A state Appeals court in New Jersey has upheld a lower court’s ruling that a debt buyer that purchased a delinquent account and subsequently sued to collect on the unpaid debt is entitled to the same arbitration clause from the original agreement, even though the debt buyer was not licensed in New Jersey.
A copy of the unpublished ruling in the case of Maisano v. LVNV Funding can be accessed by clicking here.
The plaintiff obtained a credit card from Credit One Bank. The agreement included an arbitration clause, which, in bold letters, explained the nature of arbitration and warned the cardholder that he would not be able to go to court in the event of a controversy or dispute.
The plaintiff defaulted on his debt, which was sold to the defendant. The defendant sued in state court and the plaintiff paid off the debt. The plaintiff then filed suit against the defendant, which sought to have the case dismissed and to compel arbitration.
A state court judge ruled that the arguments put forth by the plaintiff — that the defendant was not licensed to collect in New Jersey — were covered by the original arbitration agreement and dismissed the suit. The plaintiff appealed, arguing the state court judge erred by deeming it was for an arbitrator to decide if the assignment of the debt to the defendant was void, by determining that the arbitration agreement did not violate the state’s plain language requirements, and by relying on inadmissible hearsay.
“Here, the Arbitration Agreement clearly and expressly stated claims relating to the ‘application, enforceability or interpretation of this Agreement, including this arbitration provision’ are subject to arbitration,” the Appeals Court wrote in its ruling. “Therefore, the threshold issue of arbitrability is to be determined by the arbitrator.”
The Appeals Court also ruled that the agreement did not violate the state’s plain language requirements and that the judge did not abuse her discretion in considering affidavits that the plaintiff thought should be inadmissible.
The Appeals Court did disagree with the lower court’s decision to dismiss the suit, and remanded the case back for a stay pending the outcome of arbitration.