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Barbosa v. Midland Credit Management, Inc.

United States District Court, D. Massachusetts

July 3, 2019

JACKELINE BARBOSA, MARK ANDERSON, and DOUGLASS BAKER, individually and on behalf of others similarly situated, Plaintiffs,
v.
MIDLAND CREDIT MANAGEMENT, INC., SCHREIBER/COHEN, LLC, and LUSTIG GLASER & WILSON P.C., Defendants.

          REPORT AND RECOMMENDATION ON DEFENDANTS' MOTIONS TO DISMISS AND/OR COMPEL ARBITRATION

          Judith Gail Dein United States Magistrate Judg

         I. INTRODUCTION

         This is a putative class action suit pertaining to debt collection litigation pursued in state court. The named plaintiffs allegedly incurred credit card debt on accounts held with Barclays Bank Delaware (“Barclays”). Midland Funding LLC (“Midland Funding”) later acquired the plaintiffs' accounts from Barclays, for whom defendant Midland Credit Management (“MCM”) is a servicer and agent. The plaintiffs were subsequently sued by Midland Funding, allegedly at the direction of MCM, to collect outstanding credit card debt. Defendants Schreiber/Cohen, LLC (“Schreiber”) and Lustig Glaser & Wilson P.C. (“Lustig”) (collectively, “lawyer defendants”), are law firms that were retained by Midland Funding to sue the plaintiffs for the outstanding debts.

         In each of the debt collection suits initiated by Midland Funding, judgment was ultimately entered in favor of the debtor. In the instant action, the plaintiffs allege that each debt collection suit was filed after the relevant statute of limitations period had run. They further allege that these suits caused them emotional distress and resulted in lost wages, legal fees, and other expenses. Accordingly, the plaintiffs have brought a Fair Debt Collection Practices Act (“FDCPA”) claim (Count I) and a claim under Mass. Gen. Laws ch. 93A (Count II) against MCM and the lawyer defendants for initiating these allegedly time-barred debt collection suits.

         This matter is before the court on “Defendants Schreiber/Cohen, LLC and Lustig, Glaser & Wilson, P.C.'s Motion to Dismiss Plaintiffs' Amended Complaint or, in the Alternative, Compel Arbitration or Abstention” (Docket No. 24) and “Defendant Midland Credit Management, Inc.'s Motion to Compel Arbitration, Dismiss the Case, and Strike Class Allegations, or in the Alternative, Motion to Stay” (Docket No. 26). As discussed herein, case law mandates the conclusion that a valid arbitration provision exists between the parties and that arbitration must be compelled. In addition, this court concludes that the class allegations of plaintiffs Barbosa and Anderson must be stricken. Therefore, this court recommends to the District Judge to whom this case is assigned that MCM's motion and the lawyer defendants' motion be ALLOWED IN PART. Specifically, this court recommends that the class action claims of plaintiffs Barbosa and Anderson be stricken, that the court compel arbitration pursuant to the plaintiffs' agreements with Barclays Bank Delaware, and that this action be dismissed without prejudice.

         II. STATEMENT OF FACTS

         This court summarizes the facts as alleged in the plaintiffs' Amended Complaint (Docket No. 4 (“Amended Complaint”)), with additional uncontested facts where noted. The named plaintiffs are all Massachusetts residents who opened credit card accounts with Barclays. (Amended Complaint ¶¶ 1-3; see Amended Complaint ¶¶ 20, 32, 41). Each plaintiff's credit card agreement with Barclays (“Barclays agreement” or “the agreement” or “cardmember agreement”) specified that Delaware law would apply to any disputes arising out of the agreement. (Id. ¶¶ 22, 36, 45). Additionally, the cardmember agreement contained a provision permitting the assignment of the cardmember account. (See Docket No. 27-1, Ex. B at 2, Ex. E at 2, Ex. H at 2). The agreement also contained an arbitration provision allowing parties to elect to resolve disputes via binding arbitration.[1] (See id.). The arbitration provision stated in pertinent part:

At the election of either you or us, any claim, dispute or controversy (“Claim”) by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or your Account, or any transaction on your Account including (without limitation) Claims based on contract, tort (including intentional torts), fraud, agency, negligence, statutory or regulatory provisions or any other source of law and (except as specifically provided in this Agreement) Claims regarding the applicability of this arbitration clause or the validity of the entire Agreement, shall be resolved exclusively and finally by binding arbitration . . . . For purposes of this provision, . . . “we” or “us” includes our employees, parents, subsidiaries, affiliates, beneficiaries, agents and assigns . . . . Claims made and remedies sought as part of a class action, private attorney general or other representative action (hereafter all included in the term “class action”) are subject to arbitration on an individual basis, not on a class or representative basis. . . .
Alternatively, you and we may pursue a Claim within the jurisdiction of the Justice of the Peace Court in Delaware, or the equivalent court in your home jurisdiction (each a “Small Claims Court”), provided that the action remains in that court, is made on behalf of or against you only and is not made part of a class action, private attorney general action or other representative or collective action. . . .
. . . This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. . . .
ARBITRATION WITH RESPECT TO A CLAIM IS BINDING AND NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM THROUGH A COURT. IN ARBITRATION YOU AND WE WILL NOT HAVE THE RIGHTS THAT ARE PROVIDED IN COURT INCLUDING THE RIGHT TO A TRIAL BY JUDGE OR JURY AND THE RIGHT TO PARTICIPATE OR BE REPRESENTED IN PROCEEDINGS BROUGHT BY OTHERS SUCH AS CLASS ACTIONS OR SIMILAR PROCEEDINGS. IN ADDITION, THE RIGHT TO DISCOVERY AND THE RIGHT TO APPEAL ARE ALSO LIMITED OR ELIMINATED BY ARBITRATION. ALL OF THESE RIGHTS ARE WAIVED AND ALL CLAIMS MUST BE RESOLVED THROUGH ARBITRATION.

(Id. Ex. B at 2 (emphasis in original); see id. Ex. E at 2, Ex. H at 2). Barclays subsequently sold the plaintiffs' credit card accounts to Midland Funding. (See Amended Complaint ¶¶ 20, 32, 41).

         Midland Funding is a corporation that acquires charged-off consumer debts from creditors. (Id. ¶ 7). A debt that is “charged-off” is one that is deemed uncollectable by a creditor and written off as a loss. (Id. ¶ 8). Midland Funding utilizes MCM as its servicer and agent for collecting such charged-off consumer debts. (Id. ¶ 9). After acquiring the plaintiffs' credit card accounts from Barclays, Midland Funding initiated debt collection lawsuits against each of the plaintiffs. (Id. ¶¶ 20, 33, 42). MCM directed, approved, and/or ratified the initiation of each of these suits and the lawyer defendants served as counsel for Midland Funding during the judicial proceedings. (Id. ¶¶ 20, 21, 33, 34, 42, 43). The specific factual allegations as to each of the plaintiffs are detailed below.

         On October 10, 2017, Midland Funding sued Jackeline Barbosa in the Small Claims Session of the Roxbury Division of the Boston Municipal Court, with defendant Schreiber serving as counsel for Midland Funding. (Id. ¶ 20). Midland Funding alleged that Ms. Barbosa had last made a payment on her Barclays account on November 7, 2012. (Id. ¶ 23). The Boston Municipal Court issued judgment in favor of Ms. Barbosa, concluding that Midland Funding had failed to prove that it owned the debt at issue. (Id. ¶ 30).

         MCM placed for collection with Schreiber the charged-off consumer debt of Mark Anderson. (Id. ¶ 32). Subsequently, on March 23, 2018, Midland Funding sued Anderson in the Small Claims Session of the Roxbury Division of the Boston Municipal Court, with defendant Schreiber serving as counsel for Midland Funding. (See id. ¶¶ 33, 35). Midland Funding alleged that Mr. Anderson had last made a payment on his Barclays account on December 15, 2014. (Id. ¶ 35). The Boston Municipal Court ultimately entered judgment in Mr. Anderson's favor.[2](Id. ¶ 40).

         MCM placed for collection with Lustig the charged-off consumer debt of Douglass Baker. (Id. ¶ 41). Subsequently, on December 6, 2016, Midland Funding sued Baker in the Orange District Court, with defendant Lustig serving as counsel for Midland Funding. (Id. ¶ 42). Midland Funding alleged that Mr. Baker had last made a payment on his Barclays account on March 5, 2012. (Id. ¶ 44). The court ruled that Midland Funding's claim was barred by the Delaware statute of limitations and entered judgment in favor of Mr. Baker. (Id. ¶ 50). Midland Funding has filed a notice of appeal in Mr. Baker's case. (Id. ¶ 51).

         The named plaintiffs allegedly suffered significant emotional distress as a result of the lawsuits initiated by Midland Funding, as well as financial costs and interruptions to their daily lives. (Id. ¶¶ 24-27, 37-39, 46, 52).

         Additional facts will be provided below where appropriate.

         III. ...


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