Izett v. Crown Asset Management, LLC

Background

David Allan Izett sued Crown Asset Management, LLC; Rebekah Moore, also known as Rebekah Denys Toner; The Resolution Law Group, APC; Persolve, LLC; and Luis Duenas. The amended complaint alleged that the defendants made misrepresentations while attempting to collect an alleged debt arising from two Citibank consumer credit-card accounts. Izett asserted claims under the Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act. He also alleged that a declaration submitted in a prior California state-court debt-collection action falsely stated that Moore was available for service of process in San Francisco and had personal knowledge of the declaration’s contents. Izett sought to represent a proposed class of California residents who received similar declarations.

The defendants moved to compel arbitration. They submitted exemplar Citibank card agreements containing broad arbitration clauses covering claims relating to the accounts or the parties’ relationship, including statutory claims and class-action claims. The agreements stated that arbitration rights survived a transfer or sale of an account. The defendants also submitted records showing that Citibank transferred rights in Izett’s accounts to Crown.

Authentication and admissibility

The court held that the agreements were properly authenticated under Federal Rule of Evidence 901. William Peck, Citibank’s custodian of records and a Document Control Officer, described Citibank’s recordkeeping practices, including its practice of sending new card agreements when customers opened accounts. Peck stated that the exemplars were true and correct copies of agreements mailed to Izett, that Citibank had no record that the mailings were returned, and that Izett had not rejected the agreements by closing his accounts. The court also relied on related fact sheets containing Izett’s name, account numbers, and mailing address.

The court concluded that the agreements were admissible because contracts have independent legal significance and therefore are not hearsay. Alternatively, it concluded that the agreements would likely qualify under the business-record exception to the hearsay rule. Although Izett declared that he had never seen or received the agreements and had not agreed to their terms, the court applied the mailbox rule. It found that Peck’s sworn statement provided credible evidence that the agreements had been mailed and that Izett’s denial, without more, did not rebut the presumption of receipt. The court declined to strike Izett’s declaration as untimely.

Transfer of arbitration rights

Izett argued that the agreements might have been replaced or that Crown might have waived arbitration in its purchase-and-sale agreement with Citibank. The court found no evidence that the agreements had been superseded or that Crown had waived arbitration. The agreements expressly allowed arbitration rights to survive a transfer, and the defendants submitted evidence that Citibank transferred the account rights to Crown and approved Crown’s effort to compel arbitration.

Merger and waiver

Izett argued that Crown’s arbitration right had merged into, and therefore been extinguished by, the judgment in the state-court collection action. The court treated that argument as a challenge to the agreements as a whole and held that an arbitrator, not the court, must decide it.

The court separately decided whether the defendants waived arbitration by litigating the earlier state-court collection action. Applying the stated South Dakota-law waiver standard, the court explained that waiver required knowledge of the arbitration right, conduct inconsistent with that right, and prejudice to the party opposing arbitration. It found no waiver because the state-court action involved debt-collection claims in a separate lawsuit, while this case involved Izett’s debt-collection-law claims. The court also found that Izett had not been prejudiced and that the defendants moved to compel arbitration promptly in this case.

Disposition

Judge Edward M. Chen granted the defendants’ motion to compel arbitration. The court found the card agreements authenticated and admissible and found that the defendants had not waived their arbitration rights. It directed the merger question and Izett’s other claims to the arbitrator. The opinion states that the order disposed of Docket No. 44.