A federal judge last month refused to find that a mandatory arbitration clause in the fine print of a Black customer’s bank account agreement prohibited her from pursuing claims of racial discrimination in court.
Jeanetta Vaughn filed suit against Chase Bank after the manager of its S. Buckley Road branch in Aurora called the police on her as she sat in the lobby trying to access her card’s features on her phone. She alleged it was an example of “banking while Black,” and contended the responding officers even felt the call was meritless.
In response, Chase cited the agreement Vaughn signed when she opened her account, which obligates customers to resolve, through binding arbitration, “any dispute relating in any way to your account or transactions.” Therefore, Chase argued, Vaughn’s lawsuit alleging violations of state and federal anti-discrimination laws could not be litigated in court.
Not so, countered U.S. District Court Judge Charlotte N. Sweeney.
“Defendants have not directed the Court to a single case involving an arbitration provision that required a similarly situated plaintiff to arbitrate claims of racial discrimination,” Sweeney wrote in a Dec. 15 order. “Here, that Plaintiff had an account with Chase is irrelevant. Plaintiff was not allowed to even attempt a bank transaction before she was approached and accused of nefarious conduct. Indeed, Defendants acted like Plaintiff was not a customer and had no relationship with Chase.”
According to her lawsuit, Vaughn entered the Aurora Chase branch on June 9, 2022 and sat in the lobby so she could use her phone to unlock the security feature on her Chase card. Allegedly, within 90 seconds, branch manager Trina Pelech, who is White, approached Vaughn to ask if she could help with anything.
Pelech took issue with the tone of Vaughn’s response and told her she was “not welcome.” Pelech alleged to officers after the fact that Vaughn attempted to record her with her phone, but Vaughn disputed that assertion.
Pelech called 911 two minutes after Vaughn entered the bank.
“Ms. Vaughn understood that as a Black woman she needed to keep calm and deescalate the situation because (of) the dangerous, oftentimes violent, consequences to Black victims when White individuals call law enforcement on Black individuals and accuse them of crimes,” Vaughn’s attorneys wrote.
Responding officers spoke separately to Pelech and Vaughn in the bank. Pelech described Vaughn’s alleged rudeness to her. When an officer told Pelech that Vaughn felt singled out because she was Black, Pelech responded, “That’s always the excuse.”
Officers told Vaughn they were not inclined to charge her with trespassing, and the dispute was solely “between you and Chase.”
“Being rude in the bank is not a matter for law enforcement,” one officer acknowledged. When Vaughn’s husband arrived, a second officer informed him of the personal dispute and noted the two women “drug us into it.”
Vaughn filed suit against Chase and Pelech, asserting violations of the Colorado Anti-Discrimination Act, federal anti-discrimination law, defamation and emotional distress.
The defendants, in response, sought to throw out the lawsuit by pointing to the deposit account agreement Vaughn signed as a Chase customer, obligating her to arbitrate “disputes between you and us” relating to bank accounts.
“Plaintiff’s customer relationship with Chase, including the transaction that Plaintiff alleges she was preparing to complete, is governed by the (agreement),” wrote Chase’s lawyers.
In response, Vaughn pointed out that if the mandatory arbitration clause governed all disputes between a bank and its depositors, an employee could assault or shoot a customer and the injured person would never be able to sue, given the connection to the underlying banking services.
“Such services do not include race discrimination, having the police called on one, or being falsely and defamatorily accused of a crime. No reasonable individual would interpret ‘account services’ to include such conduct,” Vaughn’s attorneys argued.
Sweeney agreed with Vaughn that the claims she advanced in her lawsuit had “little or nothing to do” with Vaughn’s bank account.
“This case would be different if, for example, Plaintiff alleged that Defendants charged her a higher interest rate on a loan because of her race. In that hypothetical, Plaintiff’s claim may relate to the Deposit Account Agreement,” Sweeney wrote. “Defendants do not provide any evidence that Chase intended to sweep racial discrimination claims under the arbitration provision.”
She added that Chase has experienced other high-profile allegations of race discrimination in recent years, including a lawsuit filed shortly before Vaughn’s encounter accusing Chase of discriminating against a prospective Black customer and allegations that a Chase branch in New York called the police on a Black mayor as he was waiting to see the city’s bank records.
If Chase wanted its arbitration agreement to apply to such encounters, Sweeney observed, the bank could have explicitly updated its terms.
The case is Vaughn v. JP Morgan Chase & Co. et al.