Tuesday, July 23, 2013

Moving for arbitration in a credit card debt suit - Implications

What are the ramifications of moving for arbitration of the credit-card dispute? 


It is clear under a mountain of caselaw that the proponent of arbitration has the burden to prove arbitrability.

It is not enough for the defendant in credit card debt suit to express a preference for  arbitration. Assuming the plaintiff is opposed, as can be expected, the defendant will have to meet the two substantive requirements: (1) prove that an arbitration agreement exists, which requires proof of the cardmember agreement that contains both the arb provisions and all the other terms (unless the arbitration agreement is in the nature of a stand-alone agreement); and (2) that the arb provision in that card agreement is broad enough to cover the dispute.

The second element will hardly ever be in doubt, but it still requires reference to the contract language. A defendant cannot expect to convince a judge to grant a motion to compel arbitration merely by asserting that the original creditor’s card agreement always contain arbitration provisions. After all, there may be exceptions; the defendant would not be qualified to testify about “all” card agreements of a particular bank; nor are all arbitration agreements alike in regard to specifics. For example, they may specify particular arbitration entities, or specific procedures governing the resort to arbitration, such as notice of claim requirements and a time-table.

Instead of offering conclusory testimony averring that the dispute is subject to an arbitration agreement, the defendant will have to produce the agreement (if available) or affirmatively  rely on the one the plaintiff has produced (assuming it did, either in discovery, or as a summary judgment exhibit, or as an attachment to its petition). Relying on the Plaintiff’s contract exhibit will waive any objection about it not being the one that governs the parties’ dispute.

After all, the defendant could not treat the very same version of a form contract to as binding with respect to arbitration, but not binding regarding contractual liability to make payments on the account. Because proof of the contract containing the arbitration clause is a prerequisite for an order compelling arbitration, success with such a motion will preclude the defendant from raising the defense that the plaintiff has not proven the correct contract before the arbitrator or the arbitration panel.

Is there a way to benefit from the arbitration clause without conceding that the Plaintiff has proven the contractual foundation of its claim?


A Motion to Dismiss based on the presence of an arbitration clause in the cardmember agreement produced by the credit card bank or its assignee in discovery or attached to its motion for traditional summary judgment.

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