A District Court judge in New Jersey has denied a plaintiff’s motion for summary judgment in a Fair Debt Collection Practices Act case over whether the defendant should have dismissed or stayed a collection lawsuit after the plaintiff attempted to invoke the arbitration clause of the underlying credit agreement and demanded the case be arbitrated instead.
The background: The case stems from a debt collection lawsuit filed in New Jersey state court over an unpaid credit card account.
- The plaintiff filed a motion to compel arbitration and demanded the case be stayed, the state court denied that motion. The case was set for trial, but the plaintiff failed to appear, resulting in a default judgment being entered against them.
- Despite receiving the demand and the motion, the defendant proceeded with the lawsuit until the state court ruled on the motion to compel arbitration. The plaintiff subsequently filed this federal action, alleging that the defendant violated the FDCPA by continuing to litigate in court despite being aware of the arbitration clause. Specifically, the plaintiff claimed that the defendant’s refusal to voluntarily withdraw or pause the collection lawsuit constituted deceptive or unfair conduct.
The ruling: Judge Karen M. Williams of the District Court for the District of New Jersey rejected the plaintiff’s interpretation of the FDCPA, concluding that merely continuing to litigate until the court ruled on the arbitration motion did not amount to abusive or deceptive conduct.
- “Courts have repeatedly held that continuing to litigate until a motion to compel arbitration is granted does not, in and of itself, constitute a deceptive or unfair practice under the FDCPA,” she wrote.
- The judge emphasized that it is not the arbitration demand alone, but a court’s determination, that dictates whether the case should be compelled to arbitration. “Simply sending an arbitration demand letter does not eliminate a debt collector’s right to seek judicial resolution unless and until a court orders the matter to arbitration,” Judge Williams ruled.
- The court also noted that the plaintiff failed to demonstrate any abusive tactics or harassment, dismissing the argument that the defendant’s conduct rose to the level of an FDCPA violation.
