JDB, Citi, Arbitration as a Defensive Weapon

[FightBackNow]

Could someone explain exactly how arbitration is used as a powerful defensive weapon against a junk debt buyer suing on a 2009 defaulted Citibank account? The amount sought by the plaintiff is about $12,500.

At what point in a pro se defense should arbitration be elected and why? Can arbitration be used as a parachute if things look bad in court and the plaintiff produces proof of debt? So far after being served by a JDB my plan is to deny everything except my name and address on the complaint because no proof of debt whatsoever was included in the summons, only a grainy photocopy of a Citibank credit card agreement (which contains an arbitration clause). If the plaintiff cannot demonstrate they own the debt, or do not produce evidence that the debt is mine isn't it far better to proceed through the court system first in the hope they fail to make a case or move on to easier targets?

Edited August 4, 2010 by FightBackNow

[nobk4me]

When to pull the arb card depends on your state's law, both statute and case law. If you go too far in the court process, you can waive the right to arbitrate the claim. What is going too far? That is what varies by state. In Florida, my understanding is that even filing an answer can waive your right to arb. Other states are probably not as restrictive.

The arb strategy is a jurisdictional issue. Pursuant to the contract, once either party elects arb, the matter cannot be litigated in court. So it is best to raise jurisdictional issues at the outset, and not wait until things start looking bad in the court process.

The amount of the debt, and the fact it is "fresh," suggests that the JDB may well be able to produce documentary evidence (statements) that you owe the debt. I would suggest using the arb strategy up front.

But others may have differing opinions, which I hope they will post.

[LUEser]

The why behind the arb from a cost benefit analysis is pretty simple. Think in terms of a business. You pay a 200 dollar filing fee to go to court. You've paid maybe 10 cents on the dollar for this fresh debt. So maybe 1000 dollars. In order to even proceed in arb, if JAMS is an option, you're looking at 3000 dollars. if AAA, you're paying at least 1,000, and this is assuming the consumer doesn't fight you every step of the way running up your cost, since you, as the business, has to pay the Arbitrator's retainer.

Sure, you could potentially recover the full 10k, but by the time Arb is over, you may well have spent more than that litigating in the arb forum. And that's not counting your attorney's fees.

I'm with nobk in terms of electing early if you're going to elect. WHile thre are tried methods to beat JDBs in court (chain of custody, etc.) the same arguments can be made in arb.

[FightBackNow]

The why behind the arb from a cost benefit analysis is pretty simple. Think in terms of a business. You pay a 200 dollar filing fee to go to court. You've paid maybe 10 cents on the dollar for this fresh debt. So maybe 1000 dollars. In order to even proceed in arb, if JAMS is an option, you're looking at 3000 dollars. if AAA, you're paying at least 1,000, and this is assuming the consumer doesn't fight you every step of the way running up your cost, since you, as the business, has to pay the Arbitrator's retainer.

Sure, you could potentially recover the full 10k, but by the time Arb is over, you may well have spent more than that litigating in the arb forum. And that's not counting your attorney's fees.

I'm with nobk in terms of electing early if you're going to elect. WHile thre are tried methods to beat JDBs in court (chain of custody, etc.) the same arguments can be made in arb.

Thank you nobk4me and LUEser for the well thought out responses. As I prepare and answer and do more research on how Michigan laws come into play I'm going to take this advise into full consideration.

You're right, it is a fresh account and producing a statement or six might be just a click away. What I'm going to look into is in Michigan in my district court, can I bury them with a flurry of discovery requests probing for weakness while retaining my right to arbitrate? Nobk4me and LUEser your advise is very much appreciated.

[nobk4me]

Engaging in discovery is accepting the court's jurisdiction, and may waive your right to arbitrate. I would file either a motion to compel arb/stay pending arb, or a motion to dismiss, or in the alternative, to stay pending arb, at the outset.

If these are denied, you can always bury them in discovery after that.

[FightBackNow]

Engaging in discovery is accepting the court's jurisdiction, and may waive your right to arbitrate. I would file either a motion to compel arb/stay pending arb, or a motion to dismiss, or in the alternative, to stay pending arb, at the outset.

If these are denied, you can always bury them in discovery after that.

My goal is to preserve the right to compel for arbitration while making the plaintiff jump hoops and spend money even getting to that point. You see, zero proof of debt accompanied the complaint, only a grainy copy of an old card member agreement. Second, my wife was named in the suit and I hold compelling evidence she does not belong.

In light of this I've been advised to answer the complaint on both of our behalf separately with absolute denials on every aspect of connection of the alleged account to my wife. By the time she is dismissed and the plaintiff simply provides enough evidence to prove the debt they are going to have some serious time into this case. If the plaintiff happens to tire of the hoops, or make a mistake the jig is up.

The key question is why would I forfeit my right to arbitrate when my wife doesn't belong in the suit and before the debt and applicable card member agreement is even established?

[BrokeBob]

THe Citi user agreements USUALLY say you can arbitrate until a trial or judgement, HOWEVER, some states say you have waived if you sneeze. So, if you want to arbitrate, the sooner the better.

[FightBackNow]

THe Citi user agreements USUALLY say you can arbitrate until a trial or judgement, HOWEVER, some states say you have waived if you sneeze. So, if you want to arbitrate, the sooner the better.

Thanks Bob, the next thing to do is find out specifically my options under Michigan law. Actually, I'm going to counsel with a lawyer tomorrow because I've got to know precisely how far the case can be pushed and still retain the option to elect arbitration. The last thing I want to do immediately if it can be avoided is elect arbitration before first testing the water in court. It looks on the surface that the JDBs case is very weak hoping for a default judgment. If that is indeed the situation, I want to press the issue and force them to fold or get the case dismissed by a judge.

On the other hand, if the plaintiff pulls an unexpected rabbit out of the hat and produces some admissible evidence, I plan on taking them on a tortoise speed world tour via arbitraiton.

[Kittyring]

I have had two experiences with the arbitration card. In Michigan I believe you can make your demand for arbitration up to trial. In my experiences, I had filed with JAMS once before pre-trial, and secondly just before motion for summary judgment hearing. Both cases resulted in negotiation of a satisfactory settlement.

[FightBackNow]

I have had two experiences with the arbitration card. In Michigan I believe you can make your demand for arbitration up to trial. In my experiences, I had filed with JAMS once before pre-trial, and secondly just before motion for summary judgment hearing. Both cases resulted in negotiation of a satisfactory settlement.

Thank you Kittyring for the pertinent information as it applies to your Michigan experience with this issue. I absolutely love having arbitration as a fall back option if the plaintiff happens to produce compelling admissible evidence. I'm being very careful to preserve the arbitration parachute while probing see what they have.

[skippy1960]

Presently you know that arbitration is possible and they don't know you know. It might be useful in the future to drop a letter to plaintiff's attorney, "I found my cardmember agreement and I elect arbitration".

This sets a date in time that you waived their right to court. Now if they file any additional motions they are in breach of the contract they are using. Further sets up for you in court, that you notified the plaintiff months ago and they failed to respond if you need to use arbitration later in the court process.

You do have to be careful with anything you file in court if you use this strategy, participation in court can waive your right.

Lastly you will need a claim in arbitration, breach of contract is always a nice starter....

[FightBackNow]

Presently you know that arbitration is possible and they don't know you know. It might be useful in the future to drop a letter to plaintiff's attorney, "I found my cardmember agreement and I elect arbitration".

This sets a date in time that you waived their right to court. Now if they file any additional motions they are in breach of the contract they are using. Further sets up for you in court, that you notified the plaintiff months ago and they failed to respond if you need to use arbitration later in the court process.

You do have to be careful with anything you file in court if you use this strategy, participation in court can waive your right.

Lastly you will need a claim in arbitration, breach of contract is always a nice starter....

Excellent ideas Skippy, I'm making note of them. However, I think there are a couple things that need to be checked out before bringing up arbitration. First, do they even legally own the alleged debt and have any proof of such in their possession. Second, the only evidence included with the initial complaint was a card member agreement over 10 years old that also happens to be many years later than the inception of the alleged debt. The grainy copy of a card member agreement they have produced appears irrelevant.

My thinking is still make them show their hand in regard to ownership of debt and evidence before mentioning or springing arbitration on them. If the JDB is just trolling for a default judgment when they see a properly drafted answer and an aggressive willingness to fight they might simply fold without adding more complexity, such as the issue of arbitration.

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On my rights to arbitrate, here is a really cool item I found in the Michigan Rules of Civil Procedure. In rule Rule 2.111 General Rules of Pleading

(F) Defenses; Requirement That Defense Be Pleaded.

(3) Affirmative Defenses. Affirmative defenses must be stated in a party's

responsive pleading, either as originally filed or as amended in accordance with MCR 2.118. Under a separate and distinct heading, a party must state the facts constituting

(a) an affirmative defense, such as contributory negligence; the existence of an agreement to arbitrate; assumption of risk; payment; release; satisfaction; discharge; license; fraud; duress; estoppel; statute of frauds; statute of limitations; immunity granted by law; want or failure of consideration; or that an instrument or transaction is void, voidable, or cannot be recovered on by reason of statute or nondelivery;

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Look at that would ya!!! I found it myself right in the Michigan rules that an existence of an agreement to arbitrate is an affirmative defense!!! I'm going to add that to my list of affirmative defenses in my answer and based on this I'm not worried about not being able to elect arbitration a little later in the proceedings after feeling out the plaintiff.

Edited August 11, 2010 by FightBackNow

[skippy1960]

Bingo, you are on your way put it in the affirmative defense.