initiate Arbitration before suit? (creditone/midland)

[pierce]

What are the pros and cons of initiating arbitration from a JDB (Midland) that is known for aggressively suing in small claims court, on a card (creditone) that opts out of arb if it is brought into small claims court?

If an ARB was initiated before they sued, would arbitration be mandatory?

[Goody_Ouchless]

This is an unexplored area. It used to be thought that if you initiated arbitration and they then sued, it was an FDCPA violation, it turned out there was no case law to support that idea.

I suspect what would happen is that they'd just ignore your preemptive arbitration (by simply not paying) and sue in court once the arb case was closed. Another potential danger is in the rules that seem to say that the creditor must pay all arb fees. We saw a case where debtor was assessed fees, in part, because they argued he was the one that initiated arbitration, so the creditor was entitled to recoup their costs.

 

[BackFromTheDebt]

If I were in your shoes, I would seriously consider initiating arbitration against them pre-suit.  

For an amount that small, Midland probably wouldn't pursue the case in arbitration.  

If they drop the case, then pursue it in small claims, then argue res judica in small claims.  Say the case was already brought into arbitration, and that the court has no jurisdiction.

However, small claims won't put you with a great judge.  The magistrates often have no idea what they are doing.  That doesn't matter.  

In Wisconsin you can automatically appeal ANY small claims case to Circuit Court.  You are in Dane County, which has by far the most consumer-friendly judges in the state.  When the case is in Circuit Court, it is hear ab initio. What happened in small claims doesn't matter at all.  

At that point, file for dismissal on the grounds that the case was already decided in arbitration, and that they already lost the case.  As an alternative, file for MTC arbitration.  At that point you are NOT in small claims, and there was already an arbitration case.  

For them to win, they would have to (a) convince the magistrate that their case should go through anyway even though they already walked away from arbitration for that case, and (b) convince one of the most consumer-friendly judges in the state that they can just ignore their arbitration agreement.  

[BV80]

2 hours ago, BackFromTheDebt said:

If they drop the case, then pursue it in small claims, then argue res judica in small claims.  Say the case was already brought into arbitration, and that the court has no jurisdiction.

Res judicata means it’s already been adjudicated; that a ruling has already been made. That would not be the case if the claim were merely pending in arbitration or if the arbitration case was closed.

[Harry Seaward]

Pre-suit arbitration is a horrible idea. You force them to pay $5,000 over your frivolous claims when there's a decent chance they may have never sued you to begin with. And since you back them into a corner, they will absolutely come back at you with their own claims against you, which they will win, and since your claims were brought in bad faith, you'll also get slapped with all of their arbitration and legal fees.

Best to just wait to get sued first. 

[pierce]

On 10/19/2018 at 11:21 PM, Harry Seaward said:

Pre-suit arbitration is a horrible idea. You force them to pay $5,000 over your frivolous claims when there's a decent chance they may have never sued you to begin with. And since you back them into a corner, they will absolutely come back at you with their own claims against you, which they will win, and since your claims were brought in bad faith, you'll also get slapped with all of their arbitration and legal fees.

Best to just wait to get sued first. 

The debt is around 1300, so do you think they would follow me into arbitration? What would be the benefit of them paying the fees and going into arbitration?

With them claiming I owe a debt, wouldn't arbitration, which is part of the signed contract, be a valid solution?

The contract specifies no arbitration once brought into small claims, so couldn't I rationalize my action as arbitration being the proper format?

What grounds would be sufficient to start arbitration in regards to a debt?

[BV80]

22 minutes ago, pierce said:

The debt is around 1300, so do you think they would follow me into arbitration? What would be the benefit of them paying the fees and going into arbitration?

With them claiming I owe a debt, wouldn't arbitration, which is part of the signed contract, be a valid solution?

The contract specifies no arbitration once brought into small claims, so couldn't I rationalize my action as arbitration being the proper format?

What grounds would be sufficient to start arbitration in regards to a debt?

Is attorney representation allowed in your small claims court?   Some small claims courts don’t allow attorney representation.  As a result, corporations must then file lawsuits in higher courts. 

 

[Harry Seaward]

7 hours ago, pierce said:

The debt is around 1300, so do you think they would follow me into arbitration?

No

7 hours ago, pierce said:

With them claiming I owe a debt, wouldn't arbitration, which is part of the signed contract, be a valid solution?

Yes, but only after they file a lawsuit against you. 

7 hours ago, pierce said:

The contract specifies no arbitration once brought into small claims

Were you sued in a court called "small claims"?

7 hours ago, pierce said:

What grounds would be sufficient to start arbitration in regards to a debt?

Their claims after you have been sued. 

[Pericles]

On 10/19/2018 at 9:21 PM, Harry Seaward said:

You force them to pay $5,000 over your ...

Are they any more forced than when arbitration is initiated post suit?  It seems to me that the force is greater when there is a court order.  Debt buyers seem to make the same calculation because they usually ignore an arbitration action unless there is a court order.

 

On 10/21/2018 at 8:53 AM, pierce said:

The contract specifies no arbitration once brought into small claims, so couldn't I rationalize my action as arbitration being the proper format?

If there is a small claims carve out, it seems that you won't be able to move for arbitration in small claims court in Wisconsin.

That means that you'll have to appeal, as described in your prior thread.

Even though such an appeal in Wisconsin is ab initio (a complete do over) in circuit court, they may be able to argue that participation in the small claims case is waiver.

Pre-suit arbitration should be reserved for the rare instance when there is a reasonable degree of certainly that a suit is imminent (like a letter from a local attorney) combined with a reasonable expectation of having trouble getting a motion to compel granted in court (like a small claims carve out).  Pre-suit arbitration should be avoided otherwise.  It should also be avoided if the risks are not fully understood.

 

On 10/21/2018 at 8:53 AM, pierce said:

What grounds would be sufficient to start arbitration in regards to a debt?

For a pre-suit arbitration action, you could seek declaratory relief of the claims alleged in the letter from the local attorney.  But not of the question of arbitrability itself, which is usually only for a court to decide, if opposed.  With that in mind, if the debt buyer ignores the arbitration action, only a petition to compel will prevent the arbitration case from being dismissed due to lack of response by the debt buyer.

[pierce]

In regards to my other thread - this is a separate debt. They sent me escalating letters, and have already sued over the 688 amount, so assumed that at some point they would do the same with this debt. However, the other is with Synchrony - they have a great arbitration clause. This is with creditone - which has an opt out clause when in small claims already.

 

So, with that in mind - they will probably sue, should I put in for arbitration?

 

I called them this morning to see about settlement. This was first contact, and didn't offer much. They offered 400 lump sum, then 100 dollar payments until the debt if fully paid off. Then for lump sum, about 1000. What should my strategy be now?

 

All help is greatly appreciated!

[Pericles]

1 hour ago, pierce said:

This is with creditone - which has an opt out clause when in small claims already.

So, with that in mind - they will probably sue, should I put in for arbitration?

Not unless they have sent a pre-legal notice or have referred the matter to a local attorney.

And maybe not even then if you are willing to lose the small claims case and then move to compel arbitration once the case is in circuit court.

They will ignore the arbitration case unless you take steps to enforce it using a petition to compel.  Doing so is expensive, so you should be pretty sure they are on the cusp of suing or else the expense will be wasted.

 

1 hour ago, pierce said:

I called them this morning to see about settlement. This was first contact, and didn't offer much. They offered 400 lump sum, then 100 dollar payments until the debt if fully paid off. Then for lump sum, about 1000. What should my strategy be now?

Is it the midland division based in michigan or the one based in san diego?  Or another one?

You'll have to decide what action to take.  There are risks either way.  Don't proceed unless you are sure that you fully understand all the risks.

[Harry Seaward]

2 hours ago, Pericles said:

Are they any more forced than when arbitration is initiated post suit?

Yes. The are in beach of contract if they refuse to arbitrate *your* claims. They can simply abandon their own claims.

[BackFromTheDebt]

21 hours ago, Harry Seaward said:

No

Yes, but only after they file a lawsuit against you. 

Were you sued in a court called "small claims"?

Their claims after you have been sued. 

I don't understand this at all.

The OP is threatened with an amount that would go to small claims court.  

There is a small claims exemption for arbitration.

Therefore you say the OP should wait to be sued before filing in arbitration????????  

Once the case has started in small claims court, it is TOO LATE to file in JAMS.

I know you just haaaaaaaaaaaate it when people file preemptive arbitration, but sometimes it is a winning strategy.

Here, the OP has two choices:

1.  File in JAMS, and hope Midland won't follow.  Midland almost never follows, esp. not for $1300.  If they DO follow, the OP has a chance for a settlement.

or

2. Let Midland sue him in small claims.  Midland will win about 100% of the time.  

[BackFromTheDebt]

2 hours ago, Pericles said:

 

 

 

Pre-suit arbitration should be reserved for the rare instance when there is a reasonable degree of certainly that a suit is imminent (like a letter from a local attorney) combined with a reasonable expectation of having trouble getting a motion to compel granted in court (like a small claims carve out).  Pre-suit arbitration should be avoided otherwise.  It should also be avoided if the risks are not fully understood.

 

This is a pretty good summary.

There have been three times I have filed in JAMS preemptively, and all have worked.  

The first time was when I had already been sued for a larger amount for a different credit card with the same OC and the same law firm, and had already gotten the judge to order arbitration in JAMS.  Right before I filed, I got a letter from the law firm for the second amount, which was bound for small claims.  I combined them in my filing, and caught them when they filed in small claims.  I got them to drop that case.

The second time was when the OC had made some really serious blunders on my wife's account, making it darn near impossible for them to win the case.  They sent it to a law firm which was not registered in my state.  Whoops.  I filed in JAMS against both the firm and the OC.  That was nice.  That was settled quite nicely after discovery, when they saw how weak their case was.  

The third time was when a law firm let the case sit in a drawer for a while, and contacted me right before SOL.  BUT, under Delaware law, which JAMS says.  The law firm said they would sue me if I didn't file in JAMS within a certain deadline.  I filed, and that was settled to my satisfaction right before the hearing.  

 

I agree that preemptive arbitration should wait until right before a suit.  If there is a law firm involved, then you are right before a suit.  If not, then wait.  

[Harry Seaward]

2 hours ago, BackFromTheDebt said:

There is a small claims exemption for arbitration

Well, we don't know if the court is called "small claims" yet, so it's premature to say the agreement precludes arbitration in whatever court OP gets sued in. In any event, it doesn't change anything else I said about it forcing them to bring their claims that they may have otherwise not bothered to sue over.

Quote

I know you just haaaaaaaaaaaate it when people file preemptive arbitration,

I don't care what people do. I just tell them if it's smart or not. But I do haaaaaaaaaate when people are overly dramatic for no reason. 

[pierce]

4 hours ago, BackFromTheDebt said:

This is a pretty good summary.

There have been three times I have filed in JAMS preemptively, and all have worked.  

The first time was when I had already been sued for a larger amount for a different credit card with the same OC and the same law firm, and had already gotten the judge to order arbitration in JAMS.  Right before I filed, I got a letter from the law firm for the second amount, which was bound for small claims.  I combined them in my filing, and caught them when they filed in small claims.  I got them to drop that case.

The second time was when the OC had made some really serious blunders on my wife's account, making it darn near impossible for them to win the case.  They sent it to a law firm which was not registered in my state.  Whoops.  I filed in JAMS against both the firm and the OC.  That was nice.  That was settled quite nicely after discovery, when they saw how weak their case was.  

The third time was when a law firm let the case sit in a drawer for a while, and contacted me right before SOL.  BUT, under Delaware law, which JAMS says.  The law firm said they would sue me if I didn't file in JAMS within a certain deadline.  I filed, and that was settled to my satisfaction right before the hearing.  

 

I agree that preemptive arbitration should wait until right before a suit.  If there is a law firm involved, then you are right before a suit.  If not, then wait.  

I received mail about a week ago that was labeled as 'pre-trial'. Was unsure if they were just applying pressure (sure they were), as well as determined to sue (just not sure how soon).

After speaking to a representative on the phone, I am also unsure if that may have put me into a bit more of a holding pattern now that I contacted them.

This is the San Diego branch.

 

I would also like to know my risks. I do not want to proceed into pre-trial arb without knowing as much as I possibly can about my situation, and how to proceed. However, I sense that I need to act soon. The representative on the phone mentioned something about being forwarded to the legal department at the end of the month. Again, could be just pressure - I am still very calm - but I would like to get an informed strategy going.

 

Thanks again to all - amazing info from all. I am open to all ideas.

[pierce]

One more thought. My other suit,for 688, is with midland. Would it make more sense, and not in any way seem frivolous if I started pe trial arb with the intention of including them together?

Can one do that?

[Goody_Ouchless]

I, for one, hope you find a way to do this. If it "works," then no sold debts are collectible and the "j" in "junk" can go back to the front of JDB.

[BackFromTheDebt]

19 hours ago, pierce said:

One more thought. My other suit,for 688, is with midland. Would it make more sense, and not in any way seem frivolous if I started pe trial arb with the intention of including them together?

Can one do that?

Can you do that?  Depends on the arbitration agreements.

As I mentioned, I once had 2 accounts with the same OC and the same law firm.  I was able to combine them.  One was a Citibank Sears card and the other was a Citibank Home Depot card.  If one is Joe's Credit Card and the other is Credit Zero, that is a bit more problematic.

 

As for something being "pre-trial".  Yes, that is to scare you and put pressure on you.  That also gives you some time to prepare a JAMS complaint plot out your strategy.

 

What normally happens is:

At some point they send it to a law firm.  When the law firm gets it, they will usually send a dunning letter.  You then send a DV.  As soon as you get a response, you file in JAMS.  Or, to be safer, you file in JAMS as soon as you hear from a lawyer.

Once you hear from a lawyer licensed in the state of Wisconsin, you are very close to being sued.  Until you hear from a lawyer, you are probably NOT being sued.  

[Harry Seaward]

21 hours ago, pierce said:

This is the San Diego branch.

In california, lawyers are not permitted in small claims court, so you can't be sued there by midland.

20 hours ago, pierce said:

Would it make more sense, and not in any way seem frivolous if I started pe trial arb with the intention of including them together?

No. The whole point of arbitration is to make the cost of pursuing the debt a deterrent. If you join two debts into one arbitration action, you're giving them a two-for-one discount.