Novic v. Midland Funding, LLC et al

Filing 99

MEMORANDUM OPINION. Signed by Judge Richard D. Bennett on 9/21/2017. (krs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CHARLENE NOVIC,

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Plaintiff,

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v.

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MIDLAND FUNDING, LLC, et al.,
Defendants.
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Civil Action No.: RDB-17-0177

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MEMORANDUM OPINION

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Plaintiff Charlene Novic (“Plaintiff” or “Ms. Novic”) initially brought this action
against Defendants Credit One Bank, N.A. (“Credit One”), Midland Funding, LLC and
Midland Credit Management, LLC (collectively, “Midland”), Trans Union, LLC (“Trans
Union”), Equifax Information Services, LLC, (“Equifax”), and Experian Information
Solutions, Inc. (“Experian”) 1 alleging violations of the Federal Credit Reporting Act
(“FCRA”), 15 U.S.C. § 1681, et seq. (Am. Compl. ECF No. 23.) Currently pending before this
Court is Defendant Credit One’s Motion to Compel Arbitration and Stay the Litigation.
(ECF No. 52.) The parties’ submissions have been reviewed, and no hearing is necessary. See
Local Rule 105.6 (D. Md. 2016). For the reasons stated herein, Defendant’s Motion to
Compel Arbitration and Stay the Litigation (ECF No. 52) is DENIED.
BACKGROUND
Ms. Novic opened an account with Credit One in September of 2011. (ECF No. 23
at ¶ 6.) In August of 2013, unbeknownst to Ms. Novic, the mailing address on her account
As indicated infra, the claims against the Defendants TransUnion, Equifax, and Experian have now been
dismissed and Credit One and Midland are the only remaining defendants.

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was switched from her Maryland address to an address in Oregon. (ECF No. 23 at ¶¶ 16-19;
ECF No. 54-1 at 11.) One month later, fraudulent charges began accumulating on Ms.
Novic’s account. (Id.) Ms. Novic, not yet realizing the fraud, continued to make monthly
payments only in an amount sufficient to cover her usual spending. (ECF No. 23 at ¶ 25.)
On March 22, 2014, Ms. Novic received a late notice from Credit One via email that stated
“if you have already made your payment, please ignore this notice.” (Id. at ¶ 26.) Believing
that she had already paid her account, Ms. Novic ignored the notice. (Id.) Eight days later,
Credit One sold Ms. Novic’s account. (Id. at ¶ 27). Over the next month, Ms. Novic’s
account was sold from Credit One to MHC Receivables, LLC (“MHC”), from MHC to
Sherman Originator III LLC (“Sherman”), and then from Sherman to Midland. (ECF No.
54-1 at 9.)
In late April of 2014, Midland began contacting Ms. Novic to collect the debt via
letter and telephone calls. (ECF No. 23 at ¶¶ 28-29.) Ms. Novic, not yet aware of the fraud
or that her account had been sold to Midland, initially thought the calls were a scam. (Id. at ¶
31.) After the calls continued, Ms. Novic demanded proof that she owed the debt. (Id.) After
speaking with Midland representatives and contacting Credit One, Ms. Novic finally received
an account statement showing the fraudulent address and unauthorized charges. (Id. at ¶¶ 20,
32.) Ms. Novic immediately reported the fraudulent Oregon address and unauthorized
transactions to Midland. (Id. at ¶ 32.) When she checked her credit reports, Ms. Novic saw
that both Credit One and Midland were reporting the same fraudulent account. (Id. at ¶¶ 34,
39.) Ms. Novic then began to dispute the debt with Equifax, Trans Union, and Experian. (Id.
at ¶¶ 35-39.) When Credit One and Midland continued to report that Ms. Novic owed
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money on the fraudulent account, however, the credit bureaus refused to remove the false
reporting. (Id.)
Despite Ms. Novic’s disputes and reports of fraud, in 2016, Midland initiated
collection proceedings against Ms. Novic in the District Court of Maryland for Washington
County. (ECF No. 54-1 at 1-7.) Midland, in order to show that it was the successor-ininterest to Ms. Novic’s account, had documentation and affidavits from Credit One. (Id. at
12-14, 16-17.) To show that Credit One originated Ms. Novic’s account, Credit One’s Vice
President of Portfolio Services-Operations, Gary Harwood, noted on the bill from MHC to
Sherman that Credit One acknowledged the sale and that the accounts were originated by
Credit One and had previously been assigned to MHC. (Id. at 12.) Mr. Harwood also
provided an affidavit detailing that Ms. Novic’s account was “originated by Credit One and
owned by MHC immediately prior to the sale to Sherman” and the sale “represent[s] all
rights to the accounts and receivables previously owned and serviced by Credit One.” (Id. at
13-14.) Midland then had a copy of the bills of sale from MHC to Sherman and from
Sherman to Midland. (Id. at 8-25.) In addition, Credit One’s Senior Vice President and Chief
Financial Officer provided an affidavit similar to Mr. Harwood’s detailing how Credit One
assigns accounts and receivables “represent[ing] all rights to the accounts.” (Id. at 16-17.)
Ms. Novic filed a notice of intention to defend on the grounds that someone had
stolen her identity, changed the address on her account, and ran up charges. (ECF No. 54 at
2, ¶ 2; ECF No. 54-1 at 3.) The state district court, after a trial on the merits on October 3,
2016, entered judgment in favor of Ms. Novic. (ECF No. 23 at ¶¶ 46-52.)

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On December 27, 2016, Ms. Novic filed the instant action in the Circuit Court for
Anne Arundel County. (ECF No. 2.) Defendant Trans Union removed the case to federal
court based on federal question jurisdiction. (ECF No. 1.) On June 15, 2017, this Court
ordered a Stipulation of Dismissal with Prejudice between Ms. Novic and Defendant Trans
Union. (ECF No. 63.) On September 11, 2017, by agreement of the parties, this Court
dismissed Defendants Equifax and Experian from this action. (ECF No. 93.)
On March 24, 2017, Credit One filed a Motion to Compel Arbitration and Stay the
Litigation. (ECF No. 52.) Initially, Midland also filed a Motion to Compel Arbitration and
Stay the Proceedings. (ECF No. 61.) Following a teleconference with the parties, this Court
granted Credit One and Midland leave to file Supplemental Memorandum in Support of
their Motions to Compel Arbitration regarding the Maryland Court of Appeals’ March 24,
2017 decision in Cain v. Midland Funding, LLC, 452 Md. 141 (2017). (ECF Nos. 72, 74.) Five
days after the teleconference, Midland filed a Consent Motion to Withdraw its Motion to
Compel Arbitration and Stay Proceedings, ECF No. 75, which this Court granted. (ECF No.
77.)
STANDARD OF REVIEW
Defendant Credit One has filed the pending Motion to Compel Arbitration (ECF
No. 52) pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. The standard of
review on a Motion to Compel Arbitration pursuant to the FAA is “‘akin to the burden on
summary judgment.’” 2 Galloway v. Santander Consumer USA, Inc., 819 F. 3d 79, 85 (4th Cir.
Although the Fourth Circuit has characterized the standard of review on a Motion to Compel Arbitration as
“akin to the burden on summary judgment,” the pending motion will not be converted to or treated as a
motion for summary judgment. On the contrary, the remedies available to a defendant moving to compel
arbitration are limited to a stay or dismissal of the action. See Choice Hotels Int’l, Inc. v. BSR Tropicana Resort, Inc.,

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2016) (quoting Chorley Enterprises, Inc. v. Dickey’s Barbecue Restaurants, Inc., 807 F. 3d 553, 564
(4th Cir. 2015)). Therefore, motions to compel arbitration “shall [be] grant[ed] … if the
movant shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); Rose v. New Day Financial,
LLC, 816 F. Supp. 2d 245, 251-52 (D. Md. 2011).
A party seeking to apply the FAA must demonstrate four elements: “‘(1) the existence
of a dispute between the parties, (2) a written agreement that includes an arbitration
provision which purports to cover the dispute, (3) the relationship of the transaction, which
is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect
or refusal of the defendant to arbitrate the dispute.’” Galloway, 819 F. 3d at 84 (quoting Rota–
McLarty v. Santander Consumer USA, Inc., 700 F. 3d 690, 696 n. 6 (4th Cir. 2012)). Therefore,
“although arbitration has a favored place, there still must be an underlying agreement
between the parties to arbitrate.’” Adkins v. Labor Ready, Inc., 303 F. 3d 496, 501 (4th Cir.
2002) (quoting Arrants v. Buck, 130 F. 3d 636, 640 (4th Cir. 1997)). The Supreme Court has
directed courts to “apply ordinary state-law principles that govern the formation of
contracts” and “federal substantive law of arbitratbility.” Hill v. Peoplesoft USA, Inc., 412 F. 3d
540, 543 (4th Cir. 2005); see also Heller v. TriEnergy, Inc., 877 F. Supp. 2d 414, 423-24
(N.D.W.V. 2012) (explaining that the “one important caveat to the reach of the FAA” is that
state law governs the formation of the contract (citing Hill, 412 F. 3d at 543)).

252 F. 3d 707, 709-10 (4th Cir. 2001) (“[T]he FAA requires a district court, upon motion by any party, to stay
judicial proceedings involving issues covered by written arbitration agreements [citing 9 U.S.C. § 3] . . . .
Notwithstanding the terms of § 3, however, dismissal is a proper remedy when all of the issues presented in a
lawsuit are arbitrable. [citing Alford v. Dean Witter Reynolds, Inc., 975 F. 2d 1161, 1164 (5th Cir. 1992)].”)

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ANALYSIS
Ms. Novic does not contest that the Agreement between herself and the Defendant
Credit One once contained a valid agreement to arbitrate. Rather, Ms. Novic’s argument is
two-fold: First, that Credit One ceased to be a party to the arbitration agreement when it
assigned all of its right, title and interest to Ms. Novic’s account. Therefore, it no longer
holds the right to compel arbitration. Second, that even if the arbitration agreement between
Ms. Novic and Credit One survived the assignments, the right to arbitrate was waived as the
result of the state court litigation. This Court addresses these arguments in turn. 3
I.

Defendant assigned its right to arbitrate

Ms. Novic first argues that there is no longer a binding and enforceable agreement to
arbitrate as a result of Credit One’s assignment of its right, title and interest to her account.
(ECF No. 79 at 5.) “[A]rbitrability is at bottom a question of contract interpretation; a party
cannot be required to arbitrate a dispute if it has not contractually agreed to do so.” Sierra
Roach v. Navient Solutions, Inc., 165 F. Supp. 3d 343, 346, 2015 WL 8479195, at *3 (D. Md.
Dec. 10, 2015). Therefore, “[w]hile ambiguities in the language of [an] agreement should be
resolved in favor of arbitration, Volt [v. Information Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior Univ., 489 U.S. 468, 478 (1980)], [the Court does] not override the clear intent
of the parties, or reach a result inconsistent with the plain text of the contract, simply
because the policy favoring arbitration is implicated.” E.E.O.C. v. Waffle House, Inc., 534 U.S.
279, 294 (2002).
In Plaintiff’s initial Response in Opposition to Defendant’s Motion to Compel, Plaintiff also argued that if
Defendant retained any right to compel arbitration, that right merged into the state court judgment entered
against Midland. (ECF No. 54 at 7, 12.) Because this Court finds that Defendant did not maintain any right to
arbitrate, it does not reach this issue.
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While the parties dispute what, if any, state law would control the issue of waiver,
both parties apply Maryland law to the issue of assignment. (ECF No. 52-1 at 6; ECF No. 54
at 6.) In Maryland, “‘a contract cannot be enforced by or against a person who is not a party
to it.’” Cecilia Schwaber Trust Two v. Hartford Acc. and Indem. Co., 437 F. Supp. 2d 485, 489 (D.
Md. 2006) (quoting CraneIce Cream Co. v. Terminal Freezing & Heating Co., 147 Md. 588, 128 A.
280, 281 (1925)). An assignment “transfer[s] all interests in the property from the assignor to
the assignee.” Roberts v. Total Health Care, Inc., 349 Md. 499, 511, 709 A. 2d 142, 148 (1998);
see also Bouchard v. People’s Bank, 219 Conn. 465, 473, 594 A. 2d 1, 4-5 (1991) (“Succession by
an assignee to exclusive ownership of all or part of the assignor’s rights respecting the
subject matter of the assignment, and a corresponding extinguishment of those rights in the
assignor, is precisely the effect of a valid assignment.”). The Maryland Court of Appeals
recently reiterated this principle, stating that “[a]n assignment is a transfer of property or of
some other right from one person (the assignor) to another (the assignee), which confers a
complete and present right in the subject matter to the assignee, and privity of estate
between the original parties ceases to exist.” Julian v. Buonassissi, 414 Md. 641, 662, 997 A. 2d
104, 116, n.12 (2010).
The Agreement sets out the rights initially created when Ms. Novic opened an
account with Credit One. The Agreement to Arbitrate provision states: “[y]ou and we agree
that either you or we may, without the other’s consent, require that any controversy or
dispute between you and us . . . be submitted to mandatory, binding arbitration.” (ECF No.
52-5 at 5.) The Agreement defines “you” as those authorized to use the card and “we” as
“Credit One Bank, N.A., its successors or assigns.” (Id. at 2.)
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The subsequent bills of sale, gathered by Midland for its suit against Ms. Novic, then
show the extent of the assignments between the assignors, initially the Defendant Credit
One, and subsequent assignees. The bill of sale from MHC to Sherman states that MHC
“hereby transfers, sells, assigns, conveys, grants and delivers to Sherman Originator III LLC
… all of its right, title and interest in and to [Ms. Novic’s account].” (ECF No. 54-1 at 12.)
On the bill of sale is Credit One’s acknowledgement that “[t]he accounts assigned under the
terms of th[e] Bill of Sale were originated by Credit One Bank, N.A., and ha[d] previously
been assigned to MHC pursuant to a series of self-executing agreements.” Id.
The Defendant Credit One provided two affidavits that further assisted Midland in
the state court case in proving that it was the successor-in-interest to Ms. Novic’s account.
The Vice President of Portfolio Services-Operations at Credit One provided an affidavit of
sale stating that accounts and receivables, including Ms. Novic’s, originated by Credit One to
MHC and subsequently Sherman “represent all rights to the accounts and receivables
previously owed and serviced by Credit One.” (ECF No. 54-1 at 13.) Defendant’s Senior
Vice President and Chief Financial Officer also provided similar information in his affidavit,
stating that accounts purchased from MHC “represent all rights to the accounts previously
owed and serviced by Credit One.” (ECF No. 54-1 at 17.)
Despite the language of the Agreement and bills of sale, Credit One argues that it
maintains its right to arbitrate in the Agreement due to the Agreement’s Severability and
Survival provision. This provision states that the “arbitration provision shall survive . . . any
transfer or assignment of your account, or any amounts owed on your account.” (ECF No.
52-5 at 6.) Defendant cites a case from the United States District Court from the Northern
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District of Georgia where the court held that “an arbitration provision may survive the
termination of a contract because it is a ‘structural provision’ that relates to remedies and
dispute resolution, and not an obligation concerning performance.” Goshawk Dedicated Ltd. v.
Portsmouth Settlement Co. I, Inc., 466 F. Supp. 2d 1293, 1300 (N.D. Ga. 2006). However,
Defendant’s reliance on Goshawk Dedicated Ltd. is misplaced given that the Georgia case dealt
with the termination of the contract through novation. 4
By its language, the Agreement gave “Credit One, its successors or assigns” (emphasis
added) the right to arbitrate. Therefore, although Credit One initially held the right to
arbitrate, when Credit One transferred its rights and interests in the Agreement it transferred
that right to the assignee. This Court has previously held with respect to Defendant Midland
that as the “assignee of all right, title, and interest” in individuals’ accounts, Midland could
enforce an arbitration provision contained in agreements between the individuals and
Citibank. Bey v. Midland Credit Mgt., Inc., 2016 WL 1226648 (D. Md. Mar. 23, 2016). This Bey
decision predated the Maryland Court of Appeals’ holding in Cain v. Midland Funding, LLC,
452 Md. 141 (2017) that the defendant, also Midland, waived its contractual right to arbitrate
by filing and pursuing collection actions in state court. In addition, in the Bey case, Midland
never sought to collect from the class of individuals in state court. 5 Bey, 2016 WL 1226648.

The other cases Defendant cites can be similarly distinguished. See Rhodall v. Verizon Wireless of the E., L.P.,
No. 1:10-3195, 2011 WL 4036418, at *3 (D.S.C. Sept. 9, 2011) (“Plaintiff argues that the Agreement was
canceled, … [and therefore] no contract exists by which the parties are bound to arbitrate.”); see also Hedley v.
Clear Channel Communs., No. CV020817741S, 2003 WL 22079531, at *6-8 (Conn. Super. Ct. Aug. 5, 2003)
(examining whether an arbitration clause survived in the “post-expiration period” to the agreement).
5 Following this Court’s grant of leave to Defendants Midland and Credit One to file Supplemental
Memorandum in Support of their Motions to Compel Arbitration concerning the Maryland Court of
Appeals’ decision in Cain, Midland filed a Consent Motion to Withdraw its Motion to Compel Arbitration
and Stay Proceedings, ECF No. 75, which this Court granted. (ECF No. 77.)
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As the Defendant Credit One emphasized in its Supplemental Memorandum, “Credit
One is the entity that assigned and sold via a third party Ms. Novic’s account to Midland.
Credit One has no relationship with Midland. . . . Midland then, on its own behalf and
without Credit One as a party or beneficiary of the action, pursued the state court litigation.”
(ECF No. 76 at 1.) In light of this acknowledgement by Credit One, Ms. Novic has aptly
noted that “there is no basis in the text to conclude that the surviving arbitration provision
lives not only with the assignees but also with the assignor.” (ECF No. 79 at 3.) For this
Court to hold otherwise could mean that each assignee to Ms. Novic’s account, despite
having transferred all its rights to a subsequent assignee, still maintain the right to compel
the Plaintiff to arbitrate. When Credit One assigned all right, title and interest to Ms. Novic’s
account, it ceased to be a party to the contract. Therefore, Defendant no longer holds the
right to compel Ms. Novic to arbitrate this case. 6 Accordingly, the Defendant Credit One’s
Motion to Compel Arbitration and Stay the Litigation (ECF No. 52) is DENIED.
II.

Even if Defendant maintained its right to arbitrate, Defendant defaulted
that right

In the alternative, Ms. Novic argues that even if Credit One retained the right to
compel arbitration, that right was waived by Midland’s state court suit against her. The
parties dispute whether the Federal Arbitration Act, which applies the doctrine of default, or
Maryland state law, which applies the doctrine of waiver, applies to this issue. That dispute is
of no moment, however, in this case. As discussed below, the United States Court of
Appeals for the Fourth Circuit has specifically held that utilizing “litigation machinery” may
In concluding its Memorandum in support of its Motion to Compel (ECF No. 52-1), Defendant cites a
North Carolina case, Rice v. Credit One Financial, No. 5:15-CV-130-BO, 2015 WL 4528933 (E.D.N.C. July 27,
2015), where it successfully moved to compel arbitration. In that case, however, Credit One had neither
assigned nor sold the Plaintiff’s account. Id.
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preclude application of binding arbitration. Maxum Founds. Inc. v. Salus Corp., 779 F. 2d 974,
981 (4th Cir. 1985). Furthermore, it is abundantly clear that Maryland state law precludes
binding arbitration in light of the recent Maryland Court of Appeals opinion in Cain v.
Midland Funding, LLC, 452 Md. 141 (2017). The Defendant Credit One has defaulted its right
to arbitrate under both federal and state law for the reasons that follow.
The Federal Arbitration Act “applies to arbitration clauses in contracts ‘evidencing a
transaction involving commerce.’” See Iraq Middle Market Development Foundation v. Harmoosh,
848 F. 3d 235, 239 (4th Cir. 2017) (quoting 9 U.S.C. § 2). The Fourth Circuit has noted that
“the reach of the statute is broad” and “exercise[s] the full scope of Congress’s commerceclause power.” Rota-McLarty, 700 F. 3d at 697. “Commerce” is defined as “commerce among
the several states,” 9 U.S.C. § 1, and the effect on interstate commerce does not need to be
identified specifically, “so long as “in the aggregate the economic activity in question would
represent ‘a general practice ... subject to federal control.’” Rota-McLarty, 700 F. 3d at 698
(quoting Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56–57 (2003)); see also Alafabco, 539 U.S. at
56-57 (“Nor is application of the FAA defeated because the individual debt-restructuring
transactions, taken alone, did not have a ‘substantial effect on interstate commerce.’ … Only
that general practice need bear on interstate commerce in a substantial way.”).
Defendant claims the Agreement evidences a transaction involving commerce
because the Agreement is between Credit One, a national banking association with its
headquarters in Nevada, and Ms. Novic, a resident of Maryland. In addition, the arbitration
agreement provides that “[t]his arbitration provision is made pursuant to a transaction
involving interstate commerce.” (ECF No. 52-5 at 5.) Ms. Novic argues that the issue of
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waiver addresses whether an agreement to arbitrate still exists. The Fourth Circuit, however,
has made it clear that the FAA governs whether a party has waived the right to arbitrate. See
Harmoosh, 848 F. 3d at 239 (deciding first, under Maryland law, whether an arbitration clause
exception applied before deciding whether the defendant waived his right to arbitrate under
the FAA); see also Rota-McLarty, 700 F. 3d (finding that the transaction including the
arbitration agreement related to interstate commerce and therefore the district court erred by
not applying the FAA). Because the evidence shows that the transaction between Defendant
and Ms. Novic “evidenc[es] a transaction involving commerce,” the FAA and federal law
applies to the issue of whether Credit One waived his right to arbitrate.
Under the FAA, “a party loses its right to a stay of court proceedings in order to
arbitrate if it is ‘in default in proceeding with such arbitration.’” Forrester v. Penn Lyon Homes,
Inc., 553 F. 3d 340, 342 (4th Cir. 2009) (quoting 9 U.S.C. § 3). A party is in default when it
“so substantially utilize[es] the litigation machinery that to subsequently permit arbitration
would prejudice the party opposing the stay.” Maxum Founds. Inc. v. Salus Corp., 779 F. 2d
974, 981 (4th Cir. 1985). As the Fourth Circuit has explained, “delay and the extent of the
moving party’s trial-oriented activity are material factors in assessing a plea of prejudice.”
Microstrategy, Inc. v. Lauricia, 268 F. 3d 244, 249 (4th Cir. 2001).
In this case, Credit One has lost its right to a stay of these proceedings in order to
arbitrate as a result of its assignment of Ms. Novic’s account, which set forth a chain of
events resulting in the “litigation machinery” of Midland to be applied against her. In
proceeding with a trial in the District Court of Maryland for Washington County, Midland
not only showed that it was the successor-in-interest to Ms. Novic’s account, it also barred
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its subsequent demand for arbitration in this case. 7 This analysis also applies to the
Defendant Credit One which set forth the chain of events resulting in that litigation. That
chain of events ultimately resulted in Midland purchasing the account on April 22, 2014. Ms.
Novic was then brought into state court by Midland, the party who held the right to
arbitrate, over whether she defaulted on her account or whether an imposter fraudulently
racked up charges. Indeed, the Defendant Credit One assisted Midland in this state action by
providing documentation that Midland was the successor-in-interest to Ms. Novic’s account.
Mr. Harwood’s affidavit, detailing that Ms. Novic’s account was “originated by Credit One
and owned by MHC immediately prior to the sale to Sherman” and the sale “represent[s] all
rights to the accounts and receivables previously owned and serviced by Credit One” was
created a month after Midland took over Plaintiff’s account. (ECF No. 54-1 at 13-14.)
Given that Midland sought to recover the underlying debt on the contract now in
dispute, Midland’s litigation was based on the same issues as Plaintiff’s current complaint. As
this Court noted in Barbagallo v. Niagara Credit Solutions, Inc., 2012 WL 6478956, at *3 (D. Md.
Dec. 4, 2012), the defendant’s state court suit against plaintiff “support[ed] a finding of
prejudice, because it was based on essentially the same legal and factual issues currently
disputed: it sought to recover the underlying debt on the contract.”
Although not binding, the recent Maryland Court of Appeals case Cain v. Midland
Funding, LLC, 452 Md. 141, 156 A. 3d 807 (2017) also reflects this public policy. In Cain, the
plaintiff alleged that the defendant Midland had used unlawful debt collection practices in a
previous claims collection action against Cain. Id. Midland sought to compel Cain to arbitrate
On July 3, 2017, Midland filed a Consent Motion to Withdraw its Motion to Compel Arbitration and Stay
Proceedings, ECF No. 75, which this Court granted. (ECF No. 77.)
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the claim based on an agreement. Id. In response, Cain argued that Midland had waived its
right to arbitrate by initiating the state court collection action. Id. The Court of Appeals
agreed, holding that Midland waived its right to arbitrate Cain’s class action claim when it
chose to litigate the collection action. Id.
In this case, the actions of the Defendant Credit One in setting forth a chain of
assignments resulting in litigation “‘defeat[s] one of the reasons behind the federal policy
favoring arbitration.’” Forrester v. Penn Lyon Homes, Inc., 553 F. 3d 340, 342 (4th Cir. 2009)
(quoting ComTech Assocs. V. Computer Assocs. Int’l Inc., 938 F. 2d 1574, 1577 (2d Cir. 1991)).
Therefore, even if this Court assumes Credit One maintained its right to arbitrate, it
defaulted that right as a matter of federal law. Accordingly, the Defendant Credit One’s
Motion to Compel Arbitration and Stay the Litigation (ECF No. 52) is DENIED.
CONCLUSION
For the reasons stated above, Defendant Credit One Bank’s Motion to Compel
Arbitration and Stay the Litigation (ECF No. 52) is DENIED.
A separate Order follows.

Dated:

September 21, 2017

/s/
Richard D. Bennett
United States District Judge

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