 F.3d 26 at 1012). 27 1 DISCUSSION 2 I. WAIVER 3 Palma’s main objection is that Wells Fargo waived the right to compel arbitration by suing 4 her in court in 2019 over her credit card debt. “A ‘party seeking to prove waiver of a right to 5 arbitration must demonstrate: (1) knowledge of an existing right to compel arbitration [and] (2) 6 acts inconsistent with that existing right.’” McBurnie v. Acceptance Now, LLC, 643 F. Supp. 3d 7 1041, 1045 (N.D. Cal. 2022), aff’d in part, 95 F.4th 1188 (9th Cir. 2024) (citing Martin v. Yasuda, 8 829 F.3d 1118, 1124 (9th Cir. 2016)). “There is no concrete test to determine whether a party has 9 engaged in acts that are inconsistent with its right to arbitrate.” Id. Rather, the question of waiver 10 looks to the totality of the party’s actions. Id. The burden of proof is on the party asserting 11 waiver. Armstrong v. Michaels Stores, Inc., 59 F.4th 1011, 1014 (9th Cir. 2023). 12 Palma’s waiver theories are not well taken. To start, Palma makes a rather opaque 13 argument to the effect that the DAA was “merged” into the prior collection judgment obtained by 14 the bank, and so cannot be enforced. See Dkt. No. 13 at 6-7 (quoting Diamond Heights Vill. Assn., 15 Inc. v. Fin. Freedom Senior Funding Corp., 196 Cal. App. 4th 290, 301-02 (2011) (“[A] judgment 16 extinguishes the contractual rights and remedies previously extant, substituting in their place only 17 such rights as attach to a judgment.”)) (internal quotation omitted). That may be true in some 18 cases, but not here. Diamond Heights and the case it cites, O’Neil v. General Security Corp., 4 19 Cal. App. 4th 587 (1992), are based on principles of res judicata intended to prevent a plaintiff 20 from bringing suit more than once on the same right or claim. See O’Neil, 4 Cal. App. 5th at 602; 21 Diamond Heights, 196 Cal. App. 4th at 302. That is not the situation here. Wells Fargo is not 22 trying to sue Palma twice for the same credit card debt. Rather, Wells Fargo is asserting an 23 arbitration demand in response to Palma’s lawsuit for taking money out of her deposit accounts. 24 Palma’s “merger” suggestion is not a bar to arbitration under the DAA. 25 The 2019 collection action by the bank is also not inconsistent with seeking arbitration 26 now. As Wells Fargo stated in response to the Court’s inquiries, without meaningful opposition 27 by Palma, the collection action could not have been arbitrated. The plain language of the CCA 1 has not slept on a right that it could have enforced. Palma’s suggestion that the collection action 2 || should have been arbitrated under the DAA is of no moment. Palma is subject to the DAA for her 3 || checking and savings accounts, but the 2019 litigation involved her credit card, which was subject 4 || tothe CCA. Palma has not demonstrated that the DAA was intended to displace the CCA in any 5 way with respect to credit card debt, or that it granted Wells Fargo a right to arbitrate any claim 6 || untethered to deposit accounts. 7 Palma’s reliance on a Maryland state court case, Cain v. Midland Funding, LLC, 156 A.3d 8 807 (2017), see Dkt. No. 13 at 8-10, does not lead to a different outcome with respect to waiver. 9 Cain was decided solely under Maryland law, which has no application here. 10 || II. =PUBLIC INJUNCTIVE RELIEF 11 Palma’s objection to arbitration on public injunctive grounds under McGill, see Dkt. 12 || No. 13 at 10-11, has in effect been resolved by the parties. Wells Fargo agrees that the arbitration 5 13 || clause in the DAA “would not prevent the arbitrator from issuing a public injunction if Ms. Palma 14 || sought such an injunction and prevailed on the merits.” Dkt. No. 12 at 9; see also Dkt. No. 14 3 15 at 16 (‘[T]he arbitration provision does not preclude an arbitrator from issuing a public a 16 || injunction.”). Palma may present public injunctive relief for the arbitrator to decide.

CONCLUSION

18 The case is ordered to arbitration and stayed pending further order. See 9 U.S.C. § 3. The 19 || parties are directed to file joint status reports every 90 days beginning on March 14, 2025, and to 20 || promptly advise the Court of a settlement or other resolution. With respect to cost and expenses 21 for a motion to compel, Wells Fargo has not made a formal demand that Palma has been called 22 || upon to oppose. Consequently, the question is not ripe, and the Court will not take it up at this 23 time. 24 IT IS SO ORDERED. 25 Dated: December 12, 2024 26 7 JAMES DON United States District Judge 28