What You Need to Know About the Discover Arbitration Agreement

A Discover arbitration agreement is a mandatory contract that you sign when you open a Discover credit card account. This agreement requires you to resolve any disputes with Discover through arbitration instead of going to court.

Discover arbitration is a private process where a neutral third-party arbitrator hears both sides of the dispute and makes a binding decision. This means that the arbitrator's decision is final and can't be appealed in court.

You can't opt out of the arbitration agreement, and it applies to all disputes related to your account, including claims for damages or losses.

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The court has spoken on the enforceability of Discover arbitration agreements. The United States Supreme Court overruled the Discover Bank test in the 2011 case AT&T Mobility v. Concepcion.

The Discover Bank test, established by Carlos R. Moreno, held that a class-action waiver is unenforceable under California law when it appears in a consumer contract of adhesion, involves small amounts of damages, and alleges a deliberate scheme to cheat large numbers of consumers.

In the case of Comrey v. Discover Fin. Servs., the District Court granted Discover's motion to compel arbitration. The plaintiff had opened a Discover credit card in 1991 and agreed to the terms of the agreement when she first used the card.

The court found that the plaintiff had accepted the terms of the agreement and its subsequent amendments, including the arbitration provision, by virtue of her application and subsequent use of the credit card.

The court also held that the presumption of arbitrability is particularly strong when the parties contractually agree to an arbitration provision broadly encompassing all disputes arising from or relating to the agreement.

In this case, the plaintiff's claim against Discover for statutory violations of the FCRA arose directly from her account with Discover, and the court found that her dispute clearly related to her agreement with Discover.

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In arbitration, the court process and procedure play a crucial role in determining the outcome of a dispute.

The arbitration agreement is typically a written contract that outlines the terms and conditions of the arbitration process.

Parties involved in a dispute must submit to the arbitration process in accordance with the agreement.

A notice of arbitration is usually the first step in initiating the arbitration process, which triggers the process of selecting an arbitrator or panel of arbitrators.

The arbitrator or panel of arbitrators will review the evidence and make a decision based on the terms of the agreement and applicable laws.

The court may intervene in the arbitration process if there is a dispute over the validity of the arbitration agreement or if one of the parties fails to comply with the agreement.

For your interest: Terms of Use Agreement

The Federal Arbitration Act (FAA) establishes a strong federal policy in favor of arbitration, but it's not a one-size-fits-all solution. In some cases, the FAA can be preempted by federal law, which means that the federal law takes precedence over the arbitration agreement.

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Preemption is a crucial concept in arbitration law, and it's essential to understand how it works. The Supreme Court has held that a federal counterclaim is not a claim "arising under" federal law, unless the state law claim is completely preempted by federal law. This is known as the "complete preemption" rule.

In the case of Holmes Group v. Vornado Air Circulation Systems, Inc., the Supreme Court held that a federal counterclaim was not a claim "arising under" federal law, because it did not satisfy the well-pleaded complaint rule. However, under the doctrine of complete preemption, a state law claim can form the basis for federal question, if the state law that would decide the question is in an area of law that is wholly preempted by federal law.

Discover Financial Services argues that prohibiting look-through jurisdiction will severely undermine the FAA by precluding jurisdiction in many cases. They believe that a reversal of the Fourth Circuit would reduce federal courts' jurisdiction over Section 4 petitions to "obscure circumstances" such as incidents on federal lands. This could eviscerate the FAA's underlying policy of encouraging arbitration, particularly because state courts do not always treat the FAA as binding.

In fact, state courts may fail to enforce arbitration agreements on various grounds, especially against consumers fighting mandatory arbitration with companies. Without the FAA, parties may have difficulty vindicating their contractual right to arbitration.

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