Wexler v. LVNV Funding, LLC

Background

Shimshon Wexler sued LVNV Funding, LLC and Resurgent Capital Services LP under the Fair Debt Collection Practices Act, a federal law governing debt-collection practices. He alleged that LVNV falsely claimed to have purchased a debt connected to a Citibank personal credit-card account and that LVNV and Resurgent improperly attempted to collect it. Wexler alleged that he paid $1,322.96 through Resurgent’s website to settle a stated balance of $4,409.88, but that the defendants later continued to report and collect a remaining balance of $3,086.92.

The defendants moved to compel arbitration. They relied on a Citibank credit-card agreement containing a broad arbitration provision covering claims arising from or related to the account or the parties’ relationship, regardless of the legal theory or remedy. The agreement also incorporated the American Arbitration Association’s rules and stated that the provision survived a sale of the account.

Issues and analysis

The court considered whether the arbitration agreement was valid, whether LVNV and Resurgent could enforce it even though neither signed the original credit-card agreement, and whether Wexler’s claims fell within the agreement’s scope.

The court held that the credit-card agreement was valid under South Dakota law. Wexler admitted that he had created and used the Citibank credit-card account, and the court concluded that use of the card created a binding contract containing an enforceable arbitration provision.

The court also ruled that the credit-card agreement was admissible for purposes of the motion. A Resurgent paralegal provided a declaration describing LVNV’s business-record practices and its incorporation and use of the credit-card agreement. The court found that this foundation satisfied the business-records exception to the evidence rules and adequately authenticated the agreement.

As to LVNV, the court found that Citibank had assigned its rights in Wexler’s account through a series of documented transfers: first to Sherman Originator III LLC, then to Sherman Originator LLC, and finally to LVNV. Because the agreement allowed Citibank to assign its rights and because the documents established the transfers, the court concluded that LVNV acquired Citibank’s right to enforce the arbitration provision.

As to Resurgent, the court noted that Resurgent was not an assignee. It nevertheless held that Resurgent could enforce the arbitration agreement under equitable estoppel, a doctrine that can prevent a party from avoiding arbitration when its claims rely on a contract and the non-signatory defendant’s alleged conduct is closely connected to the signatory’s conduct. The court found that Wexler alleged substantially interdependent and concerted misconduct by LVNV and Resurgent, which managed and collected LVNV’s debts. The court therefore did not resolve Resurgent’s alternative arguments that it could enforce the agreement under the agreement’s terms or as a third-party beneficiary.

The court further found that the arbitration provision was broad and incorporated arbitration rules authorizing the arbitrator to decide questions about arbitrability. The court stated that this was clear evidence that the parties intended to delegate those questions to the arbitrator. In any event, the court said that FDCPA claims fell within the broad provision because they arose from or related to the credit-card account and debt-collection relationship.

Disposition

Judge Paul A. Engelmayer granted the defendants’ motion to compel arbitration. The court stayed the action in its entirety and directed the parties to file a joint status update every 60 days concerning the arbitration. The opinion did not decide whether LVNV or Resurgent violated the Fair Debt Collection Practices Act.