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Case 3:07-cv-04732-MJJ

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Exhibit B

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA BEFORE THE HONORABLE CHARLES R. BREYER, JUDGE ----------------------------) ) David Lee, et al., ) ) Plaintiffs, ) ) v. ) ) American Express Travel, ) ) Defendant. ) ) ----------------------------)

NO. C 07-4765 (CRB)

San Francisco, California Friday, November 30, 2007 (9 pages)

TRANSCRIPT OF PROCEEDINGS 13 APPEARANCES: 14 For Plaintiffs: 15 16 17 18 19 20 21 22 23 24 25 BY: For Defendants: Stroock & Stroock & Lavan LLP 2029 Century Park East Suite 1800 Los Angeles, California 90067 STEPHEN JULIAN NEWMAN MATTHEW SCOTT HALE Attorney at Law 45 Rivermond Drive Post Office Box 1951 Newport News, Virginia 23601

CONNIE KUHL, RMR, CRR Official Reporter - U.S. District Court (415) 431-2020

Case 3:07-cv-04732-MJJ

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Tuesday, November 30, 2007 (10:14 a.m.) DEPUTY CLERK: Appearances, Counsel? MR. HALE: Matthew Hale for the plaintiffs. Steven Newman for the defendants. Good morning. Well, anybody have anything David Lee versus American Express.

MR. NEWMAN: THE COURT:

to add to what's been filed? MR. NEWMAN: If I may, I'm the moving party, I think The plaintiffs

the standing issue is the critical one here.

here have ample other remedies if there is an issue with the arbitration clause and these can be raised in the context of a motion to compel arbitration of a particular dispute. If there

is an arbitration, they can be raised in the context of the arbitration itself. If there is an award, they can be raised

in proceedings to vacate or correct or enforce the award. So your Honor simply doesn't have a live dispute before him. The claim is just: I'm a party to this contract

and someday I might have something I'm going to arbitrate, I might have a problem with the arbitration clause. THE COURT: Well, that was my impression. My

impression is I don't have standing -- I mean, I have standing, but the plaintiffs don't. MR. HALE: So you have -Our position is there's

Yes, your Honor.

nothing to arbitrate because arbitration is impossible at this

CONNIE KUHL, RMR, CRR Official Reporter - U.S. District Court (415) 431-2020

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point. THE COURT: Why is it impossible? You haven't made a Let's

claim for arbitration.

You haven't sought arbitration.

say you seek arbitration. decisions, right? your favor.

Then the arbitrator has to make some

He could conceivably make some decisions in

Could -- if you're so sure you're so right, and And he could throw out the class action

there you are.

requirement or limitation if he thought that that was appropriate from your arguments. He could do the things that

you haven't even -- you're complaining about, but you haven't complained about it in front of the arbitrator. MR. HALE: THE COURT: MR. HALE: Your Honor, if I might. Sure. Arbitration is impossible under the

circumstances here because, first of all, down in Orange County in a superior court case Judge Carol Dunning in a response to their motion to compel arbitration ruled that American Express's arbitration clause, the same one we're disputing here, is unenforceable because it's unconscionable. appealed that. So there's now a collateral estoppel effect. The They never

Court has held that that arbitration clause is not operative at this point. Secondly, one of the big issues here is, according to the --

CONNIE KUHL, RMR, CRR Official Reporter - U.S. District Court (415) 431-2020

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THE COURT:

Well now, wait.

Let's say you're right on Are you

that, which I'm not suggesting that you're not.

telling me that you couldn't say that to the arbitrator? MR. HALE: Well, there's another point, if I could

make it, your Honor. THE COURT: MR. HALE: THE COURT: standing. I'm going one point at a time. All right. You said -- I think you don't have And then you cite as a

You say, Oh, yes, you do.

reason that you don't go to arbitration is a decision from the Orange County Superior Court holding the class action bar unconscionable and that therefore American Express is collaterally estopped from litigating -- I guess that's right -- litigating that issue, to which I say: If you are And why

right, why wouldn't you say that to an arbitrator?

wouldn't the arbitrator then theoretically be bound by the laws of collateral estoppel? MR. HALE: there's a more -THE COURT: MR. HALE: Now, let's move to the second point. The more compelling reason here, and why I suppose they would, your Honor, but

this cannot be arbitrated, is because in the contracts involved here, in the arbitration clause, it says that the arbitrator must decide the validity of the arbitration agreement. That's -- so he would have to decide that. And --

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THE COURT: MR. HALE:

What if he decided in your favor? As a matter of law, under Buckeye Check He has no authority to

Cashing and Nagrampa, he cannot.

evaluate -- has no jurisdiction to render an opinion as to the validity of the arbitration agreement itself. So by the

Supreme Court's own holding in Buckeye Check Cashing and in the Ninth Circuit en banc decision in Nagrampa, that cannot occur, so there cannot be any arbitration whatsoever because of the central issue here. As a consequence, it's a futile act. The law does not

require a plaintiff to jump through a series of hoops the last of which is obstructed by a brick wall. There can be no

arbitration here because the Supreme Court of the United States -THE COURT: Wait, wait. I don't understand. First of

all, you say -- the dispute that you have with American Express is the arbitration clause. MR. HALE: for fraud. THE COURT: But fraud was the fraud in inducing you to No, we would like to arbitrate our claim

enter into an agreement with American Express because, you claim, there's an arbitration clause. why I got their credit card? clause. By the way, I've never heard of that in my life. I've You said, Look, you know

Because they have an arbitration

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always greeted new things, and I rather enjoy that arrangement. Because I hadn't thought that people go to credit card companies or buy anything because it has an arbitration clause in it, but I guess you did, or your clients do. So -- we'll

see if they do or not, and that will be the subject of some litigation. But I still don't quite understand why you can't go to the arbitrator and say to the arbitrator, Here, this clause is unconscionable, that should be stricken, and the arbitrator says, Fine, that's out. Now, what's your next complaint? complaint is what? And your next

If he strikes the class action, so he says, I think that is You've gotten

Yeah, you want a class action, go right ahead? unconscionable. It's out.

So then what's next?

exactly what you've wanted, haven't you?

Fabulous, you've

gotten a deal with American Express and you're going to be able to bring class actions against them and that's why you got their credit card. MR. HALE: Part of this lawsuit is as a class action.

We seek to not have the remedy just based -- directed toward the plaintiffs but to a class of people. THE COURT: give it to you. And you're going to get it. He's going to

The arbitrator may very well give it to you. You'll probably get a lot of people.

That will be wonderful.

American Express has all sorts of business now because they

CONNIE KUHL, RMR, CRR Official Reporter - U.S. District Court (415) 431-2020

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have a non class action bar. MR. HALE: There's another problem with that, your

Honor, in the fact that the contract with American Express prohibits a consolidation. So there cannot be a class action

within the context of arbitration. THE COURT: The class action provision of the Is that

arbitration agreement prevents consolidation, right? your point? MR. HALE: arbitration. THE COURT: MR. HALE: That's going to be stricken. All right.

There's a ban on class actions outside

But in the contract itself

there's also a ban on consolidation, so there is a ban on -THE COURT: MR. HALE: THE COURT: throw that out. you wanted. What's the ban on consolidation? It's in the contract. He'll throw that out, too. May very well

Then what?

Then you've gotten exactly what But

The only thing you don't have is any injury.

let's not quibble about that. MR. HALE: Your Honor, we would argue that under the

Ninth Circuit's holding in Lozano not getting what he paid if -THE COURT: That's my point. He may very well get what he paid for.

You may very well get what he paid for, You may get it. You

assuming that he actually paid for it.

CONNIE KUHL, RMR, CRR Official Reporter - U.S. District Court (415) 431-2020

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don't have standing. MR. HALE:

You don't have any injury.

Well, your Honor, I respectfully disagree

based on the holding of -THE COURT: 7th and Mission. I'll write an opinion, and it's located on

You may take it right over there. Thank you, your Honor.

MR. NEWMAN: MR. HALE:

Thank you, your Honor. There's a case

One piece of housekeeping. management -THE COURT: lawsuit. MR. NEWMAN: MR. HALE: It's vacated.

I'm throwing out the

Thank you, your Honor.

Thank you.

(Adjourned) oOo

CONNIE KUHL, RMR, CRR Official Reporter - U.S. District Court (415) 431-2020

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ________________________________________ Connie Kuhl, RMR, CRR Wednesday, December 5, 2007 I, Connie Kuhl, Official Reporter for the United States Court, Northern District of California, hereby certify that the foregoing proceedings in Case No. C 07-4765 (CRB), David Lee, et al. v. American Express Travel, were reported by me, a certified shorthand reporter, and were thereafter transcribed under my direction into typewriting; that the foregoing is a true record of said proceedings as bound by me at the time of filing. The validity of the reporter's certification of said transcript may be void upon disassembly and/or removal from the court file. CERTIFICATE OF REPORTER

CONNIE KUHL, RMR, CRR Official Reporter - U.S. District Court (415) 431-2020