Lebovits v. Cavalry Portfolio Services, LLC

Background

Sarah Lebovits sued Cavalry Portfolio Services, LLC, Cavalry SPV I, LLC, and fictitiously named defendants under the Fair Debt Collection Practices Act. She alleged that a collection letter concerning a Citibank credit-card debt misleadingly referred to “Cavalry” without specifying whether disputes should be directed to Cavalry Portfolio or Cavalry SPV. She sought to proceed on behalf of herself and similarly situated people.

Before the court were the defendants’ motion to compel arbitration and stay the case and their motion to dismiss. Lebovits opposed arbitration, arguing that no reasonable person would have agreed to arbitrate claims with Citibank and its later assignees.

Arbitration Agreement

The court applied the Federal Arbitration Act and considered whether a valid arbitration agreement existed and whether Lebovits’s claims fell within its scope. The Citibank card agreement stated that Citibank could assign its rights and obligations to a third party and that the arbitration provision would survive a sale of the account or amounts owed. Citibank assigned the account to Cavalry SPV, which later assigned it to Cavalry Portfolio for collection.

The court held that the defendants stood in Citibank’s position and could enforce the arbitration provision. The court also found that Lebovits received the card agreement and used the credit card, which bound her to the agreement under the contract terms and South Dakota law.

Scope of Arbitration

The arbitration provision covered any claim, dispute, or controversy arising out of or relating to the account or the parties’ relationship, including claims based on statutory law. The court characterized the provision as broad. Because Lebovits’s claims concerned the collection of a debt arising from the account, the court held that they fell within the provision’s scope. The court also determined that the Fair Debt Collection Practices Act claims were subject to arbitration and that Lebovits had not shown that Congress intended to prevent arbitration of those claims.

Ruling

The court granted the defendants’ motion to compel arbitration and stayed the action pending arbitration. It denied the defendants’ motion to dismiss without prejudice. The clerk was directed to terminate the pending motions. Judge Kenneth M. Karas did not decide the underlying allegations about whether the collection letter violated the Fair Debt Collection Practices Act.