A split circuit court panel has rejected Sunoco’s attempts to compel arbitration in a proposed class action alleging the company’s rewards card program cheated customers.
A divided three-judge panel of the U.S. Court of Appeals for the Third Circuit ruled Tuesday that, since only Citibank, and not Sunoco, was a signatory to the awards program agreement, the Pennsylvania-based gasoline retailer could not compel arbitration. The decision upheld a ruling from the U.S. District Court for the Eastern District of Pennsylvania.
Sunoco had argued the awards program contract should be considered as part of an overall joint agreement between plaintiff Donald White, Citibank and Sunoco, based on the gas company’s promotional and advertising materials.
Judge Michael Chagares said the contract, with its arbitration agreement, bound only the signatories—White and Citibank.
“The card agreement is an unambiguous and complete contract between White and Citibank; we are aware of no basis for looking outside it to search for a broader ‘contract’ with Sunoco,” Chagares said. “Because Sunoco has advanced no colorable argument on this front, it cannot compel arbitration.”
David Stanoch of Golomb & Honik, who represented the plaintiffs, said he was “very pleased with the result.”
“We believe the district court got it right. We believe the Third Circuit also got it right,” Stanoch said. “Hopefully this result will encourage Sunoco to do the right thing now by Mr. White and Sunoco’s other customers.”
Seamus Duffy of Drinker Biddle & Reath did not return a call for comment.
Chagares was joined by Judge Luis Felipe Restrepo, and Judge Jane Roth issued a dissenting opinion, saying the plaintiff’s argument was “an attempt to bypass, through artful pleading, a valid agreement to arbitrate.”
According to Chagares, White brought the proposed class action suit over the Sunoco Rewards Program, which offered customers a 5-cent-per-gallon discount if they used a Sunoco Rewards Card. The cards were being issued by Citibank. Promotional materials also noted that the cards would be subject to Citibank’s creditworthiness criteria, and that the applicant agreed to give Citibank permission to share transactional information with Sunoco.
White, a Florida resident, obtained a rewards card in 2013. He sued in 2015, alleging Sunoco did not apply the 5-cent-per-gallon discount on all fuel purchases at every Sunoco location. His suit raised a claim of fraud.
According to Chagares, before bringing the suit White communicated with Citibank representatives, and the bank credited his account after he complained.
Sunoco disputed the lower court’s finding that the promotional materials constituted a separate contract, and argued it was a “connected” entity with Citibank under the contract, since the two companies jointly marketed the rewards program.
Chagares said there was nothing in the record to show that Citibank acted in concert with Sunoco, and that, even if Sunoco could be considered a connected entity with Citibank, being a connected entity did not give the gas retailer the right to elect arbitration.
“The cardholder agreement defines ‘you’ as the card holder and ‘we’ and ‘us’ as Citibank,” Chagares said. “Nowhere does the agreement provide for a third party, like Sunoco, the ability to elect arbitration or to move to compel arbitration.”