Calif. Appeals Court Upholds Ruling Denying Defendant’s Motion to Compel Arbitration

A California Appeals Court has affirmed a lower court’s ruling denying a defendant’s motion to compel arbitration in a Rosenthal Fair Debt Collection Practices Act case, after a lower court determined the defendant did not meet its burden of proving the existence of an arbitration agreement between the original creditor and the plaintiff.

A copy of the ruling in the case of Chai v. National Enterprise Systems can be accessed by clicking here.

The defendant was hired to collect an unpaid credit card debt from the plaintiff. The defendant sent a collection notice that allegedly did not include a disclosure because the statute of limitations on the debt had expired. The plaintiff filed suit, alleging the notice violated the RFDCPA. The defendant filed a motion to compel arbitration, submitting two cardholder agreements produced by the original creditor. Neither agreement referenced the plaintiff by name, included an account number, or had the plaintiff’s signature. The plaintiff opposed the motion, arguing that the defendant failed to connect the plaintiff to the “generic” documents and claiming that he had never seen the agreements or received any documents. A state court judge ruled the documents were not admissible because there was no proof they were sent to the plaintiff. The defendant appealed.

While the custodian of records for the original creditor declared that the agreements submitted by the defendant were linked to the plaintiff’s account, the custodian did not declare how or if the agreements were provided to the plaintiff for his review and acceptance, the Appeals Court wrote. The defendant did not produce any evidence the agreements were sent to the plaintiff or that the plaintiff assented to the terms of the agreements.

Because the plaintiff — under the penalty of perjury — declared he never received the agreements, the burden to prove the existence of a valid arbitration agreement shifted to the defendant.

The defendant “has failed entirely to demonstrate that Citibank provided Chai with the card agreements containing the arbitration provisions,” the Appeals Court wrote. “Absent such evidence, the trial court properly determined that NES failed to meet its burden to prove the existence of the agreement by a preponderance of the evidence.”

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