Motion to Compel Arbitration & Motion to Abate the Lawsuit

MOTION TO COMPEL ARBITRATION 
and 
MOTION TO ABATE THE PENDING LAWSUIT 

The obvious vehicle to give effect to an arbitration agreement when a lawsuit is already under way is a motion to compel arbitration, which is often combined with a motion to abate.

Public policy, both as the state level and at the federal level, favors arbitration, and the case law is also very favorable for parties that want to put a stop to litigation and arbitrate.

In order to be entitled to an order compelling arbitration, the proponent must prove two elements: (1) that a valid arbitration agreement exists between the parties in the lawsuit, and (2) that dispute in the lawsuit fall within its scope. The courts treat such a motion as similar to a motion for summary judgment.

The first element is far more significant in credit card debt litigation than the second. Why?
Because the arbitration agreement is contained in a cardmember agreement that is not signed by the Defendant; which implicates the question whether it is the correct agreement.

With respect to the second element, by contrast, there will rarely be any doubt at all that a failure to make payments on the account is covered by the scope as revealed in the wording of the arb provisions. The latter is a matter contract construction that requires an examination of the contract language; the former, however, requires extrinsic proof, and creditors and assignees don’t always have that kind of proof.

It is part of the creditor’s burden to prove that a particular unsigned agreement is the agreement under which the Defendant is liable. The Defendant can therefore assert in a response to a motion for summary judgment that the Plaintiff has not met that burden unless the plaintiff adduces contract-formation evidence to prove offer and acceptance with other evidence. Other evidence is need because there is no signature on the contract document to signify assent, and in most cases the cardholder’s name is not printed on the form contract either. Nor does the account number appear on it to establish a connection to the account on which the plaintiff sues. (Recent Amex  agreements are an exception in that regard).

If the Defendant wishes to move to enforce arbitration, he or she will have to either admit that the contract produced by the plaintiff is the correct one, or the defendant will have to come forth with the correct contract that was actually mailed by the card issuer, -- likely years earlier. Most consumers, of course, don’t keep monthly statements and other mailings from credit card companies. It is almost always the creditors or their assignees that produce a contract and claim it is the correct one, and sometimes do not do so either, be it for tactical reasons, or because they cannot locate the relevant agreement.

A move by the defendant or defendant’s counsel to enforce arbitration will make it necessary to waive any complaint about the contract produced by the Plaintiff not being the correct one, or about there being insufficient evidence to that effect (particularly under the summary judgment standard, which is higher than the one that applies at trial).

CONTINGENT ASSERTION OF ARBITRATION AS A DEFENSE, AND MOTION TO COMPEL 

A way of avoiding the concession -- and treating the version of a card agreement produced by the debt plaintiff as being the correct one -- would be to offer the arbitration argument as a fallback. It would go something like this:

Should the court determine that the Plaintiff has established that the cardmember agreement offered by it as a summary judgment exhibit is the one that governs the parties’ relationship, despite the absence of conclusive evidence of contract-formation, the court should give effect to defendant’s right to have the dispute resolved by arbitration, instead of litigation. 

But a motion to compel arbitration is only one option. Attorneys representing defendants may consider moving for outright dismissal instead, based on the plaintiff's reliance on a credit card agreement that contains an arbitration clause (or, more likely, an arbitration agreement consisting of several paragraphs, rather than merely a single clause comparable to a choice-of-law clause).

Moving for arbitration in a credit card debt suit - Implications

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

MOTION TO COMPEL ARBITRATION REQUIRES PROOF OF THE CONTRACT AND ITS TERMS 

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?

Possibly.

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.