Busymom5

Being sued by Midland Funding, Filed MTC ARB they Opposed.

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And then there's this:

Quote

Grounds in equity or law for revocation of a contract include an allegation that the contract is void for lack of mutual consent, consideration or capacity or voidable for fraud, duress, lack of capacity, mistake, or violation of a public purpose. Cf. Flower World v. Wenzel, 122 Ariz. 319, 594 P.2d 1015 (App. 1978).

US Insulation, Inc. v. Hilro Const. Co., 705 P. 2d 490 - Ariz: Court of Appeals, 1st Div., Dept. A 1985
https://scholar.google.com/scholar_case?case=17379273293286878317

I'd love to hear Midland argue against mutual consent, consideration or capacity on a contract you didn't draft.

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50 minutes ago, Harry Seaward said:

And then there's this:

US Insulation, Inc. v. Hilro Const. Co., 705 P. 2d 490 - Ariz: Court of Appeals, 1st Div., Dept. A 1985
https://scholar.google.com/scholar_case?case=17379273293286878317

I'd love to hear Midland argue against mutual consent, consideration or capacity on a contract you didn't draft.

In determining whether arbitration costs are prohibitively expensive, courts have considered several factors. First, the party seeking to invalidate the arbitration agreement must present evidence concerning the cost to arbitrate.  Clark v. Renaissance W., LLC, 232 Ariz. 510, 307 P.3d 77, 80 (Ariz.Ct.App.2013).  Second, a party must make a specific, individualized showing as to why he or she would be financially unable to bear the costs of arbitration. Id. Third, a court must consider whether the arbitration agreement or the applicable arbitration rules referenced in the arbitration agreement permit a party to waive or reduce the costs of arbitration based on financial hardship. Id.

I doubt Midland can show that it is “financially unable to bear the costs of arbitration.”

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1 hour ago, BV80 said:

I doubt Midland can show that it is “financially unable to bear the costs of arbitration.”

There's also this....

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3 hours ago, BV80 said:

In determining whether arbitration costs are prohibitively expensive, courts have considered several factors. First, the party seeking to invalidate the arbitration agreement must present evidence concerning the cost to arbitrate.  Clark v. Renaissance W., LLC, 232 Ariz. 510, 307 P.3d 77, 80 (Ariz.Ct.App.2013).  Second, a party must make a specific, individualized showing as to why he or she would be financially unable to bear the costs of arbitration. Id. Third, a court must consider whether the arbitration agreement or the applicable arbitration rules referenced in the arbitration agreement permit a party to waive or reduce the costs of arbitration based on financial hardship. Id.

I doubt Midland can show that it is “financially unable to bear the costs of arbitration.”

I think this is the best argument and would be my top choice to bring up first.  Not only will they not be able to show that the cost would be a financial burden on Midland, but I bet the attorney shows up without evidence of the cost of arbitration as well.  So they will not be able to "present evidence concerning the cost to arbitrate".  And if they are unable to present such evidence, they argument regarding cost should fail.

Also, there is this recent SCOTUS ruling that, while not regarding cost directly and focuses on frivolity of claims, does seem to logically follow the same argument.  If you apply the bold sections below to costs, it would stand to reason that the same arguments would work:

HENRY SCHEIN, INC. v. ARCHER & WHITE SALES, INC. 586 U. S. ____ (2019)

"We must interpret the Act as written, and the Act in turn requires that we interpret the contract as written. When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue. That is true even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.

That conclusion follows not only from the text of the Act but also from precedent. We have held that a court may not “rule on the potential merits of the underlying” claim that is assigned by contract to an arbitrator, “even if it appears to the court to be frivolous.” AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649–650 (1986). A court has “‘no business weighing the merits of the grievance’” because the “‘agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.’” Id., at 650 (quoting Steelworkers v. American Mfg. Co., 363 U. S. 564, 568 (1960)). That AT&T Technologies principle applies with equal force to the threshold issue of arbitrability. Just as a court may not decide a merits question that the parties have delegated to an arbitrator, a court may not decide an arbitrability question that the parties have delegated to an arbitrator."

[snip]

Third, Archer and White says that, as a practical and policy matter, it would be a waste of the parties’ time and money to send the arbitrability question to an arbitrator if the argument for arbitration is wholly groundless. In cases like this, as Archer and White sees it, the arbitrator will inevitably conclude that the dispute is not arbitrable and then send the case back to the district court. So why waste the time and money? The short answer is that the Act contains no “wholly groundless” exception, and we may not engraft our own exceptions onto the statutory text. See Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U. S. 546, 556−557 (2005).

[snip]

Fourth, Archer and White asserts another policy argument: that the “wholly groundless” exception is necessary to deter frivolous motions to compel arbitration. Again, we may not rewrite the statute simply to accommodate that policy concern. In any event, Archer and White overstates the potential problem. Arbitrators can efficiently dispose of frivolous cases by quickly ruling that a claim is not in fact arbitrable. And under certain circumstances, arbitrators may be able to respond to frivolous arguments for arbitration by imposing fee-shifting and cost-shifting sanctions, which in turn will help deter and remedy frivolous motions to compel arbitration. We are not aware that frivolous motions to compel arbitration have caused a substantial problem in those Circuits that have not recognized a “wholly groundless” exception. In sum, we reject the “wholly groundless” exception. The exception is inconsistent with the statutory text and with our precedent. It confuses the question of who decides arbitrability with the separate question of who prevails on arbitrability. When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract."

 

Instead of using the "wholly groundless" exception that Archer was trying to use to get out of arbitration, you can replace a "cost exception" and make the exact same arguments the SCOTUS made here; That the FAA may not be rewritten to include an exception that does not exist and that arbitration agreements must be enforced as written.  The remedy of any cost burden lies within the arbitration forum itself.  If the parties do not agree with this, they should not agree to become a party to such a contract.

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14 hours ago, Brotherskeeper said:

Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995).:

What states may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal `footing' directly contrary to the Act's language and Congress' intent.
 

 

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@fisthardcheese @Harry Seaward @BV80 @Goody_Ouchless 

What will happen if the judge doesn't grant the motion to compel but grants the stay in the alternative for busymom to file her claim in AAA? Is it still the case that AAA will refuse to accept an arb case with Midland as respondant without a court order? The form letter AAA sends to decline the claim suggests the parties use court instead. 

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47 minutes ago, Brotherskeeper said:

What will happen if the judge doesn't grant the motion to compel but grants the stay in the alternative for busymom to file her claim in AAA?

Interesting conundrum. The MTC first says motion to dismiss or compel and stay. But at the end OP asks for a order to compel and dismiss or a stay.  

@Busymom5 if you have a hearing scheduled for this motion, I would clarify at that hearing that you want, as you first asked, for the case to be dismissed OR compelled and stayed for arbitration. 

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19 hours ago, Harry Seaward said:

Interesting conundrum. The MTC first says motion to dismiss or compel and stay. But at the end OP asks for a order to compel and dismiss or a stay.  

@Busymom5 if you have a hearing scheduled for this motion, I would clarify at that hearing that you want, as you first asked, for the case to be dismissed OR compelled and stayed for arbitration. 

I don't see that a judge could interpret this any way other than either A) A motion to dismiss, B.) a motion to compel AND dismiss, or C) a motion to compel AND stay.  Those are the only 3 options I see presented in OP's MTC.

The OP clearly states in their prayer for relief for an order to compel AND dismiss OR stay.  This means the compel is to be coupled with EITHER a dismiss or a stay, but either way, the Compel is part of it.

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41 minutes ago, fisthardcheese said:

I don't see that a judge could interpret this any way other than either A) A motion to dismiss, B.) a motion to compel AND dismiss, or C) a motion to compel AND stay.  Those are the only 3 options I see presented in OP's MTC.

We've recently seen some judges grant a stay for X days in order for defendant to file in arb without signing an order compelling plaintiff. This is despite the clear title of the motion to compel. One judge told a defendant, "Yeah, it doesn't work that way. You have to file first." This has caught defendants offguard.  

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18 hours ago, fisthardcheese said:

I don't see that a judge could interpret this any way

You're kidding, right? I know you've seen some of the screwball rulings that roll though this place. 

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13 hours ago, Brotherskeeper said:

We've recently seen some judges grant a stay for X days in order for defendant to file in arb without signing an order compelling plaintiff. This is despite the clear title of the motion to compel. One judge told a defendant, "Yeah, it doesn't work that way. You have to file first." This has caught defendants offguard.  

Yes, in small claims courts generally.  My state's Magistrate Courts also rule this way regularly by setting a new hearing date and telling the parties to go arbitrate by that date.  But the same process applies.  If the JDB does not comply with the arbitration process, the defendant can just report as much to the court on the next court date.  It's not as clean, but it usually is not something detrimental to the defendant.

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3 hours ago, fisthardcheese said:

If the JDB does not comply with the arbitration process, the defendant can just report as much to the court on the next court date.  It's not as clean, but it usually is not something detrimental to the defendant.

Except it could be deterimental in the case of AAA and Midland. AAA's declination to administer letter (without an attached order to compel) due to Midland's noncompliance suggests the parties use court instead. Midland here is asking the judge to use court arbitration with a judge pro tem. 

It's funny that Midland complains so about JAMS and AAA costs, but is so quick to MTC on a FDCPA claim when a defendant. 

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1 hour ago, Brotherskeeper said:

Except it could be deterimental in the case of AAA and Midland. AAA's declination to administer letter (without an attached order to compel) due to Midland's noncompliance suggests the parties use court instead. Midland here is asking the judge to use court arbitration with a judge pro tem. 

It's funny that Midland complains so about JAMS and AAA costs, but is so quick to MTC on a FDCPA claim when a defendant. 

JAMS is also listed in the contract, so if AAA refuses, JAMS is the next option viable under the case laws cited above.

As a side note, I have always suggested JAMS over AAA every time it is available for a number of reasons.  Avoiding this issue with Midland is yet another good reason.

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On 4/26/2019 at 10:36 PM, fisthardcheese said:
On 4/26/2019 at 6:45 PM, BV80 said:

In determining whether arbitration costs are prohibitively expensive, courts have considered several factors. First, the party seeking to invalidate the arbitration agreement must present evidence concerning the cost to arbitrate.  Clark v. Renaissance W., LLC, 232 Ariz. 510, 307 P.3d 77, 80 (Ariz.Ct.App.2013).  Second, a party must make a specific, individualized showing as to why he or she would be financially unable to bear the costs of arbitration. Id. Third, a court must consider whether the arbitration agreement or the applicable arbitration rules referenced in the arbitration agreement permit a party to waive or reduce the costs of arbitration based on financial hardship. Id.

I doubt Midland can show that it is “financially unable to bear the costs of arbitration.”

I think this is the best argument and would be my top choice to bring up first.

I'd also use Clark as a first line of argument.

Notwithstanding Midland's equity argument, an argument about the "costliness of arbitration" is primarily an argument that the arbitration agreement is unconscionable.  A question of unconscionability is a question of substantive arbitrability, normally reserved for the courts.  See prior thread here; link.

Credit One Bank, N.A. recently prevailed in a 4th circuit case, Novic v. Credit One Bank, No. 17-2168 (4th Cir. Jan. 4, 2019).  See article, and unpublished decision.

Credit One argued that their arbitration agreement contains a delegation provision in which an arbitrator should decide the “gateway” issue of whether claims are subject to arbitration.

If the arbitration agreement in your case has similar delegation language to the language described in the above case, then it can be argued that the court should not decide the "gateway" issue.

Any substitution of the arbitration administrators listed in the agreement, as long as at least one is available, is contrary to the parties' agreement.

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53 minutes ago, Pericles said:

If the arbitration agreement in your case has similar delegation language to the language described in the above case, then it can be argued that the court should not decide the "gateway" issue.

OPs agreement says only a court can decide if a case is subject to arbitration. 

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11 minutes ago, Harry Seaward said:

OPs agreement says only a court can decide if a case is subject to arbitration.

Every Credit One agreement that I've seen*, including the one attached on pacer in the Novic v. Credit One Bank, No . 17-2168 case, also has the language that you describe (that only a court can decide if a case is subject to arbitration).

And yet, Credit One (with Midland as a co-defendant) argued that other language in the agreement amounts to a delegation clause, and was able to convince the 4th circuit court of appeals of the same.

I happen to think that the court of appeals decision was wrong.  I've seen much clearer delegation clauses.

But Credit One (and indirectly, Midland) argued otherwise, when it served their purpose, and they were successful.  Perhaps they would now say they were wrong in the prior case?

*including all Credit One agreements in the CFPB and FTC databases.

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1 hour ago, Pericles said:

Every Credit One agreement that I've seen*, including the one attached on pacer in the Novic v. Credit One Bank, No . 17-2168 case, also has the language that you describe (that only a court can decide if a case is subject to arbitration).

And yet, Credit One (with Midland as a co-defendant) argued that other language in the agreement amounts to a delegation clause, and was able to convince the 4th circuit court of appeals of the same.

I happen to think that the court of appeals decision was wrong.  I've seen much clearer delegation clauses.

But Credit One (and indirectly, Midland) argued otherwise, when it served their purpose, and they were successful.  Perhaps they would now say they were wrong in the prior case?

It's very important to note that the Novic courts didn't face the same arbitration agreement language as what appears in the most current version of Credit One's agreement.  From Novic:

In addition, the arbitration provision contained supplementary language (the delegation clause), stating:
Claims subject to arbitration include, but are not limited to, disputes relating to . . . the application, enforceability or interpretation of this Agreement, including this arbitration provision.
 

From current Credit One agreement:

Claims are not subject to arbitration if they are filed by you or us in a small claims court or your state’s equivalent court, so long as the matter remains in such court and advances only an individual claim for relief. Also, disputes about the validity, enforceability, coverage or scope of this Arbitration Agreement or any part thereof are not subject to arbitration and are for a court to decide. But disputes about the application, enforceability or interpretation of the Card Agreement as a whole are subject to arbitration and are for the arbitrator to decide.

The version considered by Novic courts specifically includes the arb provision in the "claims subject to arbitration".  The current Credit One agreement excludes the arbitration agreement, but includes the agreement "as a whole".  I could see an ambiguity argument being made, but that's not what went down in Novic.

I think the Novic appellate court got it right, based on the language in the agreement before them.

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55 minutes ago, Harry Seaward said:

It's very important to note that the Novic courts didn't face the same arbitration agreement language as what appears in the most current version of Credit One's agreement.  From Novic:

In addition, the arbitration provision contained supplementary language (the delegation clause), stating:
Claims subject to arbitration include, but are not limited to, disputes relating to . . . the application, enforceability or interpretation of this Agreement, including this arbitration provision.

From current Credit One agreement:

Claims are not subject to arbitration if they are filed by you or us in a small claims court or your state’s equivalent court, so long as the matter remains in such court and advances only an individual claim for relief. Also, disputes about the validity, enforceability, coverage or scope of this Arbitration Agreement or any part thereof are not subject to arbitration and are for a court to decide. But disputes about the application, enforceability or interpretation of the Card Agreement as a whole are subject to arbitration and are for the arbitrator to decide.

What's your source for the most current agreement?  I can't find the above language (in the Credit One website link below).

I hadn't reviewed agreements from '18 or '19.  I now have reviewed the '19 agreement that is presently on their website (link).

The '19 agreement has this language:

Quote

Also, controversies or disputes about the validity, enforceability, coverage, meaning, or scope of this agreement to arbitrate or any part thereof are subject to arbitration and are for the arbitrator to decide.

I can't find "for a court to decide" anywhere within the current agreement pdf on the website.

What is the date of OP's agreement?

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6 minutes ago, Pericles said:

I suppose they changed it.

The original debt collection lawsuit against Novic was from 2016 (case 11-02-0002611-2016).  You think they changed the agreement since then to the one currently on the CFPB website (June 2018), then changed it back 9 months later?  I mean, it's possible, but seems unlikely?

9 minutes ago, Pericles said:

Did OP post the relevant agreement in this case?

I haven't seen it.  I've been operating on the language from the CFPB version.

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31 minutes ago, Harry Seaward said:

The original debt collection lawsuit against Novic was from 2016 (case 11-02-0002611-2016).  You think they changed the agreement since then to the one currently on the CFPB website (June 2018), then changed it back 9 months later?  I mean, it's possible, but seems unlikely?

I don't know.  I'll have to review my history of agreements.

By "changed" all I meant was that Credit One has unquestionably changed the agreement since the date of the agreement on the CFPB website as compared to the 2019.03.31 version presently on the credit one website.

Since the 2018.06.30 agreement does not delegate, but the Novic court was provided (in 2016) an agreement that (apparently) does delegate, there must be at least one prior version of the agreement (other than the current 2019.03.31 version) that delegates.

It might be kinda shrewd to flip-flop the delegation clause in and out every so often.

Then, if they want to use it (or not) they can provide a recent-ish agreement that corresponds to their desires.  Most fdcpa lawyers probably wouldn't catch this.

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Wonder what happened to OP - maybe she was tossed in the clink for contempt of court yesterday...

 

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