The Court of Appeals for the Third Circuit has reversed the dismissal of a lawsuit filed by an individual against the consumer rights law firm she hired to help repair her credit that accused the firm of engaging in racketeering, consumer fraud, and unlawful debt adjustment practices, ruling that the lower court mis-applied the choice of law provision and that an arbitration clause in the underlying contract should be enforced.
A copy of the ruling in the case of Frederick v. The Law Office of Fox Kohler & Associates, f/k/a National Legal Center, Arthur Kohler and Roseanna Fox can be accessed by clicking here.
The plaintiff entered into an agreement with the defendants to help her negotiate unpaid debts that were owed to her creditors. She filed the lawsuit six years later, claiming that the defendants had withdrawn nearly $30,000 from her bank account, but only used half of it to repay her creditors. She also claimed the services were provided by attorneys or licensed debt adjusters who were authorized to practice in New Jersey. The defendants sought to enforce an arbitration claim in the agreement, but a District Court judge denied the motion, ruling that New Jersey law should apply, and not Delaware as stated in the agreement.
At the end of the day, the Appeals Court ruled, there was nothing wrong with the arbitration clause in the agreement that would require it to be invalidated, regardless of which state’s laws are being applied.
“The Agreement’s arbitration provision explains that arbitration ‘replaces the right to go to court before a judge or jury’ and further states that arbitration ‘may limit each party’s right to discovery and appeal,’ ” the Appeals Court wrote. “Additionally, it states that ‘[a]ny dispute that cannot be resolved between the parties after 180 days must be resolved by binding arbitration’ and that the Agreement ‘shall be submitted for binding arbitration in accordance with the rules of the American Arbitration Association[,]’ thereby both clarifying that arbitration is the singular way for the parties to resolve their disputes and establishing the rules that will govern the arbitration.”
