Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


12-19-2007

Gay v. CreditInform
Precedential or Non-Precedential: Precedential

Docket No. 06-4036




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                                        PRECEDENTIAL

          UNITED STATES COURT OF APPEALS
               FOR THE THIRD CIRCUIT


                         No. 06-4036


       MARY GAY, ON BEHALF OF HERSELF AND
         ALL OTHERS SIMILARLY SITUATED,

                                              Appellant

                                  v.

         CREDITINFORM; INTERSECTIONS, INC.



        On Appeal from the United States District Court
           for the Eastern District of Pennsylvania
                 (D.C. Civ. No. 05-cv-06729)
           Honorable James T. Giles, District Judge



                   Argued October 17, 2007

             BEFORE: FISHER, ALDISERT and
               GREENBERG, Circuit Judges

                  (Filed December 19, 2007)



James A. Francis (argued)
Francis & Mailman
Suite 208
100 South Broad Street
Land Title Building, 19th Floor
Philadelphia, PA 19110
David A. Searles
Donovan Searles
Suite 1100
1845 Walnut Street
Philadelphia, PA 19103

   Attorneys for Appellant Mary Gay

Carleton O. Strouss
David R. Fine (argued)
Kirkpatrick & Lockhart Preston Gates Ellis
Market Square Plaza
17 North Second Street
Harrisburg, PA 17101

   Attorneys for Appellee Intersections Inc.

Christopher D. Thomas
Nixon Peabody
P.O. Box 31051
Clinton Square
Rochester, NY 14603

   Attorneys for Amicus-Appellee National Organization of
   Consumer Credit Attorneys



                  OPINION OF THE COURT


GREENBERG, Circuit Judge.

                      I. INTRODUCTION

       This case arises from appellant Mary Gay’s purchase of
credit repair services from defendants CreditInform and
Intersections Inc. (“Intersections”). Gay, however, filed a notice




                                2
of voluntary dismissal as to CreditInform on April 14, 2006,1 and,
accordingly, we will refer to Intersections as though it has been the
sole defendant throughout the proceedings in the District Court and
here. Gay claims that in selling its services Intersections violated
its obligations under the Credit Repair Organizations Act, 15
U.S.C. §§ 1679, et seq. (“CROA”), and the Pennsylvania Credit
Services Act, 73 Pa. Cons. Stat. Ann. §§ 2181, et seq. (West 1993)
(“CSA”).2 In addition to allegations concerning her purchase of the
credit repair services from Intersections, Gay’s complaint includes
allegations supporting prosecuting the case as a class action.
Nevertheless, in response to Intersections’ motion to stay the case
and compel arbitration, the District Court ordered the parties to
arbitrate the dispute on an individual basis pursuant to an
arbitration provision included in Gay’s purchase agreement
(“Agreement”) for the credit repair services.

       Gay appeals from the District Court’s order as she contends
that under both the CROA and the CSA she has a right to assert her
claims in a judicial forum and that under the CROA she has a right
to bring her case as a class action. She further argues that both


       1
        CreditInform is not a legal entity but merely is a trademark
Capital One has registered through which to market products and
services through Capital One Services, Inc. Intersections then
provides the products and services. Gay filed the notice of
dismissal as to Capital One Services, Inc. We are uncertain as to
the relationship, if any, between Intersections and Capital One.
       2
         In its brief on this appeal, after describing the background
of the CROA, Intersections includes the following footnote:
“Intersections notes that there are credit-repair businesses that
comply with the CROA. Intersections’ products, however, are not
credit-repair products and thus are not governed by the CROA.”
Appellee’s br. at 5 n.3. Rather, it indicates that it supplies a
“credit-monitoring product.” 

Gay disputes this
contention, stating that “Intersections falls squarely within the
definition of a credit repair organization and CROA’s coverage.”
Reply br. at 2. Inasmuch as Intersections, notwithstanding its claim
that the CROA does not apply to it, treats the CROA as applicable
in this case, we will do the same.

                                 3
statutes prohibit a consumer of services that those statutes regulate
from waiving those rights. Alternatively, Gay argues that even if
the statutes do not provide her with these nonwaivable rights, the
arbitration provision in her Agreement with Intersections does not
include her claims and is unconscionable and therefore a court
should not enforce it. The Supreme Court and, as far as we are
aware, no court of appeals has addressed the issues that we now
address under the CROA.

       For reasons that we will discuss, we will affirm the District
Court’s order to stay the proceedings and compel arbitration on an
individual basis.



          II. FACTS AND PROCEDURAL HISTORY

        Gay alleges that on or about January 21, 2005, she entered
into her Agreement with Intersections for the purchase of services
related to monitoring and improving her credit history. Gay further
alleges that between February 2005 and September 2005, she made
monthly payments of $4.99 to Intersections pursuant to the
Agreement. According to Gay, she made the payments before
Intersections fully performed any services for her. Gay claims that
Intersections violated the CROA by requiring her to pay for credit
repair services before it rendered them, and violated the CROA and
CSA by requiring her to waive certain rights and protections that
the statutes afforded to her as a consumer of a product governed by
them. Gay also claims that Intersections violated the CROA and
the CSA by failing to make disclosures that the statutes required.
Additionally, as we have indicated, she makes allegations in
support of class action treatment of her claims.

       Intersections filed its motion on February 27, 2006, to stay
the case and compel arbitration pursuant to the arbitration provision
in the Agreement that states:

              Any claim arising out of or relating to
              the Product shall be settled by binding
              arbitration in accordance with the
              commercial arbitration rules of the

                                 4
               American Arbitration Association on
               an individual basis not consolidated
               with any other claim.

J.A. at 98. As we have indicated, on June 12, 2006, the District
Court granted the motion, stayed the case, and ordered the parties
to submit their dispute to arbitration on an individual basis.

       Gay subsequently moved to certify the District Court’s order
for an interlocutory appeal, and on June 29, 2006, the District
Court granted her motion. Gay then petitioned us to accept her
interlocutory appeal and we granted Gay’s petition on August 30,
2006.



                       III. JURISDICTION

       The District Court had subject matter jurisdiction over this
case pursuant to 28 U.S.C. §§ 1331 and 1367, and we have
jurisdiction pursuant to 28 U.S.C. § 1292(b).3

        We exercise plenary review over legal questions concerning
the applicability and scope of an arbitration agreement. Medtronic
AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 

, 53
(3d Cir. 2001). If we reviewed the District Court’s interpretation
as distinguished from construction of the Agreement, we would
apply the clearly erroneous standard. We are not concerned,
however, with the sometimes elusive distinction between
contractual interpretation and construction as there can be no
question that, as we explain below, as written the arbitration clause
includes Gay’s claim. See 

n.2.




       3
        Although 9 U.S.C. § 16(b) provides that “an appeal may
not be taken from an interlocutory order . . . directing arbitration to
proceed under section 4 of this title,” the provision creates an
exception for appeals taken pursuant to 28 U.S.C. § 1292(b).

                                  5
                       IV. DISCUSSION

       A.     Did the District Court err in holding that Gay’s
              claims based on the CROA, 15 U.S.C. §§ 1679, et
              seq., and the CSA, 73 Pa. Cons. Stat. Ann. §§ 2181,
              et seq., are subject to arbitration?

              1. The parties’ arguments

       Gay argues that her claims are not arbitrable because both
the CROA and the CSA protect a consumer’s right to assert her
claims in a judicial forum, and the CROA further protects a
consumer’s right to prosecute her claim on a class action basis.
Thus, in her view, there are irreconcilable conflicts between the
statutes on the one hand and the arbitration provision in the
Agreement on the other hand. She also argues that the arbitration
provision does not cover her claims, and that, in any event, it is
unconscionable and unenforceable.

        Preliminarily we reject out of hand her contention that the
arbitration provision does not cover her claims. As we explain
below, a court determines whether the parties have agreed to
submit a dispute to arbitration. It is perfectly clear that the
arbitration provision in Gay’s Agreement which covers “[a]ny
claim arising out of or relating to the Product” includes Gay’s
claims. Thus, we pass to the more substantial issues raised on this
appeal.

        In contending that the statutes preclude arbitration of her
claims, Gay points to 15 U.S.C. § 1679g, the CROA provision
which prescribes the bases for determining civil liability and
includes several references to a “court” and class actions in its
discussion of punitive damages. In particular, section 1679g(a)(2)
states:

              (2) Punitive damages

              (A) Individual actions

              In the case of any action by an
              individual, such additional amount as

                                6
the court may allow.

(B) Class actions

In the case of a class action, the sum of –

(i) the aggregate of the amount which
the court may allow for each named
plaintiff; and

(ii) the aggregate of the amount which
the court may allow for each other
class member, without regard to any
minimum individual recovery.Gay
also refers to section 1679g(b), which
prescribes the factors to be considered
in awarding punitive damages and
states:

(b) Factors to be considered in
awarding punitive damages

In determining the amount of any
liability of any credit repair
organization under subsection (a)(2)
of this section, the court shall
consider, among other relevant factors
–

(1) the frequency and persistence of
noncompliance by the credit repair
organization;

(2) the nature of the noncompliance;

(3) the extent to which such
noncompliance was intentional; and

(4) in the case of any class action, the
number of consumers adversely
affected.

                    7
Gay argues that we should construe section 1679g’s references to
a “court” and class actions in a way that recognizes that the CROA
grants a consumer a right to file suit for an alleged violation of the
statute in a judicial forum on a class action basis.4

       Gay similarly argues that 73 Pa. Cons. Stat. Ann. § 2191
grants a consumer the right to sue for an alleged CSA violation in
a judicial forum. That section states:

              Any buyer or borrower injured by a
              violation of this act or by the credit
              services organization’s or loan
              broker’s breach of a contract subject
              to this act may bring an action for
              recovery of damages. Judgment shall
              be entered for actual damages, but in
              no case less than the amount paid by
              the buyer or borrower to the credit
              services organization or loan broker,
              plus reasonable attorney fees and
              costs. An award, if the trial court
              deems it proper, may be entered for
              punitive damages.


       4
         Gay also argues that 15 U.S.C. § 1679c(a) supports her
argument that the CROA creates a right for a consumer to bring
suit in a judicial forum. That section provides that an agreement
for services governed by the CROA must include a recital
providing that: “You have a right to sue a credit repair
organization that violates the Credit Repair Organization Act.” But
the section does not specify the forum for the resolution of the
dispute and therefore does not support Gay’s argument that the
CROA provides a consumer with the right to bring suit in a
judicial, rather than an arbitral, forum for CROA violations.
Moreover, even if the use of the word “sue” implies the availability
of a judicial forum for an action against a credit repair
organization, use of the word would not mean that the organization
could not assert defenses that it had to such an action including the
right to invoke a contractual arbitration provision to change the
forum.

                                  8
As with the CROA, Gay argues that the CSA’s reference to a
“court” provides a consumer with the right to assert CSA claims in
a judicial forum. We note, however, that Gay does not point to
language in the CSA to support an argument that it, like the CROA,
provides a consumer with the right to bring suit on a class action
basis.

       In addition to arguing that the statutes create a right for a
consumer to an adjudication in a judicial forum, and that the
CROA gives a consumer the further right to proceed in a class
action, Gay contends that the statutes prohibit a consumer from
waiving those rights. Gay refers to a provision of the CROA which
provides:

              (a) Consumer waivers invalid

              Any waiver by any consumer of any
              protection provided by or any right of
              the consumer under this subchapter–

              (1) shall be treated as void; and

              (2) may not be enforced by any
              Federal or State court or any other
              person.

              (b) Attempt to obtain waiver

              Any attempt by any person to obtain a
              waiver from any consumer of any
              protection provided by or any right of
              the consumer under this subchapter
              shall be treated as a violation of this
              subchapter.

              (c) Contracts not in compliance

              Any contract for services which does
              not comply with the applicable
              provisions of this subchapter –


                                 9
              (1) shall be treated as void; and

              (2) may not be enforced by any
              Federal or State court or any other
              person.

15 U.S.C. § 1679f.

      Gay also refers to the CSA anti-waiver provision which
provides:

              (a) Waiver – Any waiver by a buyer or
              borrower of the provisions of this act
              shall be deemed contrary to public
              policy and shall be void and
              unenforceable. Any attempt by a
              credit services organization or a loan
              broker to have a buyer or borrower
              waive rights given by this act shall
              constitute a violation of this act.

73 Pa. Cons. Stat. Ann. § 2189(a).

       Intersections’ answer to Gay’s claims is straightforward. It
argues that the arbitration provision governs Gay’s claims and is
enforceable. Moreover, it contends that neither the CROA nor the
CSA provides a consumer with the right to bring suit for its alleged
violation in a judicial forum or on a class action basis. It also
argues that the statutes’ anti-waiver provisions do not preclude a
consumer from waiving whatever right she might have to bring an
action in a court individually or on a class action basis, and that a
consumer therefore may agree to submit her claims to arbitration.5


       5
         The National Organization of Consumer Credit Attorneys
filed an amicus curiae brief in opposition to this appeal. In arguing
that the District Court’s order compelling arbitration should be
affirmed, it makes essentially the same arguments as Intersections,
namely, that the CROA does not prohibit arbitration of claims
brought pursuant to the statute and that the CROA’s anti-waiver
statute does not extend to a right either to bring suit in a judicial

                                 10
              2. The enforcement of arbitration agreements for
statutory claims

     Of course, this case implicates the Federal Arbitration Act
(“FAA”) which provides that:

              [a] written provision in any maritime
              transaction or a contract evidencing a
              transaction involving commerce to
              settle by arbitration a controversy
              thereafter arising out of such contract
              or transaction . . . shall be valid,
              irrevocable, and enforceable, save
              upon such grounds as exist at law or in
              equity for the revocation of any
              contract.

9 U.S.C. § 2.6 Congress enacted the FAA “to reverse the
longstanding judicial hostility to arbitration agreements that had
existed at English common law and had been adopted by American
courts, and to place arbitration agreements upon the same footing
as other contracts.” Gilmer v. Interstate/Johnson Lane Corp., 

, 24, 

, 1651 (1991).

        The circumstance that Gay’s claims are statutory does not
mean that the Agreement could not specify that the parties to it
would submit their controversies, if any, arising from it to
arbitration for resolution. 

111 S.Ct. at 1652 (“It is by
now clear that statutory claims may be the subject of an arbitration



forum or to proceed on a class action basis. Though it approaches
the case from the perspective of attorneys who assist clients with
credit problems, in addressing both its and Intersections’
arguments, as a matter of convenience we will refer only to
Intersections’ brief.
       6
         Gay does not contend that the Agreement is not “a contract
evidencing a transaction involving commerce.” In fact she asserts
that Intersections “used instrumentalities of interstate commerce”
in marketing and performing its services. Appellant’s br. at 2.

                                11
agreement, enforceable pursuant to the FAA.”); see also
Shearson/American Express, Inc. v. McMahon, 

, 226,

, 2337 (1987) (“This duty [of the courts] to enforce
arbitration agreements is not diminished when a party bound by an
agreement raises a claim founded on statutory rights.”); Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 

, 626,

, 3354 (1985) (“There is no reason to depart from
these guidelines [for enforcing arbitration agreements] where a
party bound by [such an] agreement raises claims founded on
statutory rights.”). But even though statutory claims are subject to
arbitration agreements, “[l]ike any statutory directive, the [FAA]’s
mandate may be overridden by a contrary congressional
command.” 

, 107 S.Ct. at 2337.

        A party seeking to avoid arbitration for a statutory claim has
the burden of establishing that Congress intended to preclude
arbitration of the claim. Congress’s intention “may be found in the
text, legislative history, or in an ‘inherent conflict’ between
arbitration and the statute’s underlying purposes.” Johnson v. W.
Suburban Bank, 

, 371 (3d Cir. 2000) (quoting Gilmer,
500 U.S. at 

); see also Gilmer, 500 U.S. at 

(“Although all statutory claims may not be
appropriate for arbitration, having made the bargain to arbitrate, the
party should be held to it unless Congress itself has evinced an
intention to preclude a waiver of judicial remedies for the statutory
rights at issue.”) (internal quotation marks and citation omitted).
“Throughout such an inquiry, it should be kept in mind that
questions of arbitrability must be addressed with a healthy regard
for the federal policy favoring arbitration.” 

(quoting Gilmer, 500 U.S. at 

).

        As we have indicated, Gay argues that the CROA and the
CSA both provide a consumer with the statutory right to bring suit
in a judicial forum, and that the CROA provides her with the
additional right to assert claims pursuant to the statute on a class
action basis. As we further have indicated, she rests her argument
on the provisions of both statutes that contain references to a
“court” in describing both the relief available to a consumer and the
forum for obtaining it, as well as on the CROA’s explicit reference
to class actions.


                                 12
        Gay, however, is confronted with Johnson in which we
rejected a similar argument under another consumer protection
statute. There we considered whether the Truth in Lending Act
(“TILA”), 15 U.S.C. §§ 1601, et seq., prohibited the parties to an
agreement subject to the statute from agreeing to arbitrate claims
asserted pursuant to the statute. The plaintiff in Johnson argued
that the TILA’s repeated references to “class action[s]” granted
consumers a statutory right to file TILA claims on a class action
basis, and that an arbitration agreement abrogating those rights
therefore was in irreconcilable conflict with the statute. In our
analysis, although we addressed only the third method identified in
McMahon by which Congress can demonstrate its intention to
preclude arbitration, i.e., inherent conflict between the allowance
of the arbitration of a dispute and the statute’s underlying purposes,
we noted that “[b]oth the statute and the legislative history . . . offer
insight into the question whether an ‘inherent conflict’ is to be
found between the statute and arbitration.” 

.

       We began our analysis in Johnson by discussing the
statutory language, observing that the TILA allowed plaintiffs to
recover:

               in the case of a class action, such
               amount as the court may allow, except
               that as to each member of the class no
               minimum recovery shall be applicable,
               and the total recovery under this
               subparagraph in any class action or
               series of class actions arising out of
               the same failure to comply by the
               same creditor shall not be more than
               the lesser of $500,000 or 1 per centum
               of the net worth of the creditor.

U.S.C. § 1640(a)(2)(B)). The statute further stated
that:

               [i]n determining the amount of award
               in any class action, the court shall
               consider, among other relevant

                                   13
               factors, the amount of any actual
               damages awarded, the frequency and
               persistence of failures of compliance
               by the creditor, the resources of the
               creditor, the number of persons
               adversely affected, and the extent to
               which the creditor’s failure of
               compliance was intentional.

U.S.C. § 1640(a)). The plaintiff argued that section
1640’s multiple references to class actions demonstrated that
Congress intended to provide a consumer with the right to bring
TILA claims on a class action basis, and that the enforcement of
the arbitration agreement would deprive him of that right.

       We rejected that argument, observing that while “the statute
clearly contemplates class actions, there are no provisions within
the law that create a right to bring them, or evince an intent by
Congress that claims initiated as class actions be exempt from
binding arbitration clauses.” 

that “[t]he ‘right’
to proceed to a class action, insofar as the TILA is concerned, is a
procedural one that arises from the Federal Rules of Civil
Procedure,” rather than from the TILA. 

plaintiff in Johnson argued that the legislative
history of the TILA demonstrated the “centrality of class actions”
to the enforcement of the statute. 

In discussing the
legislative history, we noted that Congress responded to a
reluctance by the courts to hear TILA class action claims by
enacting limitations on the amounts recoverable in class actions,
and that it thereby acknowledged “the potential role that class
actions are meant to play in the enforcement of the TILA’s
substantive requirements.” 

We also noted that several
years later Congress again addressed the role of class actions in the
enforcement of the TILA by raising the limits for class action
recoveries. Nonetheless, we concluded that “nothing in the
legislative history . . . clearly expresses congressional intent to
preclude the ability of parties to engage in arbitration,” and that the
plaintiff therefore must “demonstrate that arbitration irreconcilably



                                  14
conflicts with the purposes of the TILA.”7 

        Finally, the plaintiff in Johnson argued that there was an
irreconcilable conflict between the role of class actions in TILA’s
enforcement scheme and the arbitration of such claims because
Congress intended the statute “to encourage private attorneys
general, and the statute as a whole [was] intended for public
purposes rather than private grievances.” 

that
argument, stating that even if plaintiffs waive their right to proceed
as part of a class, “they retain the full range of rights created by the
TILA,” and that “[t]hese rights remain available in individual
arbitration proceedings.” 

:

               Under the prevailing jurisprudence,
               when the right made available by a
               statute is capable of vindication in the
               arbitral forum, the public policy goals
               of that statute do not justify refusing to
               arbitrate. The notion that there is a
               meaningful distinction between
               vindicating a statute’s social purposes
               and adjudicating private grievances
               for purposes of determining whether a
               statute precludes compelling
               arbitration under a valid arbitration
               clause was rejected by the Supreme
               Court in Gilmer v. Interstate/Johnson
               Lane Corp., 

, 

, 

(1991).

       We noted in Johnson that although arbitration of cases that


       7
        In Johnson, we interchangeably used the terms “inherent
conflict,” which the Supreme Court used in Gilmer, 500 U.S. at 

, and “irreconcilable conflict,” which the parties
used in 

. In keeping with our language
in Johnson, we will continue using the term “irreconcilable
conflict” in this opinion.

                                  15
otherwise might have proceeded as class actions “potentially
reduces the number of plaintiffs seeking to enforce the TILA
against creditors, arbitration does not eliminate plaintiff incentives
to assert rights under the Act.” 

that “[t]he sums
available in recovery to individual plaintiffs are not automatically
increased by use of the class forum,” and that insofar as attorneys
could recover fees pursuant to the TILA, there was reason to
believe that the supply of attorneys would remain sufficient for
arbitration proceedings. 

that “[although]
pursuing individual claims in arbitration may well be less attractive
than pursuing a class action in the courts, we do not agree that
compelling arbitration of the claim of a prospective class action
plaintiff irreconcilably conflicts with TILA’s goal of encouraging
private actions to deter violations of the Act.” 

       In Johnson, in concluding that there was not an
irreconcilable conflict between the role of class actions in the
enforcement of the statute and the arbitration of a plaintiff’s claims,
we also considered the TILA’s administrative enforcement
provisions to be significant. After identifying the different
administrative enforcement mechanisms that the TILA provided,
we explained that while “[i]t may be true that Congress saw value
in maintaining the availability of class actions, . . . that does not
translate to the conclusion that it intended to preclude private
parties from contracting around their availability.” 

       We recognized that:

               When [legislative] history is used . . .
               merely to demonstrate that the judicial
               remedies provided for or contemplated
               by a statute are important, it is of
               noticeably reduced value.          The
               importance of statutory judicial
               remedies [is] always evident from
               their mere existence – Congress
               obviously enacted them for a reason.
               Were they not the object of a
               congressional goal, they would not
               have been enacted . . . . Insofar as
               Congress’s intent, broadly

                                  16
              contemplated, is concerned, we must
              give equal consideration to Congress’s
              policy goals in enacting the FAA.

We explained that “[the plaintiff’s] reliance on the
legislative history . . . is fundamentally flawed” because he used it
only “to show that class actions have important purposes under the
statute,” but failed to identify any passages demonstrating that
parties cannot choose to waive judicial remedies in favor of
arbitration. 

We observed that though “[i]t may be true
that the unavailability of class actions removes an incentive for
lenders to comply with the statute, . . . it is far from the only
incentive to do so.” 

that Gay relies on the CROA and the CSA
references to a “court” and class actions in arguing that the statutes
give consumers a right to pursue these procedures. Although the
statutes clearly contemplate consumers’ actions being brought in
a judicial forum and, in the case of the CROA, on a class action
basis, and to that extent may be said to recognize a consumer’s
right to proceed in court, they neither contain provisions creating
such rights nor indicate that Congress or the Pennsylvania
Legislature, respectively, intended to exclude claims asserted under
the CROA or the CSA from arbitration agreements.8 Rather than
creating substantive rights the statutes merely recognize that a party
who believes she has been wronged may bring an action in a court
seeking a remedy for her injuries and may do so on a class action
basis if she satisfies the criteria for bringing such an action. This
recognition is hardly surprising because ordinarily persons
considering themselves to have been wronged may seek judicial
remedies. Moreover, whatever role judicial forums and class
actions may have in the enforcement of the substantive
requirements of the respective statutes, Gay has not identified
anything in the legislative history of either statute that “clearly
expresses [legislative] intent to preclude the ability of parties to


       8
        Our conclusion on this point with respect to the Legislature
relieves us of the need to consider whether there is a conflict
between the CSA and the FAA. See Southland Corp. v. Keating,

, 16, 

, 861 (1984).

                                 17
engage in arbitration . . . .” 

         Significantly, Gay does not demonstrate that there is an
irreconcilable conflict between requiring a consumer to arbitrate
her claims and the enforcement of either the CROA or the CSA.
If this case proceeds to arbitration instead of litigation in a judicial
forum, Gay will “retain the full range of rights created by [the
statutes],” and “[t]hese rights remain available in individual
arbitration proceedings.” Id.; see also 

,
105 S.Ct. at 3354 (“By agreeing to arbitrate a statutory claim, a
party does not forgo the substantive rights afforded by the statute;
it only submits to their resolution in an arbitral, rather than a
judicial, forum.”).

       Furthermore, as is particularly germane to the claimed right
to bring this case as a class action, as we observed with respect to
the TILA in Johnson, the CROA provides for the administrative
enforcement of the rights created by the statute. The CROA
provides that “[c]ompliance with the requirements imposed under
this subchapter with respect to credit repair organizations shall be
enforced under the Federal Trade Commission Act [15 U.S.C. §§
41, et seq.] by the Federal Trade Commission.” 15 U.S.C. §
1679h(a). In particular, section 1679h(b)(1) states that “any
violation of any requirement or prohibition imposed under this
subchapter with respect to credit repair organizations shall
constitute an unfair or deceptive act or practice in commerce in
violation of section 5(a) of the Federal Trade Commission Act [15
U.S.C. §§ 45(a), et seq.].” 15 U.S.C. § 1679h(b)(1). The CROA
also grants the states authority to enforce the statute, providing
that:

               In addition to such other remedies as
               are provided under State law,
               whenever the chief law enforcement
               officer of a State, or any official or
               agency designated by a State, has
               reason to believe that any person has
               violated or is violating this subchapter,
               the State –

               (A) may bring an action to enjoin such violation;

                                  18
               (B) may bring an action on behalf of
               its residents to recover damages for
               which the person is liable to such
               residents under section 1679g of this
               title as a result of the violation; and

               (C) in the case of any successful
               action under subparagraph (A) or (B),
               shall be awarded the costs of the
               action and reasonable attorney fees as
               determined by the court.

15 U.S.C. § 1679h(c). Clearly, these provisions for administrative
enforcement supply procedures for obtaining remedies reasonably
substituting for those available in a class action.

        Moreover, it is important to recognize that the right of any
injured party to sue in court and, in an appropriate case, to do so on
a class action basis, is inherent when a statutory substantive right
is created as a party conceiving herself to be wronged would have
had a right to sue in a court and, in an appropriate case, to do so on
a class action basis, that would have preexisted the newly created
substantive right allegedly infringed. Thus, when Congress or a
legislature creates a statutory substantive right a party injured by a
statutory violation may seek her remedy for its violation in court,
and, if the ordinary criteria specified by the Federal Rules of Civil
Procedure or the parallel state rules are satisfied, may do so on a
class action basis, unless Congress or the legislature, as the case
may be, validly precludes her from doing so.9 Accordingly,
identification of a court as a forum for an allegedly wronged party
to seek relief adds nothing to the statute helpful to resolution of the
issue before us, i.e., whether a party consensually may bind herself
to arbitrate her claims for injuries resulting from violation of the
statutes.


       9
         We say “validly” because a state law expressly precluding
arbitration might not be valid as the FAA could preempt an anti-
arbitration clause. See supra note 8. We are not concerned with
resolution of a situation of that type here as the CSA, in terms, does
not preclude arbitration.

                                  19
        We reiterate that Gay argues that the CROA and the CSA
both prohibit the waiver of rights the respective statutes have
created, in particular a consumer’s right to assert her claims in a
judicial forum and, in the case of the CROA, a consumer’s right to
proceed on a class action basis. But even if the CROA’s and the
CSA’s references to a “court,” and the CROA’s references to class
actions, give consumers rights to proceed in a judicial forum on a
class action basis and thus may be said to be broader than we
construe them to be, we then would have to determine whether
consumers may waive such rights, i.e., whether the rights would
fall outside of the statutes’ respective anti-waiver provisions. As
we will explain, at least with respect to the CROA, the statute’s
anti-waiver provision as a matter of legislative intent would not
apply to a right to assert claims in a judicial forum or on a class
action basis, and a consumer asserting claims pursuant to the
CROA may therefore waive such rights.10

        The Supreme Court addressed a similar issue in McMahon
in considering whether section 29(a) of the Exchange Act, 15
U.S.C. § 78cc(a), prohibited arbitration agreements. The Court
acknowledged that section 27 of the Act provides that “[t]he
district courts of the United States . . . shall have exclusive
jurisdiction of violations of this [chapter] or the rules and
regulations thereunder, and of all suits in equity and actions at law
brought to enforce any liability or duty created by this [chapter] or
the rules and regulations thereunder.” 

,
107 S.Ct. at 2338 (quoting 15 U.S.C. § 78aa). Furthermore, section
29(a) declares void “[a]ny condition, stipulation, or provision
binding any person to waive compliance with any provision of [the
Act].” 

U.S.C. § 78cc(a)). The plaintiffs in
McMahon argued that section 29(a) prohibited waiver of the right


       10
          There is nothing for a consumer to waive under our
understanding of the provisions of the statutes dealing with judicial
forums and class actions for, as we have explained, the rights to
judicial forums and class action resolution of disputes exist outside
of the statutes. Consequently, at this point, in discussing waiver of
rights we are treating the statutes as creating rights to bring actions
in judicial forums and, in the case of the CROA, to do so on a class
action basis, though we have concluded that they do no such thing.

                                  20
to bring suit in a federal district court pursuant to section 27.

        The Supreme Court rejected that argument, stating that
“[w]hat the antiwaiver provision of § 29(a) forbids is enforcement
of agreements to waive ‘compliance’ with the provisions of the
statute,” and that “§ 27 itself does not impose any duty with which
persons trading in securities must ‘comply.’” 

107 S.Ct.
at 2338. The Court distinguished between the procedural right that
section 27 provided, namely, the right to file an action in a federal
district court, and the substantive rights that section 29(a) provided.
As the Court explained, “[b]y its terms, § 29(a) only prohibits
waiver of the substantive obligations imposed by the Exchange
Act,” and “[b]ecause § 27 does not impose any statutory duties, its
waiver does not constitute a waiver of ‘compliance with any
provision’ of the Exchange Act under § 29(a).” 

at
2338.

        Similarly, in Rodriguez de Quijas v. Shearson/American
Express, Inc., 

, 

(1989), the Court
addressed the question of whether section 14 of the Securities Act,
15 U.S.C. § 77n, prohibited arbitration of claims brought pursuant
to section 12(2) of the Act. Section 14 provides:

               Any condition, stipulation, or
               provision binding any person
               acquiring any security to waive
               compliance with any provision of this
               subchapter or of the rules and
               regulations of the Commission shall
               be void.

15 U.S.C. § 77n. The Court had answered the arbitration question
36 years earlier in Wilko v. Swan, 

, 

(1953), when it held that section 14’s prohibition against waiving
compliance with the statute extended to agreements for arbitration
of disputes. 

74 S.Ct. at 186. But the Court revisited the
issue in Rodriguez de Quijas and overruled Wilko. After
acknowledging “[t]he shift in the Court’s views on arbitration away
from those adopted in Wilko,” the Court determined that “[o]nce
the outmoded presumption of disfavoring arbitration proceedings
is set to one side, it becomes clear that the right to select the

                                  21
judicial forum and the wider choice of courts are not such essential
features of the Securities Act that § 14 is properly construed to bar
any waiver of these provisions.” Rodriguez de 

, 109 S.Ct. at 1920.

        In Rodriguez de Quijas the Court distinguished between
substantive provisions in the statute, e.g., the requirement that a
seller prove a lack of scienter in a claim of fraud, 15 U.S.C. § 77l,
and procedural provisions, e.g., providing for venue in the federal
courts, the existence of nationwide service of process in the federal
courts, the extinction of the amount-in-controversy requirement for
fraud suits based on diversity jurisdiction, and the grant of
concurrent jurisdiction in state courts. The Court held that “[t]here
is no sound basis for construing the prohibition in § 14 on waiving
‘compliance with any provision’ of the Securities Act to apply to
these procedural provisions.” Rodriguez de 

, 109 S.Ct. at 1920; see also 

, 105
S.Ct. at 3354 (“By agreeing to arbitrate a statutory claim, a party
does not forgo the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral, rather than a judicial,
forum.”).

       The CROA provides that:

               Any waiver by any consumer of any
               protection provided by or any right of
               the consumer under this subchapter –

               (1) shall be treated as void; and

               (2) may not be enforced by any
               Federal or State court or any other
               person.

15 U.S.C. § 1679f. Significantly, the section in which this anti-
waiver provision appears is entitled “Noncompliance with this
subchapter.” 

appropriate for us to consider this title for the
Supreme Court in Almendarez-Torres v. United States, 

, 234, 

, 1226 (1998), “note[d] that the title of a
statute and the heading of a section are tools available for the
resolution of a doubt about the meaning of a statute.” (internal

                                  22
quotation marks and citation omitted).

        Clearly, even Gay recognizes that this title is important as
she set it forth in her brief in bold type thus ensuring that we would
not overlook it. Appellant’s br. at 9. It appears, then, that the
CROA’s anti-waiver provision is no broader than the anti-waiver
provisions that the Supreme Court considered in McMahon and
Rodriguez de Quijas, which extended to “compliance with any
provision” of the Exchange Act and the Securities Act,
respectively, but which the Court nevertheless held did not extend
to the right to sue in a judicial forum. As with the “compliance
with any provision” to which the anti-waiver clauses in McMahon
and Rodriguez de Quijas refer, under the CROA, a claimant may
not waive the “protection[s]” provided by the statute which, if
violated, would constitute “[n]oncompliance with” the statute. We
therefore construe the CROA’s anti-waiver provision as only
extending to rights premised on the imposition of statutory duties,
absent contrary language in the statute. See McMahon, 482 U.S.
at 

(“Because § 27 does not impose any
statutory duties, its waiver does not constitute a waiver of
‘compliance with any provision’ of the Exchange Act under §
29(a).”).

        In contrast, we note that as a matter of statutory
interpretation, the anti-waiver provision in the CSA does not limit
itself to rights based on compliance with the statute and therefore
is broader than the provisions which the Supreme Court discussed
in McMahon and Rodriguez de Quijas. Nevertheless, even if we
interpret the CSA anti-waiver provision as granting consumers with
the right to assert claims pursuant to the statute in a judicial forum
and not be subject to arbitration defenses, the anti-waiver provision
probably would be invalid in this respect. We make this point for
the Supreme Court has stated with respect to the FAA that “[i]n
creating a substantive rule applicable in state as well as federal
courts, Congress intended to foreclose state legislative attempts to
undercut the enforceability of arbitration agreements.” Southland
Corp v. Keating, 

, 16, 

, 861 (1984). But
we emphasize that the question of what the Pennsylvania
Legislature intended to do is separate from what it has the power
to do. We further emphasize that even if we are wrong with
respect to the scope of the CROA anti-waiver provision or the

                                 23
validity of the CSA anti-waiver provision, our result in this case
would not change because the statutes did not create the underlying
rights, i.e., the right of consumers to sue in a judicial forum and, in
the case of the CROA, the right to do so on a class action basis.11

       B. Did the District Court err in enforcing the arbitration
         provision in her Agreement with Intersections?

       Gay argues that to the extent that claims brought pursuant
to the CROA and the CSA may be arbitrated, the arbitration
provision in this case does not apply by its terms to her claims, an
argument that we rejected above, and further contends that even if
it does apply as written, the provision is unconscionable and
therefore a court should not enforce it. Beyond the arbitration
provision, Gay also argues that pursuant to 15 U.S.C. § 1679f(c),
the entire agreement is void and should not be enforced.
Intersections answers that the arbitration provision is applicable
and that Gay has waived her argument that the provision is
unconscionable under the CROA because she failed to raise that
argument in the District Court. It acknowledges, however, that
Gay preserved the unconscionabilty issue with respect to the CSA
by raising it in the District Court but contends that it is not
unconscionable. We have examined the record and agree with
Intersections on the waiver argument and thus will consider the
unconscionability issue only under the CSA.12


       11
        The parties spend considerable space in their briefs
discussing Alexander v. U.S. Credit Management, Inc., 384 F.
Supp.2d 1003 (N.D. Tex. 2005), a case that undoubtedly supports
Gay’s contentions, but we will not do so as it does not bind us and
we do not agree with it.
       12
         We note, however, that we cannot comprehend in view of
the consistent purposes and provisions in the CROA and the CSA
how we would reach a different result under the two statutes if we
had considered Gay’s CSA unconscionability argument under the
CROA. We reach this conclusion even though Intersections, in
contending that Gay’s CSA unconscionability argument does not
apply to the CROA, correctly states that “one cannot simply argue
that a provision is unconscionable with respect to one statute and

                                  24
        In reviewing the District Court’s decision to compel
arbitration, we are limited to a “narrow scope” of inquiry. Great
W. Mortgage Corp. v. Peacock, 

, 228 (3d Cir. 1997).
As we have explained:

               Under the FAA the district court must
               be satisfied that the parties entered
               into a valid arbitration agreement. In
               conducting this inquiry the district
               court decides only whether there was
               an agreement to arbitrate, and if so,
               whether the agreement is valid. In so
               deciding, the district court is not to
               consider the merits of the claims
               giving rise to the controversy, but is
               only to determine, as we have stated,
               whether there is a valid agreement to
               arbitrate. Once such an agreement is
               found, the merits of the controversy
               are left for disposition to the arbitrator.

omitted). As the Supreme Court has
explained, “unless the challenge is to the arbitration clause itself,
the issue of the contract’s validity is considered by the arbitrator in
the first instance.” Buckeye Check Cashing, Inc. v. Cardegna, 

, 445-46, 

, 1209 (2006); see also Medtronic

(“While a court asked to stay proceedings
pending arbitration must determine whether there is a valid
agreement to arbitrate and, if so, whether the specific dispute falls
within the substantive scope of that agreement, ‘[its] function
[nevertheless] is very limited when the parties have agreed to
submit all questions of contract interpretation to the arbitrator. It
is confined to ascertaining whether the party seeking arbitration is
making a claim which on its face is governed by the contract.’”)
(quoting United Steelworkers of Am. v. Am. Mfg. Co., 363 U.S.


assume that the argument applies to all statutes.” Appellee’s br. at
33 n.16. Though we agree that such an assumption cannot be
made, certainly the same result can be reached after analysis of
complementary statutes.

                                   25
564, 567-68, 

, 1346 (1960)); PaineWebber Inc. v.
Hofmann, 

, 1381 (3d Cir. 1993) (“‘Whether
‘arguable’ or not, indeed even if it appears to the court to be
frivolous,’ the merits of an arbitrable claim is for the arbitrators to
decide.”) (quoting AT&T Techs. v. Commc’ns Workers of Am.,

, 649-50, 

, 1419 (1986)).

        We recently have described the proper scope of a court’s
inquiry in determining whether a case should be arbitrated. In
Certain Underwriters at Lloyd’s London v. Westchester Fire
Insurance Co., 

(3d Cir. 2007), we summarized the
limitations that a court faces in making such a determination:

               [T]he question of ‘whether the parties
               have submitted a particular dispute to
               arbitration, i.e., the “question of
               arbitrability,” is an issue for judicial
               determination unless the parties
               clearly and unmistakably provide
               otherwise.’ . . . [W]hereas one might
               call any potentially dispositive
               gateway question a ‘question of
               arbitrability,’ ‘the phrase . . . has a far
               more limited scope.’ Such questions
               of arbitrability are raised only in
               ‘narrow circumstance[s]’ where courts
               must determine ‘gateway matter[s],’
               such as a dispute about ‘whether the
               parties are bound by a given
               arbitration clause’ or . . . ‘a
               disagreement about whether an
               arbitration clause in a concededly
               binding contract applies to a particular
               type of controversy.’

(quoting Howsam v. Dean Witter Reynolds, Inc., 

, 83-84, 

, 592 (2002)). We observed that
“‘only when there is a question regarding whether the parties
should be arbitrating at all’ is a question of arbitrability raised for
the court to resolve,” and that “[i]n other circumstances, resolution
by the arbitrator remains the presumptive rule.” 

Dockser v. Schwartzberg, 

, 426 (4th Cir. 2006)). This
allocation of roles between courts and arbitrators promotes
efficiency because “an expectation that aligns (1) decisionmaker
with (2) comparative expertise will help better to secure a fair and
expeditious resolution of the underlying controversy – a goal of
arbitration systems and judicial systems alike.” 

, 123 S.Ct. at 593.

       In determining whether a matter should be arbitrated, “there
is a strong presumption in favor of arbitration, and doubts
‘concerning the scope of arbitrable issues should be resolved in
favor of arbitration.’” Great W. 

(quoting Moses H. Cone Mem’l Hosp., 

, 24-25, 

, 941 (1983)); see also Medtronic 

(“An order to arbitrate ‘should not be denied unless it may be said
with positive assurance that the arbitration clause is not susceptible
of an interpretation that covers the asserted dispute.’”) (quoting
United Steelworkers of Am. v. Warrior and Gulf Navigation Co.,

, 582-83, 

, 1353 (1960)). Nonetheless,
“while interpretive disputes should be resolved in favor of
arbitrability, a compelling case for nonarbitrability should not be
trumped by a flicker of interpretive doubt.” Medtronic 

(internal quotations omitted).

        Gay argues that both the arbitration provision and the
Agreement as a whole are unconscionable. We are limited,
however, to addressing the first issue, i.e., whether to enforce the
arbitration provision. The question of whether the Agreement as
a whole is unconscionable is a separate issue that, if we find that
arbitration of the case would be appropriate, the arbitrator must
decide.

       In arguing that the arbitration provision is unconscionable,
Gay relies on Pennsylvania law but Intersections argues that
Virginia law applies because there is a choice-of-law provision in
the Agreement that states: “These Terms of Use are governed by
the laws of the Commonwealth of Virginia, USA, exclusive of its
choice of law principles.” J.A. at 98. Intersections argues that
under Virginia law, and for that matter under Pennsylvania law
should it apply, the arbitration provision is not unconscionable.


                                 27
        We begin our disposition of this issue by emphasizing the
overarching principle that “[f]ederal law determines whether an
issue governed by the FAA is referable to arbitration.” Harris v.
Green Tree Fin. Corp., 

, 178 (3d Cir. 1999).
“Questions concerning the interpretation and construction of
arbitration agreements are determined by reference to federal
substantive law.” 

see also Moses H. Cone Mem’l 

n.32 (“[The FAA] creates a
body of federal substantive law establishing and regulating the duty
to honor an agreement to arbitrate . . . .”). Section 2 of the FAA
sets forth the basic rule of federal law:

                A written provision in . . . a contract
                evidencing a transaction involving
                commerce to settle by arbitration a
                controversy thereafter arising out of
                such contract or transaction, or the
                refusal to perform the whole or any
                part thereof, . . . shall be valid,
                irrevocable, and enforceable, save
                upon such grounds as exist at law or in
                equity for the revocation of any
                contract.

9 U.S.C. § 2.

        Nevertheless, notwithstanding the supremacy of federal law,
courts repeatedly have held that “in interpreting [arbitration]
agreements, federal courts may apply state law, pursuant to section
two of the FAA.” 

. In particular, “generally
applicable contract defenses, such as fraud, duress, or
unconscionability, may be applied to invalidate arbitration
agreements without contravening § 2.” Doctor’s Assocs., Inc. v.
Casarotto, 

, 687, 

, 1656 (1996). In
applying ordinary state law principles to evaluate arbitration
agreements, First Options of Chicago, Inc. v. Kaplan, 

, 944, 

, 1924 (1995), the cases have indicated
that courts may look in particular to the laws of the involved state
or territory. See, e.g., Parilla v. IAP Worldwide Servs. VI, Inc.,

, 276 (3d Cir. 2004) (applying Virgin Islands law to
determine whether arbitration agreement was enforceable in

                                  28
lawsuit based on Title VII); Spinetti v. Serv. Corp. Int’l, 

, 214 (3d Cir. 2003) (applying Pennsylvania law to determine
whether arbitration agreement was enforceable in action based on
Title VII and the ADEA); Blair v. Scott Specialty Gases, 

, 603 (3d Cir. 2002) (applying Pennsylvania law to determine
whether arbitration agreement was enforceable in lawsuit based on
Title VII); 

(applying Pennsylvania law
to determine whether arbitration agreement was unconscionable in
lawsuit based on RICO).13

       The cardinal principle of the law of arbitration is that “under
the [FAA, arbitration] is a matter of consent, not coercion, and
parties are generally free to structure their arbitration agreements
as they see fit.” Volt Info. Sciences, Inc. v. Bd. of Trustees of the
Leland Stanford Junior Univ., 

, 479, 

,
1256 (1989). That freedom extends to choice-of-law provisions
governing agreements, including agreements to arbitrate. See
Trippe Mfg. Co. v. Niles Audio Corp., 

, 532 (3d Cir.
2005) (applying New York law pursuant to choice-of-law provision
in determining whether to enforce arbitration agreement); Gen.
Elec. Co. v. Deutz AG, 

, 155 (3d Cir. 2001) (“In
general, we respect the choice of law that parties agree upon to
resolve their private disputes.”); see also Suburban Leisure Ctr.,
Inc. v. AMF Bowling Prods., Inc., 

, 526 (8th Cir.


       13
         We recognize that courts including our court look to the
law of the forum state or another state related to the circumstances
of the dispute in determining as a matter of federal law whether an
issue is referable to arbitration. Yet one might wonder why the
consideration of state law is so confined. After all, if, as is the
case, federal common law developed under the FAA is at issue
then it is logical that the law should be uniform throughout the
country. In this regard it could be asked whether federal common
law should be one thing in a district court in California but be
different in a district court in Pennsylvania. But if a further
examination of that point ever is needed it will be at some later day
as we have no need to consider it now. The need to examine the
question might arise if a party contended that the law of an
involved state to which a court might look in applying federal
common law is aberrational.

                                 29
2006) (applying Virginia law pursuant to choice-of-law provision
after determining that both Virginia and the forum state of Missouri
enforce choice-of-laws provisions); Overstreet v. Contigroup Cos.,

, 411 (5th Cir. 2006) (applying Georgia law pursuant
to choice-of-law provision in determining whether to enforce
arbitration agreement); Pro Tech Indus., Inc. v. URS Corp., 

, 872 (8th Cir. 2004) (applying Texas law pursuant to
choice-of-law provision to determine whether to enforce arbitration
agreement).

        Gay challenges the choice-of-law provision in the
Agreement providing that Virginia law governs its terms of use, but
does not explain what state’s law to apply in evaluating the
provision. The Agreement is not helpful on this point as it provides
that its selection of Virginia law with respect to its “terms of use”
does not extend to Virginia choice-of-law principles. But
inasmuch as Gay argues that Pennsylvania law governs the
arbitration provision and the Agreement as a whole, it seems
reasonable to use Pennsylvania law in evaluating the choice-of-law
provision. The use of Pennsylvania law on this choice-of-law
question is consistent with what we said in Spinetti that “[t]he
federal policy encouraging recourse to arbitration requires federal
courts to look first to the relevant state law of contracts . . . in
deciding whether an arbitration agreement is valid under the 

. Furthermore, if the District Court’s jurisdiction
in this federal question case had been based on diversity of
citizenship of the parties we would apply Pennsylvania’s choice-of-
law principles as the court was in the Eastern District of
Pennsylvania. See Klaxon Co. v. Stentor Elec. Mfg. Co., 

, 61 Sup. Ct. 1020 (1941). Accordingly, we look to
Pennsylvania law to determine which state’s law we should use in
considering the unconscionability argument.

       Applying Pennsylvania law, we recognized in Kruzits v.
Okuma Machine Tool, Inc., 

(3d Cir. 1994), that
“Pennsylvania courts generally honor the intent of the contracting
parties and enforce choice of law provisions in contracts executed
by them.” 

(citing Smith v. Commonwealth Nat. Bank,

, 777 (Pa. Super. Ct. 1989)). In Kruzits, we noted
that Pennsylvania courts have adopted section 187 of the
Restatement (Second) Conflict of Laws, which provides that

                                 30
choice-of-law provisions will be enforced:

              unless either (a) the chosen state has
              no substantial relationship to the
              parties or the transaction and there is
              no other reasonable basis for the
              parties’ choice, or (b) application of
              the law of the chosen state would be
              contrary to a fundamental policy of a
              state which has a materially greater
              interest than the chosen state in the
              determination of the particular issue
              ....

will uphold choice-of-law provisions in
contracts to the extent that the transaction bears a reasonable
relation to the chosen forum.” Churchill Corp. v. Third Century,
Inc., 

, 537 (Pa. Super. Ct. 1990) (citing 13 Pa. Cons.
Stat. Ann. § 1105(a) (West 1999) (“Except as otherwise provided
in this section, when a transaction bears a reasonable relation to
this Commonwealth and also to another state or nation the parties
may agree that the law either of this Commonwealth or of such
other state or nation shall govern their rights and duties.”)).

       Gay’s Agreement states that she purchased services
“provided by Intersections Inc.,” which is “located in Chantilly,
Virginia.” J.A. at 98. Virginia therefore has a “substantial
relationship” to Intersections. Inasmuch as we see no reason to
conclude that Pennsylvania “has a materially greater interest” in the
enforceability of the arbitration agreement, or that applying
Virginia law to determine whether it should be enforced “would be
contrary to a fundamental policy” of Pennsylvania, under
Pennsylvania’s choice-of-law rules we are satisfied that there is no
reason not to honor the parties’ choice of Virginia law in
considering the unconscionability claim. Though it certainly is true
that Pennsylvania has an interest in protecting its consumers, we
cannot say that Virginia has a lesser interest in protecting
businesses located in it. Thus, even if we adopt Gay’s position that
the arbitration provision is advantageous to Intersections, we see no
reason not to honor the parties’ choice of Virginia law to govern
the terms of use of the Agreement. Overall, applying Pennsylvania

                                 31
law for our selection of the applicable state law, we will apply
Virginia law in considering the enforceability of the arbitration
provision.

        In reaching our conclusion that Virginia law applies we
have not overlooked Gay’s argument that the choice-of-law
provision should not be enforced for two reasons. First, she
contends that the provision governs only the “Terms of Use,” and
that the issue of whether the arbitration provision is enforceable
does not arise from those terms of use. Appellant’s reply br. at 12.
But Gay’s complaint undercuts her argument. After all, in her
allegations she refers to those terms of use as “terms of the
contract,” and the choice-of-law provision appears in the “copy of
the contract” that Gay includes as an exhibit to her complaint. J.A.
at 79, 98. Indeed, we regard her argument on this point as being
insubstantial. Plainly, as written, the choice-of-law provision
pointing to Virginia law applies to her unconscionability argument.

       Second, Gay argues that the choice-of-law provision itself
is unconscionable because, “like the arbitration clause, [it] is buried
in small print at the end of the contract drafted by a sophisticated
party with superior bargaining power.” Appellant’s reply br. at 12.
Under Pennsylvania law, however, a contract is not unconscionable
simply because there is a disparity in bargaining power between the
contracting parties, absent a showing that the terms were
unreasonable. Witmer v. Exxon Corp., 

, 1228 (Pa.
1981). Gay fails to explain how the application of Virginia law, as
opposed to Pennsylvania law, is so unreasonable that it invalidates
the choice-of-law provision.

       Inasmuch as we have determined that we should enforce the
terms of use choice-of-law provision selecting the application of
Virginia law, we consider whether the arbitration provision in the
Agreement is unconscionable under that law.14 We reiterate that
the arbitration provision states:


       14
         In considering the matter under Virginia law we are laying
to one side the effect of the FAA. We point out, however, that as
a matter of pure federal common law we see no reason to conclude
that the arbitration provision is unconscionable.

                                  32
              Any claim arising out of or relating to
              the Product shall be settled by binding
              arbitration in accordance with the
              commercial arbitration rules of the
              American Arbitration Association on
              an individual basis not consolidated
              with any other claim.

J.A. at 98. Gay argues that the arbitration provision is
unconscionable because it was “drafted by Intersection[s] and
lacking any choice on the part of Ms. Gay,” and “bears all the
earmarks of an unconscionable contract of adhesion . . . .”
Appellant’s br. at 19.

      In describing unconscionability under Virginia law, the
Supreme Court of Virginia has stated that:

              [w]hile the jurisdiction undoubtedly exists
              in the courts to avoid a contract on the
              ground that it makes an unconscionable
              bargain, nevertheless an inequitable and
              unconscionable bargain has been defined to
              be ‘one that no man in his senses and not
              under a delusion would make, on the one
              hand, and as no fair man would accept, on
              the other.’ The inequality must be so gross
              as to shock the conscience.

Mgmt. Enters., Inc. v. Thorncroft Co., 

, 231 (Va.
1992) (quoting Smyth Bros.-McCleary-McClellan Co. v.
Beresford, 

, 382 (Va. 1920)). The doctrine “deals
primarily with a grossly unequal bargaining power at the time the
contract is formed . . . .” Envirotech Corp. v. Halco Eng’g, Inc.,

, 220 (Va. 1988).

       Although Gay surely did not have the same bargaining
power as Intersections when she entered into the Agreement, she
has not provided a basis for finding that the inequality in
bargaining power was “so gross as to shock the conscience.”



                                33
Mgmt. 

.15 Nor do the terms of the
Agreement, namely to arbitrate disputes on an individual basis,
constitute an unconscionable bargain. In Johnson, we observed
that “even if plaintiffs who sign valid arbitration agreements lack
the procedural right to proceed as part of a class, they retain the full


       15
           Though we doubt that in the highly unlikely event that a
consumer before entering into an agreement with Intersections
attempted to negotiate to remove the arbitration provision she
would have been successful, a consumer considering contracting
with Intersections certainly could have decided to forego obtaining
its services. Without in any way besmirching its services, we
cannot characterize them as something that a consumer must obtain
from one source or another. On the other hand, Gay seems not be
burdened by the constraints we feel in characterizing the value of
Intersections’ services as she contends that credit repair
“organizations are in reality, at least, mere letter writing services
that . . . consumers would probably not retain . . . if they knew the
truth.” Appellant br. at 8.

       Furthermore, Gay has not demonstrated that only
Intersections supplies services of the kind for which she contracted
with it. Quite to the contrary, she does not deny Intersections’
assertion that there are other businesses that supply credit repair
services. See supra note 2. In the circumstances, this case does not
involve, in the words of Mitsubishi, “well supported claims that the
agreement to arbitrate resulted from the sort of fraud or
overwhelming economic power that would provide grounds for the
revocation of any 

, 105 S.Ct. at 3354
(internal quotation marks and citation omitted). Furthermore, we
can see no basis for a claim that the Agreement was the product of
Intersections’ fraud. Moreover, we do not understand how a party
can claim to be subject to overwhelming economic power when
contracting for a service that costs only $4.99 a month and is
available from more than one source and, in any event, she may not
need as it may be essentially worthless. Clearly, if Gay objected to
the terms of the Agreement she could have walked away from it.
Thus, her position is different, for example, from that of a
homeowner facing a mortgage foreclosure who accepts onerous
refinancing terms in a desperate attempt to save her home.

                                  34
range of rights” created by the relevant statute, and that “[t]hese
rights remain available in individual arbitration 

. Inasmuch as Gay retains her substantive rights
pursuant to the CROA and the CSA, the terms of the arbitration
agreement surely do not “shock the conscience.” Mgmt. 

.

       Moreover, even if we disregard the Agreement’s choice-of-
law provision and apply Pennsylvania law in considering the
enforceability of the arbitration clause, as Gay urges us to do, we
would reach the same result, largely because federal law requires
that we do so and Pennsylvania law must conform with federal law.
In discussing the doctrine of unconscionability under Pennsylvania
law, we have stated that “‘[u]nconscionability requires a two-fold
determination: that the contractual terms are unreasonably
favorable to the drafter and that there is no meaningful choice on
the part of the other party regarding acceptance of the provisions.’”

(internal quotation marks and citations
omitted).

        Gay argues that the arbitration provision is unconscionable
because she agreed to it at a time when she lacked any bargaining
power to negotiate its terms, and the Agreement is one of adhesion.
In Harris, however, we reiterated that “inequality of bargaining
power, alone, is not a valid basis upon which to invalidate an
arbitration agreement.” 

Moreover, she does not contend
that she was under any compulsion to sign the Agreement.16

        Gay argues with respect to its terms that the arbitration
provision is unconscionable because it requires cases to proceed
“on an individual basis not consolidated with any other claim,” J.A.
at 98, and therefore is “the functional equivalent of a denial of Ms.
Gay’s request to represent a class of similarly situated consumers.”
Appellant’s br. at 14. In Johnson, however, we described the right
to a class action as “merely a procedural one” pursuant to the
Federal Rules of Civil Procedure, and stated that the right “may be

.



       16
        See supra note 15.

                                 35
        We recognize that Gay has support for her claim that the
arbitration provision is unconscionable in two Pennsylvania
Superior Court cases, Lytle v. CitiFinancial Services, Inc., 

(Pa. Super. Ct. 2002), and Thibodeau v. Comcast Corp.,

(Pa. Super. Ct. 2006). In Lytle the Superior Court
considered whether an arbitration provision in a loan agreement
was unconscionable. The plaintiffs challenged several aspects of
the provision, including a section that prohibited a consumer from
bringing class action claims against the defendant. The Lytle court
began its analysis by observing that “class actions are favored in
this Commonwealth as a means of resolving many meritorious
claims which would otherwise, due to the amounts involved,
escape 

. It noted that “[t]he
arbitration provision at issue . . . specifically prohibits any use of
or participation in a class action by the Lytles.” 

The
Lytle court discussed our analysis in Johnson of whether the waiver
of the right to class actions would undermine the public policy
goals of the TILA. 

(discussing 

). The Lytle court concluded that the record before it was
“devoid of any evidence that would establish that the damages
claimed by appellants are insufficient to permit the Lytles to seek
legal redress for their injuries in the absence of a class action,” and
remanded the case to the trial court to develop the record on that
issue. 

, the Superior Court considered
whether a waiver of a right to class action contained in an
arbitration agreement was unconscionable. There, the court
described the reasons for encouraging class actions:

               Class action lawsuits are and remain
               the essential vehicle by which
               consumers may vindicate their lawful
               rights. The average consumer, having
               limited financial resources and time,
               cannot individually present minor
               claims in court or in an arbitration.
               Our justice system resolves this
               inherent inequality by creating the
               procedural device which allows
               consumers to join together and seek

                                  36
               redress for claims which would
               otherwise be impossible to pursue.
               Both the Federal and Pennsylvania
               Rules of Civil Procedure delineate
               specific rules for publicly selected trial
               court judges to actively manage class
               action lawsuits through the public
               judicial system.

(quotations omitted). The court proceeded to discuss
the federal and state rules providing for class actions, and
continued:

               It is only the class action vehicle
               which makes small consumer
               litigation possible. Consumers joining
               together as a class pool their
               resources, share the costs and efforts
               of litigation and make redress
               possible. Should the law require
               consumers to litigate or arbitrate
               individually, defendant corporations
               are effectively immunized from
               redress of grievances.

(quotations omitted).17 The court ultimately affirmed the
trial court’s ruling that the waiver of the right to a class action was
unconscionable. 

      Though the arbitration provisions in both Lytle and
Thibodeau are distinguishable from the provision in this case, Gay


       17
         The Thibodeau court certainly has had much judicial
company in expressing its sentiments. It might be more
evenhanded, however, also to recognize that a business such as
Intersections which enters into transactions bringing it very small
revenues under any particular contract, perhaps $39.92 in the case
of Gay, has a legitimate reason to seek to avoid expensive litigation
to resolve disputes with its customers and instead resolve its
disputes less formally and probably less expensively in arbitration.

                                  37
is correct that in both cases the Superior Court addressed the
waiver of the right to bring a class action specifically, and found
that such a provision would be unconscionable, 

, if there are facts showing that “the costs associate[d]
with individual versus class-based litigation of their claim against
[the defendant] would . . . result in continuing immunity for [the
defendant] for its wrongful acts,” 

. In doing
so, the two Superior Court panels recognized that under
Pennsylvania law, class actions are “favored,” 

and are
of “great public importance” as “the essential vehicle” for
vindicating consumer rights, 

.

       But those cases are hardly the end point of our
unconscionability analysis because we are concerned with the
federal law that Congress set forth in the FAA; the federal law is
controlling here and the Pennsylvania law must conform with it.18
In Perry v. Thomas, 

, 

(1987), the
Supreme Court explained how courts should reconcile the
promotion of arbitration agreements with competing state interests:

              [T]he text of § 2 provides the
              touchstone for choosing between
              state-law principles and the principles
              of federal common law envisioned by
              the passage of [the FAA]: An
              agreement to arbitrate is valid,
              irrevocable, and enforceable, as a
              matter of federal law, ‘save upon such


       18
         Of course, Lytle and Thibodeau are Superior Court cases
and thus even if we were concerned with pure state law they would
not bind us. See State Farm Mut. Auto. Ins. Co. v. Coviello, 

, 713 (3d Cir. 2000). We hasten to add, however, that
even if they were Pennsylvania Supreme Court cases our result
would be the same. We also note that in a very different context
from that here the Supreme Court of Pennsylvania has indicated
that “[w]hile we believe that Lytle was well intentioned in its
efforts to guard against pernicious lending practices, our
conclusion is that it swept too broadly.” Salley v. Option One
Mort. Corp., 

, 129 (Pa. 2006).

                                38
              grounds as exist at law or in equity for
              the revocation of any contract.’ Thus
              state law, whether of legislative or
              judicial origin, is applicable if that law
              arose to govern issues concerning the
              validity, revocability, and
              enforceability of contracts generally.

n.9 (internal citations omitted).
The Court distinguished state law principles that apply to contracts
generally from those that are unique to arbitration agreements:

              A state-law principle that takes its
              meaning precisely from the fact that a
              contract to arbitrate is at issue does not
              comport with this requirement of § 2.
              See Prima Paint [Corp. v. Flood &
              Conklin Mfg. Co.,] 388 U.S. [395,]
              404, 87 S.Ct. [1801,] 1806 [(1967)];
              Southland Corp. v. Keating, 465 U.S.
              [1,] 16-17[ ] n.11, 104 S.Ct. [852,] 861
              [ ] n.11 (1984)]. A court may not,
              then, in assessing the rights of litigants
              to enforce an arbitration agreement,
              construe that agreement in a manner
              different from that in which it
              otherwise construes nonarbitration
              agreements under state law.

at 2527 n.9. The Court further admonished in a
critical explanation that: “Nor may a court rely on the uniqueness
of an agreement to arbitrate as a basis for a state-law holding that
enforcement would be unconscionable, for this would enable the
court to effect what we hold today the state legislature cannot. 

at 2527 n.9.

       Addressing the same competing interests that we face in this
case, namely, the promotion of arbitration agreements and the
protection of class actions prohibited by such agreements, we
observed in Johnson that the FAA “reflects ‘a liberal federal policy
favoring arbitration agreements,’” 

                                 39
(quoting Moses H. Cone Mem’l 

, 103 S.Ct.
at 941), and that “[w]hatever the benefits of class actions, the FAA
‘requires piecemeal resolution when necessary to give effect to an
arbitration agreement,’” 

(quoting Moses H. Cone Mem’l

, 103 S.Ct. at 939). To the extent, then, that
Lytle and Thibodeau hold that the inclusion of a waiver of the right
to bring judicial class actions in an arbitration agreement
constitutes an unconscionable contract, they are not based “upon
such grounds as exist at law or in equity for the revocation of any
contract” pursuant to section 2 of the FAA, and therefore cannot
prevent the enforcement of the arbitration provision in this case.
9 U.S.C. § 2 (emphasis added).

        Certainly the Pennsylvania Superior Court panels were
aware of Perry and thought that they were reaching outcomes in
considering the unconscionability issues consistent with it as well
as other Supreme Court cases. We, however, reject Lytle and
Thibodeau for we do not agree with them as there is no escape
from the fact that they deal with agreements to arbitrate, rather than
with contracts in general, and thus they are not in harmony with
Perry. It would be sophistry to contend, in the words of Perry, that
the Pennsylvania cases do not “rely on the uniqueness of an
agreement to arbitrate as a basis for a state-law holding that
enforcement would be 

n.9. After all, though the Pennsylvania cases are
written ostensibly to apply general principles of contract law, they
hold that an agreement to arbitrate may be unconscionable simply
because it is an agreement to arbitrate. A finding that the
arbitration provisions in those cases are unconscionable can be
reached only by parsing the provisions themselves to determine
what they provide.

       Overall, it is perfectly obvious that Gay relies on the
uniqueness of the arbitration provision in framing her
unconscionability argument. Nothing could be clearer because her
argument is not predicated on a contention that Intersections misled
her as to the Agreement’s terms or forced her by some unlawful
coercion to enter into it and accept the arbitration provision. Nor
can she even fairly contend that she was under any compulsion to
enter into the Agreement which she clearly views as having been
essentially worthless to her. See supra note 15. Quite to the

                                 40
contrary she contends that the provision is unconscionable because
of what it provides, i.e., arbitration of disputes on an individual
basis in place of litigation possibly brought on a class action basis.
Thus, with all due respect to the Pennsylvania Superior Court, we
will not apply state law as explicated in Lytle and Thibodeau and
thereby interfere with the appropriate application of the FAA. The
Commerce and Supremacy Clauses of the United States
Constitution are implicated here. U.S. Const. art. I, § 8, cl.3; VI,
cl. 2.

        We cannot close our opinion without making one more
observation about the Pennsylvania Superior Court cases. Clearly
their reasoning with respect to the unconscionability of arbitration
provisions can be applied to arbitration provisions in all sorts of
contracts between vendors of goods and services on the one hand
and consumers on the other hand. Thus, their reasoning if applied
logically could result in a significant narrowing of the application
of the FAA. We express no view on whether that might be a
desirable result as it is not our function to do so. Rather, our
obligation is to honor the intent of Congress and that is what we are
doing. If the reach of the FAA is to be confined then Congress and
not the courts should be the body to do so.



                        V. CONCLUSION

        For the foregoing reasons, we conclude that Gay’s claims
are subject to arbitration, and that the arbitration provision in this
case is not unconscionable. The District Court’s order of June 29,
2006, to stay the proceedings and compel arbitration on an
individual basis will be affirmed.




                                 41