Judge Denies Motion to Compel Arbitration in FDCPA Case

A District Court judge in California has denied a defendant’s motion to compel arbitration in a Fair Debt Collection Practices Act case, ruling that the collection law firm’s actions were independent of the original creditor, and thus not subject to the original agreement’s arbitration clause.

A copy of the ruling in the case of Estrada v. The Moore Law Group can be accessed by clicking here.

The plaintiff’s wallet was stolen and someone used her credit card 200 times, charging more than $8,500 to the card. The plaintiff claims the original creditor did not conduct an investigation, refused to remove the charges, and attempted to collect on the debt. The creditor sued the plaintiff to collect and the plaintiff sought to have the case moved to arbitration. The creditor placed the account with the defendant, whom the plaintiff accused of engaging in unlawful collection attempts. The defendant sought to compel arbitration, based on the arbitration clause in the original agreement between the plaintiff and the creditor.

Governing law to the agreement is from South Dakota and a court ruling from that state’s Supreme Court has held that nonsignatories to an arbitration agreement can compel arbitration where the plaintiff alleged “substantially interdependent and concerted misconduct” between the signatory and nonsignatory.

In this case, the plaintiff did not allege such a relationship between the defendant and the original creditor, and the Court is not able to infer that the defendant worked “in concert” with the creditor to unlawfully collect the debt, noted Judge Otis D. Wright, II of the District Court for the Central District of California.

The defendant argued that the plaintiff would not have a claim against it “but for” the dispute between the plaintiff and the original creditor, but the plaintiff’s claims against the defendant are independent of her claims against the creditor, Judge Wright ruled.

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