Find Legal Information

THIRD DIVISION

No. 1-03-0814

JUSTICE KARNEZIS delivered the opinion of the court:

This interlocutory appeal arises as a result of disputed charges on plaintiff's SaksFifth Avenue credit card. The issue on appeal is whether an arbitration clause in anamended credit card agreement is enforceable.

Plaintiff, Richard Rosen, filed a class action lawsuit against defendants, SCIL,LLC, Saks Incorporated and DOES 1-10, disputing two charges of "fictitious taxes" onhis Saks Fifth Avenue credit card. Defendants filed a motion to compel arbitration andto stay the proceedings pursuant to an amendment to plaintiff's credit card agreementpermitting either party to compel arbitration. The circuit court denied the motion anddefendants now appeal. We reverse and remand.

Plaintiff's complaint alleged that defendants unlawfully charged him sales tax onthe purchase of services, i.e., alterations on clothing he purchased at defendants' store. The sales tax plaintiff paid on the two transactions totaled $3.19. Plaintiff's complaintfurther alleged that defendants' practice violated section 2 of the Illinois ConsumerFraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 2000)).

Defendants' motion to compel arbitration and stay the proceedings included acopy of the amendment to the credit agreement that was sent to Saks Fifth Avenuecardholders. The cover page of the arbitration agreement contained the following inlarge, bold-faced type.

"Important Notice Saks Fifth Avenue Credit Card Accounts

The following pages of the agreement contained the following relevant information.

"Summary of Important New Terms

1. Arbitration of Disputes. We are adding a provision to the NewAgreement at paragraph 18 in which both we and you agree toresolve all disputes involving your account balance attributable topurchases charged to your account on or after the Effective Date)by arbitration rather than by litigation in court, if you OR we requestarbitration on or for a particular dispute. This means that if onlyone of us requests arbitration for a dispute involving your account,(1) the dispute will be arbitrated in accordance with paragraph 18(even if the other does not want to arbitrate the dispute), (2) therewill be no jury trial for the dispute, (3) generally, there will be noprearbitration discovery (i.e., the pre-trial fact-finding process) forthe dispute, and (4) the dispute will not be arbitrated on a class-action basis, and neither you nor we will have the right toparticipate as a representative or member of any class of claimantspertaining to any dispute involving your account. If neither you norwe requests arbitration, the dispute will not be resolved byarbitration and instead will be litigated in court. However, absentunusual circumstances, we currently intend to request arbitrationfor all disputes that are claims by you against us, and when werequest arbitration the disputes will be arbitrated in accordance withparagraph 18 even if you do not want the disputes to be arbitrated.

Please carefully read paragraph 18 of the New Agreement. If you do not wish to agree to this new arbitration provision, do notcharge a purchase to your account on or after the Effective Date. In that case, the arbitration provision will not apply to your account,and the current terms of your account will continue to apply untilyour account balance is paid in full. However, if you charge apurchase to your account on or after the Effective Date, thatpurchase will be your agreement to the new arbitrationprovision in which you agree to resolve all disputes between youand us by arbitration in accordance with paragraph 18 of the NewAgreement, but arbitration will not apply to disputes involvingany part of your account balance attributable to purchasescharged to your account before the Effective Date." (Bold inoriginal.)

"18. Arbitration for Disputes; No Jury Trials or Class Actions:

If we or you request arbitration of a Claim, we and you will nothave the right to litigate the Claim in court. This means (1)there will be no jury trial on the Claim, (2) no prearbitrationdiscovery except as the Rules permit, and (3) no claim may bearbitrated on a class-action basis, and neither we nor you willhave the right to participate as a representative or member ofany class of claimants pertaining to any Claim subject toarbitration. Generally, the arbitrator's decision will be finaland binding. There are other rights that you would have if youwent to court that also may not be available in arbitration.

If you make a request to us in writing, we will temporarily advanceto you the filing, administrative, and hearing fees for the arbitrationof your Claim against us * * * in excess of any filing fee you wouldhave been required to pay to file the Claim in a state or federalcourt * * *. At the end of the arbitration, the arbitrator will decide ifyou have to repay the advance (and if you do have to repay, youagree to do so).

This paragraph 18 will be governed by the Federal Arbitration Act('FAA')." (Bold in original.)

The circuit court denied the motion to compel arbitration and to stay theproceedings, finding that the arbitration provision either violated public policy or that itwas unconscionable. The court stated, "I don't think that the litigant can effectivelyvindicate their cause of action in the arbitrable forum because the claims are so small,and I think the effect of compelling arbitration would be to, in essence, [neither] provideany remedy for the plaintiff [nor] provide any deterrence to the defendant."

An order to compel arbitration is injunctive in nature and is appealable underSupreme Court Rule 307(a)(1). Salsitz v. Kreiss, 198 Ill. 2d 1, 11 (2001); 188 Ill. 2d R.307(a)(1). Generally, the standard employed in reviewing an interlocutory ordergranting or denying a motion to compel arbitration is whether the circuit court abused itsdiscretion. Bishop v. We Care Hair Development Corp., 316 Ill. App. 3d 1182, 1189(2000). However, a review of a trial court's construction of the arbitration agreement,presents a question of law which is subject to a de novo standard. Caligiuri v. FirstColony Life Insurance Co., 318 Ill. App. 3d 793, 800 (2000).

Initially, we note, defendants maintain that the Federal Arbitration Act (FAA) (9U.S.C.