Sued by JDB, Arbitration is not really an option, how to answer this?

[Mistymouse4590]

It appears that the Arb clause in the original note says that the oc is liable only for the first $1k of arb expenses, so i think it's not a good option for me. That said, I want to file an answer to help avoid a default. Here are my responses

 

1. Who is the named plaintiff in the suit?

Ve locity Investments LLC

3. How much are you being sued for?

$3,750. 

4. Who is the original creditor? (if not the Plaintiff)

WebBank

5. How do you know you are being sued? (You were served, right?)

Was served

6. How were you served? (Mail, In person, Notice on door)

Docs left at front door

7. Was the service legal as required by your state?

Yes

8. What was your correspondence (if any) with the people suing you before you think you were being sued?

None.

9. What state and county do you live in?

Arizona, Maricopa

10. When is the last time you paid on this account? (looking to establish if you are outside of the statute of limitations)

2020

11. When did you open the account (looking to establish what card agreement may be applicable)?

2017

12. What is the SOL on the debt? To find out:

3 years per AZ state

13. What is the status of your case? Suit served? Motions filed? 

Summons and complaint filed and served. No motions yet. 

14. Have you disputed the debt with the credit bureaus

No.

15. Did you request debt validation before the suit was filed? Note: if you haven't sent a debt validation request before being sued, it likely won't help create FDCPA violations, but disputing after being sued could be useful to show the court that you dispute the debt ('account stated' vs. 'breach of contract').

No. 

16. How long do you have to respond to the suit? (This should be in your paperwork). If you don't respond to the lawsuit notice you will lose automatically. In 99% of the cases, they will require you to answer the summons, and each point they are claiming. We need to know what the "charges" are. Please post what they are claiming. Did you receive an interrogatory (questionnaire) regarding the lawsuit?

a few more days till i have to submit response.

 

7. What evidence did they send with the summons? An affidavit? Statements from the OC? Contract? List anything else they attached as exhibits.

A Truth in Lending statement with my name, but no signature from me. Can't be sure it's the correct document and appears to show a different interest rate than the online portal of the OC. 

18.  How did you find out about this site?

Google! 

 

Further info: 

I have drafted an answer denying most claims in the complaint. The following allegations are made in the Plaintiff's complaint: 

1. that I executed a promissory note

2. that i borrowed a specific sum

3. that I agreed to pay all amounts due

4. that I have failed to make payments

and 5. that they have acquired the rights and obligations from the OC. 

Should I deny all of those allegations? on what grounds?

 

And finally, my answer draft includes the following affirmative defenses: 

1. fail to state cause of action

2. lack of legal standing

3. barred by statute of frauds

4. unjustly enrich the plaintiff

5. plaintiff has not proven debt is valid

 

Am I missing anything or doing anything wrong? 

[BV80]

1 minute ago, Mistymouse4590 said:

3. barred by statute of frauds

How is it barred by the Statute of Frauds?

 

1 minute ago, Mistymouse4590 said:

4. unjustly enrich the plaintiff

If you’re referring to the fact that the JDB paid “pennies on the dollar”, that usually won’t work.  It doesn’t matter that they didn’t pay full value for the account.  What matters is how much the contract required you to pay back.

In regard to the arbitration provision, is it with JAMS or AAA?

[nobk4me]

As I stated in another response to your inquiry, if this is a consumer debt, the arb forum consumer rules will limit your fees to either $200 (AAA) or $250 (JAMS).

[BackFromTheDebt]

11 minutes ago, nobk4me said:

As I stated in another response to your inquiry, if this is a consumer debt, the arb forum consumer rules will limit your fees to either $200 (AAA) or $250 (JAMS).

This is important. 
 

The JAMS and AAA rules can overrule what is in the arbitration agreement.  
 

And some states have limits as well.  

[Mistymouse4590]

8 minutes ago, BackFromTheDebt said:

The JAMS and AAA rules can overrule what is in the arbitration agreement.  

How can I be certain that these rules overrule what's in the arb language of my note? Obviously, I don't want to get into a situation where I'm liable for thousands of dollars of arb expenses. 

[kittycat]

2 hours ago, Mistymouse4590 said:

How can I be certain that these rules overrule what's in the arb language of my note? Obviously, I don't want to get into a situation where I'm liable for thousands of dollars of arb expenses. 

If you want no risk, settle.

Attached is an image from a webbank agreement.  A typical webbank agreement contains language of the sort:

Quote

We will always pay amounts required under applicable law or the administrator's rules

Check if your agreement has similar language.  I've never seen a webbank consumer arbitration agreement that limits their arbitration cost to the first $1000.  Post the entirety of the arbitration clause if you can.

Even if you don't plan to use arbitration it won't hurt to include it as an affirmative defense in your answer.

[Mistymouse4590]

49 minutes ago, kittycat said:

Check if your agreement has similar language.  I've never seen a webbank consumer arbitration agreement that limits their arbitration cost to the first $1000.  Post the entirety of the arbitration clause if you can.

 

Thanks. Here's the entirety of the arbitration clause from the promissory note. I've bolded the section that discusses cost. I don't have the original agreement available at this time, so I'm relying only on the Promissory note. I don't see any type of language like what you included, or a table like that. 

 

18. Arbitration. RESOLUTION OF DISPUTES: I HAVE READ THIS PROVISION CAREFULLY, AND UNDERSTAND THAT IT LIMITS MY RIGHTS IN THE EVENT OF A DISPUTE BETWEEN YOU AND ME. I UNDERSTAND THAT I HAVE THE RIGHT TO REJECT THIS PROVISION, AS PROVIDED IN PARAGRAPH (i) BELOW.

(a) In this Resolution of Disputes provision:
(i) "I", "me" and "my" mean the promisor under this Note, as well as any person claiming through such promisor;

(ii) "You" and "your" mean WebBank, any person servicing this Note for WebBank, any subsequent holders of this Note or any interest in this Note, any person servicing this Note for such subsequent holder of this note, and each of their respective parents, subsidiaries, affiliates, predecessors, successors, and assigns, as well as the officers, directors, and employees of each of them; and

(iii) "Claim" means any dispute, claim, or controversy (whether based on contract, tort, intentional tort, constitution, statute, ordinance, common law, or equity, whether pre-existing, present, or future, and whether seeking monetary, injunctive, declaratory, or any other relief) arising from or relating to this Note or the relationship between you and me (including claims arising prior to or after the date of the Note, and claims that are currently the subject of purported class action litigation in which I am not a member of a certified class), and includes claims that are brought as counterclaims, cross claims, third party claims or otherwise, as well as disputes about the validity or enforceability of this Note or the validity or enforceability of this Section.

(b) Any Claim shall be resolved, upon the election of either you or me, by binding arbitration administered by the American Arbitration Association or JAMS, under the applicable arbitration rules of the administrator in effect at the time a Claim is filed ("Rules"). Any arbitration under this arbitration agreement will take place on an individual basis; class arbitrations and class actions are not permitted. If I file a claim, I may choose the administrator; if you file a claim, you may choose the administrator, but you agree to change to the other permitted administrator at my request (assuming that the other administrator is available). I can obtain the Rules and other information about initiating arbitration by contacting the American Arbitration Association at 1633 Broadway, 10th Floor, New York, NY 10019, (800) 778-7879, www.adr.org; or by contacting JAMS at 1920 Main Street, Suite 300, Irvine, CA 92614, (949) 224-1810, www.jamsadr.com. Your address for serving any arbitration demand or claim is WebBank, c/o Prosper Marketplace, Inc., 221 Main Street, Third Floor, San Francisco, CA 94105, Attention: Legal Department.

(c) Claims will be arbitrated by a single, neutral arbitrator, who shall be a retired judge or a lawyer with at least ten years' experience. You agree not to invoke your right to elect arbitration of an individual Claim filed by me in a small claims or similar court (if any), so long as the Claim is pending on an individual basis only in such court.

(d) You will pay all filing and administration fees charged by the administrator and arbitrator fees up to $1,000, and you will consider my request to pay any additional arbitration costs. If an arbitrator issues an award in your favor, I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible. If I receive an award from the arbitrator, you will reimburse me for any fees paid by me to the administrator or arbitrator. Each party shall bear its own attorney's, expert's and witness fees, which shall not be considered costs of arbitration; however, if a statute gives me the right to recover these fees, or fees paid to the administrator or arbitrator, then these statutory rights will apply in arbitration.

(e) Any in-person arbitration hearing will be held in the city with the federal district court closest to my residence, or in such other location as you and we may mutually agree. The arbitrator shall apply applicable substantive law consistent with the Federal Arbitration Act, 9 U.S.C. § 1-16, and, if requested by either party, provide written reasoned findings of fact and conclusions of law. The arbitrator shall have the power to award any relief authorized under applicable law. Any appropriate court may enter judgment upon the arbitrator's award. The arbitrator's decision will be final and binding except that: (1) any party may exercise any appeal right under the FAA; and (2) any party may appeal any award relating to a claim for more than $100,000 to a three-arbitrator panel appointed by the administrator, which will reconsider de novo any aspect of the appealed award. The panel's decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal's cost, regardless of its outcome. However, you will consider any reasonable written request by me for you to bear the cost.

(f) YOU AND I AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN OUR INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and I agree otherwise in writing, the arbitrator may not consolidate more than one person's claims. The arbitrator shall have no power to arbitrate any Claims on a class action basis or Claims brought in a purported representative capacity on behalf of the general public, other borrowers, or other persons similarly situated. The validity and effect of this paragraph (f) shall be determined exclusively by a court, and not by the administrator or any arbitrator.

(g) If any portion of this Section 18 is deemed invalid or unenforceable for any reason, it shall not invalidate the remaining portions of this section. However, if paragraph (f) of this Section 18 is deemed invalid or unenforceable in whole or in part, then this entire Section 18 shall be deemed invalid and unenforceable. The terms of this Section 18 will prevail if there is any conflict between the Rules and this section.

(h) YOU AND I AGREE THAT, BY ENTERING INTO THIS NOTE, THE PARTIES ARE EACH WAIVING THE RIGHT TO A TRIAL BY JURY OR TO PARTICIPATE IN A CLASS ACTION. YOU AND I ACKNOWLEDGE THAT ARBITRATION WILL LIMIT OUR LEGAL RIGHTS, INCLUDING THE RIGHT TO PARTICIPATE IN A CLASS ACTION, THE RIGHT TO A JURY TRIAL, THE RIGHT TO CONDUCT FULL DISCOVERY, AND THE RIGHT TO APPEAL (EXCEPT AS PERMITTED IN PARAGRAPH (e) OR UNDER THE FEDERAL ARBITRATION ACT).

(i) I understand that I may reject the provisions of this Section 18, in which case neither you nor I will have the right to elect arbitration. Rejection of this Section 18 will not affect the remaining parts of this Note. To reject this Section 18, I must send you written notice of my rejection within 30 days after the date that this Note was made. I must include my name, address, and account number. The notice of rejection must be mailed to WebBank, c/o Prosper Marketplace, Inc., 221 Main Street, San Francisco, CA 94105, Attention: Legal Department. This is the only way that I can reject this Section 18.

(j) You and I acknowledge and agree that the arbitration agreement set forth in this Section 18 is made pursuant to a transaction involving interstate commerce, and thus the Federal Arbitration Act shall govern the interpretation and enforcement of this Section 18. This Section 18 shall survive the termination of this Note and the repayment of any or all amounts borrowed thereunder.

(k) This section shall not apply to covered borrowers as defined in the Military Lending Act.

[kittycat]

When it comes to arbitration costs (whether they be filing fees, administration fees, or arbitrator fees), there is the matter of which party pays which portion of them in the first instance.

In other words, how will the administrator (JAMS or AAA) allocate the initial charges and who be responsible for paying them when initially billed, in order to even start the arbitration.

If JAMS or AAA accepts the arbitration as a consumer arbitration, they will always allocate the initial charges according to their consumer rules.

There has been no reported deviation from this practice for any consumer arbitration.

If the non-consumer party argues that the contract limits their responsibility, the case manager will defer that argument to be made after the arbitrator is selected.

The non-consumer party still must pay the upfront costs in order for the arbitration to proceed, and if there is a court order to arbitrate in effect, they may violate the order if they fail to comply.

After the arbitrator is selected, the consumer rules usually prohibit the reallocation of arbitration costs and fees to the consumer except in instances of bad faith.

Your promissory note has express language to this effect:

Quote

I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible.

There are a lot of pronouns in the arbitration language.  Some provisions apply to only one party.  Replace all of the pronouns with the party names to make this clear.

While it is not impossible that the arbitration forum case manager could allocate upfront costs above $1000 to you, it is highly unlikely, so long as the arbitration is accepted by the forum as a consumer arbitration.

The odds are greatly against you in proceeding on the merits in arizona justice court.  If you file an answer without simultaneously filing a motion to compel arbitration, they will probably file a motion for summary judgment in short order.  There would be no risk of arbitration costs, but the risk of a quick judgment is quite high.

Arbitration can go bad as well.  You'll just have to decide for yourself.

You could email the attorney, seeking agreement for a stipulation and order referring the matter to private arbitration.  If they are amenable and don't refuse or offer an alternative settlement, that might be some indication about the usefulness of using the arbitration strategy. If you plan to defend in court, file your answer within the allowed time.

[BackFromTheDebt]

I think you misread the pronouns.  
 

Doesn’t “you” refer to Web Bank?

[Mistymouse4590]

8 hours ago, BackFromTheDebt said:

Doesn’t “you” refer to Web Bank?

Yes, that's correct. 

Thanks, @kittykat. I see that the language you quoted has a modifier at the beginning: 

If an arbitrator issues an award in your favor, I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible

Doesn't that mean that I am not responsible only if the arbitrator issues an award in webbank's favor. Seems like it doesn't preclude me from having to pay initial arbitration fees.

 

And thank you for the other advice. I am planning to file an answer today, as well as a MTC. Good strategy?

[BackFromTheDebt]

1 hour ago, Mistymouse4590 said:

Yes, that's correct. 

Thanks, @kittykat. I see that the language you quoted has a modifier at the beginning: 

If an arbitrator issues an award in your favor, I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible

Doesn't that mean that I am not responsible only if the arbitrator issues an award in webbank's favor. Seems like it doesn't preclude me from having to pay initial arbitration fees.

 

And thank you for the other advice. I am planning to file an answer today, as well as a MTC. Good strategy?

Yes.  Make sure to have an affirmative defense of improper venue due to the arbitration agreement 

[kittycat]

10 hours ago, BackFromTheDebt said:

I think you misread the pronouns.  
 

Doesn’t “you” refer to Web Bank?

Yes, you/your refers to WebBank, or for the purposes of the lawsuit, Velocity.

Quote

If an arbitrator issues an award in Velocity's favor, Mistymouse4590 will not be required to reimburse Velocity for any fees Velocity has/have previously paid to the administrator or for which Velocity is/are responsible.

How do you interpret this sentence?  In what way has it been misread?

 

2 hours ago, Mistymouse4590 said:

If an arbitrator issues an award in your favor, I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible

Doesn't that mean that I am not responsible only if the arbitrator issues an award in webbank's favor. Seems like it doesn't preclude me from having to pay initial arbitration fees.

There is allocation of fees and reallocation of fees.

The consumer arbitration rules of the arbitration forum limit the initial allocation of fees to you.

The language in the arbitration provision of the promissory note, as well as consumer arbitration rules of the arbitration forum, limit the later reallocation of fees to you.

The language in the promissory note also provides for an in-person arbitration hearing.  JAMS has resumed in-person hearings.  Leverage is less if you agree to a zoom virtual hearing rather than an in-person hearing.

[Mistymouse4590]

2 hours ago, BackFromTheDebt said:

Yes.  Make sure to have an affirmative defense of improper venue due to the arbitration agreement 

Thank you, I had already included: "The underlying contract contains a private arbitration clause which the Defendant has elected to exercise. Therefore, This Court does not have jurisdiction to hear this matter.". Is that sufficient, or do you recommend I add "Improper venue"? Could i add it like this: 

"Improper Venue. The underlying contract contains a private arbitration clause which the Defendant has elected to exercise. Therefore, This Court does not have jurisdiction to hear this matter."

Or does "improper venue" need to be its own affirmative defense?