The United States Court of Appeals for the Fifth Circuit addressed a class action lawsuit led by Vickie Forby against One Technologies, claiming deceptive practices related to “free” credit reports. In a previous ruling (Forby I), the court found that One Technologies waived its right to arbitrate state-law claims. The current appeal examines whether this waiver extends to newly added federal claims after remand. Consistent with prior precedent, the court determined that One Technologies did not waive the right to arbitrate these federal claims, reversing the district court's conclusion.
In 2014, Forby signed up for a credit report on Scoresense.com, operated by One Technologies, authorizing a nominal charge to verify her identity. She had to agree to terms that included a "negative option billing" clause, obligating her to cancel to stop further charges. Forby alleges she was unaware of her enrollment in this program until she noticed repeated charges of $29.95 and claims One Technologies ignored her cancellation request. She filed a class action in Illinois under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) and for unjust enrichment, asserting her situation mirrored that of other affected consumers. The case was removed to federal court and subsequently transferred to the Northern District of Texas, where One Technologies' motion to dismiss was partially granted, allowing the ICFA claim to proceed. One Technologies later moved to compel arbitration, which the district court initially granted, but the Fifth Circuit previously reversed this decision, affirming that the company had waived its arbitration rights.
One Tech was aware of its right to compel arbitration when it filed a motion to dismiss, yet it chose to pursue litigation, which prejudiced Forby by requiring her to potentially re-litigate her claims in arbitration after One Tech had already presented its arguments in court. The court vacated the order compelling arbitration and allowed Forby to file a second amended complaint, adding a claim under the Credit Repair Organizations Act (CROA), alleging deceptive practices by One Tech, including misleading offers of "free" credit score access and failure to provide necessary consumer rights notifications. One Tech subsequently moved to compel arbitration again, arguing that the amended complaint changed the scope of the case, reviving its right to arbitrate. However, the district court denied this motion, reasoning that Forby’s new claim did not significantly alter the underlying case's nature. One Tech appealed the denial, arguing its waiver of arbitration did not extend to the new federal claims. The appellate court agreed, noting a strong presumption against finding a waiver of arbitration, which places the burden of proof on the party asserting waiver. Arbitration is waived only if a party substantially engages in judicial processes to the detriment of the other party.
Waiver is evaluated through a two-step test: first, whether a party substantially invoked the judicial process, and second, whether this invocation caused prejudice to the opposing party. In this case, the analysis concluded at the first step. A party only invokes the judicial process regarding claims it later seeks to arbitrate. One Tech did not litigate Forby’s CROA claims; instead, it moved to compel arbitration as soon as Forby amended her complaint to include these claims. One Tech took no overt action in court that indicated a desire to litigate the arbitrable dispute. Previous attempts to dismiss other claims (ICFA and unjust enrichment) only demonstrated a desire to resolve those specific claims through litigation and did not affect the CROA claims, which were not part of the lawsuit at that time.
The court referenced the Eleventh Circuit’s decision in Collado v. J. G Transportation, which established that waiver of arbitration rights for initially asserted claims does not extend to claims raised later. The same principle applies here: One Tech's waiver concerning the ICFA claims does not extend to the subsequently pled CROA claims. Consequently, One Tech has not waived its right to arbitrate the CROA claims, leading to the reversal of the district court’s order denying the motion to compel arbitration and a remand for further proceedings. There was no need to assess possible prejudice to Forby from One Tech’s prior litigation conduct.
