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Kaufman v. American Express Travel Related Services Co.

March 7, 2008

SAUL M. KAUFMAN, PLAINTIFF,
v.
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

The defendant, American Express Travel Related Services Company, Inc. ("American Express"), has filed a notice of removal from state court and a motion to compel arbitration and stay proceedings pending arbitration. For the reasons stated below, the court finds that it has subject matter jurisdiction over this case and denies the motion to compel arbitration.

I. BACKGROUND

Plaintiff, Saul M. Kaufman ("Kaufman"), filed a putative class action lawsuit against American Express in the Circuit Court of Cook County on February 14, 2007. He alleged breach of contract, unjust enrichment, and statutory fraud. American Express filed a notice of removal to federal court on March 27, 2007, pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d) ("CAFA"). On May 1, 2007, American Express filed this motion to compel arbitration and stay proceedings.

All claims in this case stem from Kaufman's purchase, on October 27, 2006, of an "American Express Gift Card" ("Gift Card"), valued at $50, from a CVS/pharmacy store in Niles, Illinois. Kaufman alleges*fn1 that the packaging of the Gift Card stated that: (1) the Gift Card could be used "all over the place"; (2) the Gift Card had no value until purchased and validated; (3) the Gift Card could be used only in the United States; and (4) the "enclosed American Express Gift Card Cardholder Agreement includes information for the recipient." Compl. ¶ 38, id. Ex. 1.

When he opened the card, Kaufman alleges that he read a one-page insert (the "Insert") containing disclaimers that did not appear on the outside of the package. Id. ¶ 42. The Insert read:

Important information about your Card:

* Your card is welcomed at retail establishments and restaurants in the U.S. that accept the American Express(r) Card.

* This Card is not for use at airline, hotel, car rental, telecom, gasoline merchants, or ATMs. Additional restrictions apply.

* Please use your Card soon! A monthly Service Fee is waived for the first 12 months after purchase.* Please see Terms and Conditions.

*Subject to applicable law.

Id. Ex. 2 (emphasis in original).

Kaufman used the Gift Card for the first time on November 11, 2006, spending $22.11, and again on November 12, 2006, spending $14.59. Id. ¶¶ 45-46. He alleges he was unable to use the card again to spend down the remaining $13.30 because of restrictions on "split tender" transactions in which a retailer accepts cash for a balance on a purchase when the Gift Card available balance is insufficient. Id. ¶¶ 47-54. Kaufman alleges that he learned of the restrictions only when he read the six-page leaflet also included with the Gift Card that was entitled "Using the American Express(r) Gift Card," which included the "American Express(r) Gift Card Cardholder Agreement" ("Agreement"). Id. ¶ 51, id. Ex. 3. The Agreement, which is five-pages of approximately six-point narrow typeface, includes disclosures that: (1) value cannot be added to the Gift Card; (2) American Express charges $5.95 for a replacement card, $10.00 to issue a check refunding available funds on the Gift Card after its expiration date, and $2 per month in "service fees" from any balance remaining twelve months from issuance (where allowed by law); and (3) retailers have discretion to accept a "split tender." See id. Ex. 3. Of relevance to this motion, at the very end, the Agreement contain a broad arbitration provision and a choice of law clause specifying New York law. See id. Ex. 3 at 5-6. The arbitration provision provides in part:

As used in this Arbitration Provision, the term "Claim" means any claim, dispute or controversy between you and us arising from or relating to the Gift Card or this Agreement as well as any related or prior agreement that you may have had with us or the relationships resulting from this Agreement, including the ...


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