Tuesday, July 23, 2013

Motion to Dismiss Credit Card Debt Suit Based on Arbitration Clause


Instead of moving for an order compelling arbitration, and thereby triggering the requirement to prove the underlying contract that contains it, the Defendant could instead seek dismissal of the litigation, albeit without prejudice to it being brought as an arbitration claim, by invoking the arbitration clause in the agreement produced by Plaintiff in response to a request for production, or attached by the Plaintiff as an exhibit to its motion for traditional summary judgment.

The argument would go like this:

On such and such date Plaintiff produced an account agreement titled Cardmember Agreement and designated CMA18103 or whatever. The proffered agreement contains arbitration provisions. Plaintiff had the obligation to fully respond to Defendant’s request for production regarding the contractual foundation of its claim, and was required to produce all material contract documents . The document produced by Plaintiff establishes conclusively that it relies on a contract that subject the claim asserted in this lawsuit to mandatory arbitration, upon election of either party. The document is admissible against Plaintiff because Plaintiff produced it in discovery. 

 …. or … 

By moving for summary judgment with CMA 37964 Plaintiff represents to the court, and thus judicially admits, that the contract upon which it relies subjects its claim to mandatory arbitration because said version of a Cardmember Agreement contains an arbitration clause to that effect.  
Defendant hereby elects arbitration and requests that the Court dismiss this suit because no issue remains that does not fall within the scope of the arbitration clause, and is therefore a proper subject of litigation and judicial determination, as opposed to arbitration.


The conventional manner to deal with arbitration in the context of a lawsuit that is already on file is to request an abatement contemporaneously with a motion to compel.

Abatement, however, does not end the lawsuit, and will likely allow either party to revive the lawsuit for the sole purpose of securing judicial confirmation of an arbitration award. If the defendant prevails in arbitration, there would be no need for judicial confirmation. The option to quickly return to court for confirmation of the award would only serve the interests of the creditor. Such confirmation would allow it invoke the remedies available for enforcement of a judgment, which are not available in the case of an arbitration award, standing by itself.

A dismissal, by contrast, would end the lawsuit. At the minimum, it would look better on the defendant’s public record, because a dismissal would not be an adjudication of the merits of either party claim or defense.

Because the court would not have reached the merits of the plaintiff’s claim, the dismissal would not be with prejudice, and would not entail res judicata or collateral estoppel effect (at least not on any issue other than arbitrability of the claim).

Assuming a dismissal without prejudice suits the defendant better than an abatement (which implies pendency), the Defendant would still have to persuade the judge to sign an order closing the case, rather than merely abating it.

Luckily, there is federal caselaw in support of dismissal being the proper disposition rather than merely abatement, at least under the Federal  Arbitration Act (FAA), to which most credit card agreements, if not all, make express reference.

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