## Facts

- Francis and Trish Puleo held Chase credit cards governed by a cardmember agreement drafted by Chase.
- The agreement contained an arbitration clause requiring arbitration of disputes, a class-action waiver barring class actions in court and in arbitration, and a severability clause.
- The Puleos alleged Chase improperly increased interest rates retroactively on their account balances; one alleged increase raised Francis Puleo’s rate from 4.99% to 29.99%, producing $267 in additional finance charges.
- The Puleos filed a putative class action in Pennsylvania state court challenging the rate increases; Chase removed to federal court and moved to compel arbitration and dismiss.
- The Puleos did not contest arbitration generally; they argued the class-action waiver was unconscionable and that class arbitration should be compelled, with the arbitrator deciding unconscionability.

## Issues

1. Whether an unconscionability challenge to a class-action waiver in an arbitration agreement is a gateway “question of arbitrability” for a court, rather than a procedural issue for an arbitrator.
2. Whether a severability clause or the parties’ arbitration language constituted clear and unmistakable delegation of that gateway issue to the arbitrator.

## Decision

- The Third Circuit, sitting en banc, affirmed the order compelling individual arbitration.
- The court held that a challenge asserting a class-action waiver is unconscionable is a question of arbitrability for the court.
- The court found no clear and unmistakable agreement delegating the enforceability of the class-action waiver to the arbitrator.
- The severability clause did not shift the decisionmaker because severance presupposes a judicial determination that a provision is invalid.

## Legal Principles

- Under the Federal Arbitration Act, arbitration agreements are enforceable except on generally applicable contract defenses, but courts decide gateway questions of arbitrability unless the parties clearly and unmistakably provide otherwise.
- Whether parties agreed to arbitrate on a class basis is a threshold issue because class arbitration changes the nature of the proceeding compared to bilateral arbitration.
- An unconscionability attack on a class-action waiver in an arbitration clause concerns the scope and enforceability of the agreement’s specified arbitral forum (individual vs. class) and is therefore for courts to decide absent clear delegation.
- A severability clause does not itself delegate validity determinations; it operates after a provision is found invalid.

## Conclusion

The en banc Third Circuit held that courts, not arbitrators, decide unconscionability challenges to class-action waivers in arbitration agreements unless the parties clearly and unmistakably delegate that gateway issue, and it upheld compelled individual arbitration under the cardmember agreement.


Puleo v. Chase Bank USA, N.A., 605 F.3d 172 (3d Cir. 2010) (en banc)