The Court of Appeals of Indiana has affirmed a lower court’s ruling compelling arbitration in a Fair Debt Collection Practices Act class-action case brought by a plaintiff that accused the defendant of adding additional provisions into a settlement agreement between the two parties.
The Background: The plaintiff took out a loan to finance the purchase of a car from a CarMax dealership. CarMax assigned its rights under the contract to Santander Consumer USA, a lender. The defendant defaulted on the loan and the lender repossessed and sold the vehicle, but the sale did not cover the balance on the remaining debt. The plaintiff still owed more than $11,000 to the lender. The lender assigned its rights to collect on the remaining debt to the defendant.
- The defendant filed a collection lawsuit against the plaintiff. The two sides purportedly reached a settlement and the defendant sent the plaintiff a copy of an agreed judgment to sign. But instead of signing it, the plaintiff filed a class-action against the defendant, saying the judgment contained provisions that were not part of the original settlement and the defendant’s actions violated the FDCPA and state law in Indiana.
- The defendant filed a motion to compel arbitration, which a state court judge granted.
- The plaintiff appealed, arguing that the arbitration clause in the original contract contained language that did not allow the defendant to invoke its terms. The language in question — “For purposes of this Arbitration Provision, references to we, us and our mean the Seller including its respective subsidiaries, affiliates, agents, employees and officers, or anyone to whom the Seller transfers its rights under the Contract” — especially this — “or anyone to whom the Seller transfers its rights under the Contract” — limits the provision to apply only to CarMax and Santander and not Santander to the defendant, because Santander is not the seller.
The Ruling: Unfortunately for the plaintiff, the language in question does not express an intent to limit assignments, the Appeals Court determined. Once a seller transfers its rights by assignment, the purchaser of the contract possess all of its rights, including the ability to subsequently transfer its rights.
- “Jefferson had the same set of rights that CarMax possessed when it executed the Contract and could enforce the Arbitration Provision,” the Appeals Court wrote.
