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Atlantic Credit & Finance v. Stacy

Atlantic Credit & Finance v. Stacy

Case No. 
Type of Proceeding: 
Appeal from Circuit Court of Wyoming County (Judge McGraw)

Was a valid, enforceable arbitration agreement entered into by the parties?  If so, did the litigation conduct of the party seeking arbitration amount to a waiver of the right to arbitrate?



Petitioner, Atlantic Credit & Finance, is a debt purchasing firm.  In this case, Petitioner purchased a $720 debt allegedly owed by Respondent, Courtney Stacy, to Synchrony Bank.  Petitioner sued Respondent in magistrate court in Wyoming County.  Respondent removed the case to circuit court, then filed an answer and counterclaim.  In the counterclaim, Respondent alleged on a classwide basis that Petitioner had engaged in violations of West Virginia’s consumer laws.  Specifically, Respondent alleged that Petitioner had failed to provide information regarding the underlying debt as required by W.Va. Code 50-4-1.  The parties then engaged in substantial discovery and motion practice.  Nearly seven months into the litigation, Petitioner filed a motion to compel arbitration.

Petitioner produced what it alleged to be Respondent’s application for a credit card account with Synchrony and a credit card agreement that was mailed to Respondent’s address.  The agreement required arbitration of disputes and also contained language barring any classwide arbitration.  The trial court, however, found that the application was dated later than the alleged charges on the account and did not contain any signatures, electronic or otherwise.  In addition, the court found insufficient proof that the arbitration agreement was actually mailed to Respondent or had ever been seen or approved by Respondent.  Therefore, a valid, enforceable arbitration agreement did not exist.

The trial court made two alternative findings.  First, the trial court ruled that the agreement was both procedurally and substantively unconscionable.  Second, the court found that Petitioner’s conduct operated as a waiver of its right to arbitrate.  In this regard, the court noted that  Petitioner itself filed the initial lawsuit and that Petitioner had actively engaged in class action litigation for the better part of the year.

Positions of the Parties: 

Petitioner (Atlantic Credit):

Petitioner argues that federal law requires only a writing, not a signed writing.  Furthermore, Petitioner argues that by using the credit card Respondent agreed to the terms of the credit card agreement, including the arbitration provisions.  Therefore, Petitioner proved the existence of a valid agreement to arbitrate.  Furthermore, Petitioner argues that Respondent failed to prove the elements required for unconscionability.  Finally, Petitioner argues that the issue of waiver is governed by Utah law, which requires a showing that the party opposing arbitration suffered prejudice.  In any event, Respondent failed to prove that Petitioner intentionally waived its arbitration rights.

Respondent (Stacy):

Respondent argues that the trial court’s arbitration rulings were correct.  First, the party signing the authenticating affidavit on Petitioner’s behalf lacked personal knowledge regarding the agreements and regarding Respondent’s dealings with Synchrony.  Therefore, Petitioner cannot prove that an arbitration agreement actually existed.  Moreover, Petitioner failed to prove that it obtained any rights from Synchrony other than an account receivable.  Respondent also argues that because Petitioner chose to sue in the first place, and extensively litigated thereafter (including the litigation of class issues), it waived any right to arbitration.

Probable Impact: 

“Formation” issues have become the new battle ground in arbitration practice.  Before a court can order arbitration, it must first find that a valid arbitration agreement was formed.  This case presents vitally important issues.  If the arbitration provision here is upheld, it is likely that the victims of Petitioner’s consumer law violations will be deprived of any legal remedy.  How the Supreme Court deals with these issues will have important consequences not only for the litigants, but also for our bench and bar.

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