There Were Two Agreements To Arbitrate And Neither Worked.
Iliana Perez entered into two arbitration agreements: one, with Citibank in 2010 in connection with a student loan, the second, with Discover Bank in 2018, in connection with a consolidation loan for her student loan. She sued Discover Bank after her application for a consolidation loan was denied in, based on her undocumented immigration status. Discover Bank moved unsuccessfully in the trial court to compel arbitration under the two arbitration agreements, a result that was affirmed on appeal. Perez v. Discover Bank, 22-15322 (9th Cir. 7/24/23) (S.R. Thomas, Holly Thomas, Rakoff).
The dispute centered around the denial of the consolidation loan, which occurred some eight years after Perez entered into the arbitration agreement relating to the student loan. The consolidation loan was not within the scope of the earlier agreement.
As for the second agreement, Perez argued that it was unconscionable. However, in court, Discover Bank's attorney argued that it could not be unconscionable, because Perez still had 30 days to opt out. After the hearing, Perez did opt out of arbitration under the second agreement. After Perez opted out, the court addressed the matter again. Now Discover Bank's attorney argued that Perez's exercise of her opt out only applied to future discrimination, not past discrimination. But that position was inconsistent with the earlier representation to the court, and the Ninth Circuit invoked the doctrine of equitable estoppel to reject Discover Bank's argument that Perez could not opt out of arbitration for past discrimination. Indeed, Discover Bank's argument that the second agreement was not unconscionable relied, at least in part, on its representation to the court that Perez could still opt out. So it would have been unfair not to hold the bank to a representation upon which the court had earlier relied.
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