## Facts

- Obie Payton financed a home satellite system through a revolving credit card account issued by Beneficial National Bank, U.S.A.
- The cardholder agreement included a change-of-terms clause permitting the issuer to modify terms (including for existing balances) with notice.
- Beneficial later mailed a notice adding a mandatory arbitration provision, effective unless the cardholder rejected it within a stated period; Payton did not reject it and continued using the card.
- Beneficial assigned Payton’s account to Household Bank (SB), N.A.; Payton received notice and continued using the account under Household’s materials, which also included mandatory arbitration terms.
- Payton sued Beneficial and Household in Mississippi state court, alleging fraudulent misrepresentations and other wrongful conduct connected to the satellite-system financing transaction and seeking damages exceeding $10 million.
- Beneficial and Household filed a federal action under FAA § 4 to compel arbitration; Payton moved to dismiss for lack of diversity jurisdiction, later attempting to reduce his damages demand below the jurisdictional amount.

## Issues

1. Whether diversity jurisdiction existed where the state-court complaint initially sought damages above the jurisdictional amount but was later amended to seek less.
2. Whether an arbitration clause added through a contract’s change-of-terms provision became part of the agreement when the cardholder received notice, had an opt-out opportunity, and continued using the account.
3. Whether the arbitration clause applied to disputes connected to the earlier satellite-system transaction, including claims predating the amendment.
4. Whether the arbitration requirement (including the designated forum) was unenforceable due to unconscionability or lack of meaningful assent.

## Decision

- The court denied Payton’s motion to dismiss for lack of subject-matter jurisdiction.
- The court held diversity jurisdiction attached based on the parties’ diverse citizenship and the amount in controversy as pleaded at filing; later reductions in the damages demand did not divest jurisdiction.
- The court granted the motion to compel arbitration under the FAA.
- The court found Payton assented to the arbitration amendment by failing to opt out after notice and continuing to use the account.
- The court found the arbitration provision’s broad wording covered Payton’s claims and could reach disputes predating the amendment.
- The court rejected unconscionability challenges, concluding the arbitral forum specified in the agreement was not shown to be unfair.

## Legal Principles

- Diversity jurisdiction’s amount-in-controversy requirement is determined at the time jurisdiction attaches; subsequent amendments reducing claimed damages generally do not defeat jurisdiction.
- A credit card issuer may add an arbitration clause pursuant to a contractual change-of-terms provision when the issuer provides notice and an opt-out opportunity, and the cardholder assents by continuing to use the account.
- Broad arbitration language covering “any claim, dispute or controversy” may extend to disputes related to the account even if the underlying events occurred before the amendment, absent a contrary contractual limitation.
- Under the FAA, doubts about the scope of arbitrable issues are resolved in favor of arbitration, and an arbitration agreement is enforced absent a valid contract defense such as unconscionability.

## Conclusion

The court retained diversity jurisdiction based on the original damages demand and compelled arbitration, holding that Payton accepted the added arbitration terms through notice-and-opt-out procedures followed by continued card use and that the broadly worded clause covered his claims, including those tied to the earlier transaction.


Beneficial Nat’l Bank, U.S.A. v. Payton, 214 F. Supp. 2d 679 (S.D. Miss. 2001)