Shetiwy v. Midland Credit Mgmt.
| Decision Date | 12 July 2013 |
| Docket Number | No. 12 Civ. 7068(SAS).,12 Civ. 7068(SAS). |
| Citation | 959 F.Supp.2d 469 |
| Parties | Amal SHETIWY, Louis C. Yeostros, Patricia R. Diffley, Johanna Arbelaez, Nicholas Doudalis, Nicole Gagnon, Safet Koljenovic, Magdi Abdalla, Ahmed Hassan, Ekatereine Skotedis, Vielka Vargas, Rose Villaneuva, John Murphy, Plamen Pankoft, Spiros Argyros, and others similarly situated, Plaintiffs, v. MIDLAND CREDIT MANAGEMENT, a/k/a Midland Funding LLC, Calvary Portfolio Service, Debtone, LLC, Cach, LLC, Asset Acceptance, LLC, FIA Card Services, N.A., Portfolio Recovery, Chase Bank, N.A., American Express Company, Bank of America, N.A., Capital One Financial Advisors, LLC, Associated Recovery Systems, Citigroup Inc., Citibank, N.A., Capital Management Services, GE Capital Consumer Lending, Inc., Equable Assent Financial, LLC, LVNV Funding, LLC and NCO Financial Systems, Defendants. |
| Court | U.S. District Court — Southern District of New York |
OPINION TEXT STARTS HERE
George E. Bassias, Esq., Astoria, NY, Phillip Jaffe, Esq., New York, NY, for Plaintiffs.
Casey Devin Laffey, Esq., Reed Smith, New York, NY, for Defendant Midland Credit Management also known as Midland Funding LLC.
Donald S. Maurice, Jr., Esq., Rachel Marin, Esq., Thomas Robert Dominczyk, Esq., Maurice & Needleman, P.C., Flemington, NJ, for Defendants Calvary Portfolio Service and Equable Asset Financial, LLC.
William Raley Alford, Esq., Stanley, Reuter, Ross, Thornton & Alford, New Orleans, LA, for Defendant DebtOne, LLC.
Jonathan Justin Greystone, Esq., Spector Gadon & Rosen, P.C., Philadelphia, PA, Kevin Evont Bowens, Esq., Manuel H. Newburger, Esq., Barron, Newburger, Sinsley & Wier, PLLC, Austin, TX, for Defendant Cach, LLC.
Aaron R. Easley, Esq., Sessions, Fishman, & Nathan, LLP, Metairie, LA, Kevin Barry McHugh, Esq., Law Offices of Edward Barfinkel, Brooklyn, NY, for Defendants NCO Financial Systems and Capital Management Services.
Concepcion A. Montoya, Esq., Hinshaw & Culbertson LLP, New York, NY, for Defendant LVNV Funding, LLC.
Jill M. Wheaton, Esq., Dykema Gossett, P.L.L.C., Ann Arbor, MI, Jonathan M. Albano, Esq., S. Elaine McChesney, Esq., Bingham McCutchen LLP, Boston, MA, for Defendant Asset Acceptance, LLC.
Gillian Ivy Biron, Esq., Bingham McCutchen LLP, New York, NY, Jonathan M. Albano, Esq., S. Elaine McChesney, Esq., Boston, MA, for Defendants FIA Card Services, N.A. and Bank of America, N.A.
Christopher William Madel, Esq., Jennifer M. Robbins, Esq., Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN, Oren Dov Langer, Esq., Robins, Kaplan, Miller & Ciresi, LLP, New York, NY, for Defendant Portfolio Recovery.
Andrew Arthur Ruffino, Esq., Covington & Burling LLP, New York, NY, Robert D. Wick, Esq., Covington & Burling, L.L.P., Washington, DC, for Defendant Chase Bank, N.A.
Carmine D. Boccuzzi, Jr., Esq., Mitchell A. Lowenthal, Esq., Lauren Kathryn Handelsman, Esq., Cleary Gottlieb Steen & Hamilton, LLP, New York, NY, for Defendant American Express Company.
David John Fioccola, Esq., Jessica Kaufman, Esq., Mark Paul Ladner, Esq., Morrison & Foerster LLP, New York, NY, for Defendants Capital One Financial Advisors, LLC and Capital One Financial Corporation.
John E. Brigandi, Esq., Salvo Law Firm, Fairfield, NJ, for Defendant Associated Recovery Systems.
Stephen Craig Robinson, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for Defendants CitiGroup Inc., Citibank, N.A.
Michael D. Hynes, Esq., Sarah B. Zimmer, Esq., DLA Piper U.S. LLP, for Defendant GE Capital Consumer Lending, Inc.
I. INTRODUCTION
Plaintiffs in this putative class action allege that banks, credit card companies, and debt collectors obtained thousands of judgments against debtors through false affidavits, misleading evidence, and other improper litigation tactics.1 They request injunctive, declaratory, and collateral relief based on: (i) the Racketeer Influenced and Corrupt Organizations Act (“RICO”); 2 (ii) the Fifth and Fourteenth Amendments of the U.S. Constitution; 3 (iii) the Fair Debt Collection Practices Act (“FDCPA”); 4 (iv) unjust enrichment; 5 (v) intentional infliction of emotional distress; 6 (vi) fraud; 7 (vii) Section 349 of the New York General Business Law; 8 and (vii) Section 487 of the New York Judiciary Law.9
Defendants American Express Company, GE Capital Consumer Lending, Inc., Citigroup, Inc. and Citibank N.A. (“Moving Defendants”), move to compel arbitration pursuant to the Federal Arbitration Act (“FAA”) and to stay all remaining proceedings against them pending the completion of that arbitration. For the reasons set forth below Moving Defendants' motion to compel arbitration and stay all further proceedings is granted.
II. BACKGROUNDA. Debt Collection
Plaintiffs allege that the defendant debt collection agencies, banks, and credit card companies conspired to collect debts though “fraudulently obtained judgments of default” in state courts around the country.10 Specifically, plaintiffs allege that credit card companies and banks sold debt for pennies on the dollar that they had previously written off for tax purposes.11 The debt collectors allegedly obtained judgments for default through fraudulent acts, including: (i) submitting affidavits containing statements of facts that were untrue or that were not based on the affiant's personal knowledge; (ii) failing to disclose how defendants calculated the amount of debt owed; (iii) proceeding without notifying plaintiffs that their debt had been assigned; (iv) suing on the full amount of debt even though the creditors had “already charged off a good portion of the debt for their tax advantage,” and (v) amending “the terms of [their] contract [s] with ... consumer[s] after the litigation [had] begun.” 12
Plaintiffs allege that the defendants' conduct is part of a larger pattern whereby debt collectors and creditors harass debtors and overwhelm the courts by filing thousands of frivolous debt collection suits.13 The state courts and the Federal Trade Commission (“FTC”) have on occasion identified and attempted to curtail many of the practices complained of in this suit. 14
B. The Arbitration Agreements
The Moving Defendants have each submitted affidavits swearing that the named plaintiffs and any individual that held credit accounts with the defendants agreed to the terms of the Arbitration Agreement contained in their respective Cardmember Agreements.15 The Arbitration Agreements require, upon election by either of the parties, mandatory and binding arbitration—on an individual basis only—of any claim, dispute or controversy arising from or relating to plaintiffs' accounts or the Cardmember Agreements, including those based on contract, tort, fraud, statute, regulation, common law, and equity.16
The GE Moneybank Card Agreement,17 the GE Money Bank Lord & Taylor Credit Card Agreement,18 and the American Express Business Capital Line Agreement 19 each contain a Utah choice of law provision. The Citibank Card Agreement contains a South Dakota choice of law provision. 20
III. LEGAL STANDARD AND APPLICABLE LAW
On a motion to compel arbitration, “the court applies a standard similar to that applicable for a motion for summary judgment.” 21 “If undisputed facts in the record require[ ] the issue of arbitrability to be resolved against the [p]laintiff as a matter of law,” then a district court must compel arbitration.22
These arbitration agreements are subject to the FAA.23 In determining arbitrability under the FAA the Second Circuit asks: “(1) whether the parties have entered into a valid agreement to arbitrate, and, if so, (2) whether the dispute at issue comes within the scope of the arbitration agreement.” 24 The party resisting arbitration bears the burden of demonstrating that the arbitration agreement is invalid or does not encompass the claims at issue.25
Section 2 of the FAA provides that an agreement to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 26 The enforceability of an arbitration clause is a matter for the courts to decide. 27
IV. DISCUSSION28A. The Arbitration Agreements Are Enforceable Under Governing State Law
The cardinal principle of the law of arbitration is that “under the [FAA, arbitration] is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit.” 29 “That freedom extends to choice-of-law provisions governing agreements, including agreements to arbitrate.” 30 Therefore, the parties' choice of law must govern. Utah or South Dakota law governs the arbitration agreements at issue.31 The parties agree that the arbitration clauses are valid under both Utah 32 and South Dakota law.33B. The Class Action Waivers Do Not Render the Arbitration Agreements Unenforceable
Plaintiffs argue that the arbitration agreements are not enforceable with respect to their RICO and FDCPA claims because the costs associated with individual arbitration preclude vindication of the statutory rights provided by these statutes.34
Just last month the Supreme Court answered in the negative the question “whether the [FAA] permits courts to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.” 35First, the Court reaffirmed that the FAA mandate that courts “rigorously enforce arbitration agreements according to their terms” extends to “claims that allege a violation of a federal statute, unless [the] mandate has been overridden by a contrary congressional command.” 36 In the context of federal antitrust law, the Court rejected the notion that Congress' “willing[ness] to go, in certain respects, beyond the normal limits of law in advancing its [antitrust goals]” constituted the necessary contrary congressional command to override the FAA's mandate.37
Second, the Court rejected a “judge-made [‘effective vindication’] exception to the FAA” as a basis for invalidating class action waivers. The majority...
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...apply it to invalidate the arbitration agreement at issue.” Id. at 2310;see also Shetiwy v. Midland Credit Mgm't, 959 F.Supp.2d 469, 474, No. 12 Civ. 7068(SAS), 2013 WL 3530524, at *3 (S.D.N.Y. July 12, 2013) (describing the Supreme Court in American Express as having “rejected a ‘judge mad......
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Shetiwy v. Midland Credit Mgmt.
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