Midland Funding LLC A/P/O Webbank v. Roberta Bordeaux

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0850-14T3

MIDLAND FUNDING LLC
A/P/O WEBBANK, APPROVED FOR PUBLICATION

September 29, 2016
Plaintiff-Respondent,
APPELLATE DIVISION
v.

ROBERTA BORDEAUX,

Defendant-Appellant.

————————————————————————————————————————————————————————————————

Argued December 16, 2015 – Decided September 29, 2016

Before Judges Fuentes, Koblitz and Gilson.

On appeal from Superior Court of New Jersey,
Law Division, Special Civil Part, Bergen
County, Docket No. DC-7527-14.

Leah M. Nicholls (Public Justice) of the
Washington DC and Virginia bars, admitted
pro hac vice, argued the cause for appellant
(Kim Law Firm, LLC and Ms. Nichols,
attorneys; Karla Gilbride (Public Justice)
of the California bar, admitted pro hac
vice, and Yongmoon Kim, of counsel and on
the briefs).

Lawrence J. Bartel argued the cause for
respondent (Marshall, Dennehey, Warner,
Coleman & Goggin, P.C. and Forster, Garbus &
Garbus, attorneys; LaTi W. Spence and Glenn
S. Garbus, on the brief).

The opinion of the court was decided by

FUENTES, P.J.A.D.
 Plaintiff Midland Funding, L.L.C., A/P/O Webbank is in the

business of purchasing consumer debt from the original creditor

at a substantial discount. Plaintiff thereafter attempts to

collect the full amount of the alleged outstanding balance, plus

accrued interest and late fees, from the debtor. The issue in

this appeal concerns the enforceability of an arbitration clause

that plaintiff alleges was part of the consumer credit

application form prepared by the original creditor. Plaintiff

alleges that this application form was provided to and accepted

by defendant as a condition of receiving credit.

This issue arose in the context of a small claims case that

plaintiff filed in the Law Division, Special Civil Part to

collect $1018.04 from defendant. After joinder of issues, which

included a counterclaim alleging violations of fair debt

collection practices, the trial court granted plaintiff's motion

to enforce the arbitration clause and dismissed the case with

prejudice. Based on the record before us, we conclude that the

trial court erred in its decision to compel defendant to submit

to arbitration. The evidence plaintiff provided to the trial

court in support of its motion to compel arbitration did not

establish that defendant knowingly agreed to waive her rights to

have the matter adjudicated in state court.

2 A-0850-14T3
 Plaintiff filed a small claims civil action1 in the Bergen

County Superior Court, Law Division, Special Civil Part, seeking

to collect from defendant Roberta Bordeaux on a past due

consumer debt. Plaintiff alleged that "[u]pon information and

belief," defendant "made credit card purchases or took money

advances under a credit card or line of credit account or

promissory note or loan in the total amount of $1018.04."

Plaintiff further claimed that it is "the current owner of this

debt and retains all rights, title, and interest to this debt."

The complaint stated that the loan originated with Webbank and

proceeded to list "the last four digits of the original account

number . . . ." As required by Rule 4:5-1(b)(2), plaintiff's

counsel certified that the dispute was not subject to any other

action or arbitration proceeding "now or contemplated."

Defendant filed an answer denying liability, as well as a

counterclaim alleging that defendant violated the Fair Debt

Collection Practices Act (FDCPA),2 15 U.S.C.A. §§ 1692–1692p.

1
Small claims civil actions are defined, in relevant part, as
"all actions in contract . . . when the amount in dispute,
including any applicable penalties, does not exceed, exclusive
of costs, the sum of $ 3,000." R. 6:1-2(a)(2).
2
"[T]he FDCPA prohibits a debt collector from, among other
conduct, using 'any false, deceptive, or misleading
representation or means in connection with the collection of any
debt,' . . . and using 'unfair or unconscionable means to
collect or attempt to collect any debt.'" Hodges v. Sasil
(continued)

3 A-0850-14T3
Plaintiff filed an answer to defendant's counterclaim, denied

liability under the FDCPA, asserted six separate affirmative

defenses, and reserved its right to assert further defenses "as

discovery warrants." Pursuant to Rule 4:5-1(b)(2), plaintiff's

counsel certified that "[n]o other action or arbitration

proceeding is contemplated." After joinder of issues, the

parties engaged in discovery, which included defendant's motion

to compel plaintiff to respond to interrogatories.

Before the return date of defendant's discovery motion,

plaintiff filed a motion to compel arbitration. The matter was

originally scheduled for oral argument on August 22, 2014. On

the day before the return date of plaintiff's motion, however,

defendant filed a motion for summary judgment. The oral

argument hearing was then adjourned until September 19, 2014.

The following constitutes the entire verbatim record of what

occurred at the oral argument hearing.

THE COURT: All right. Why shouldn't this
be in arbitration? Your credit card
agreement says any dispute[] goes to
arbitration. Right?

DEFENSE COUNSEL: Well, I have -- I have two
points. First, the -- the party moving to
compel [the] arbitration bears the burden of

(continued)
Corp., 189 N.J. 210, 222 (2007) (quoting 15 U.S.C.A. § 1692e; §
1692f).

4 A-0850-14T3
 proof that the arbitration agreement exists.
And the --

THE COURT: Well, it exists. Okay. So . . .
just tell me . . . if they sign[ed] a credit
card agreement that says any disputes go to
arbitration, what are we doing here?

DEFENSE COUNSEL: And my second point is that
it doesn't exist because . . . the
certification[] . . . attached a partial
agreement without no --

THE COURT: This agreement contains an
arbitration clause. Please read this. It's
going to arbitration. Thank you. Have a
nice day.

PLAINTIFF'S COUNSEL: Thank you, Your Honor.

THE COURT: So it's going to arbitration.
Summary judgment is denied. Motion to
answer interrogatories [propounded by
defendant] is moot. Thank you.

The transcript shows that the oral argument hearing began at

9:10 a.m. and concluded at 9:11 a.m. As the record reflects,

the motion judge did not address defendant's summary judgment

motion or defendant's discovery motion to compel plaintiff to

respond to interrogatories.

On October 15, 2014, defendant filed her notice of appeal,

challenging the order compelling arbitration. Pursuant to Rule

2:5-1(b), on November 5, 2014, the trial court placed on the

record supplementary findings of fact and conclusions of law

explaining its reasons for granting the motion to compel

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arbitration. The court made the following findings and

conclusion of law in this supplemental statement:

The only issue that is being appealed is the
determination by the [c]ourt that the motion
to compel arbitration should not have been
granted and that the [c]ourt's determination
that the other issues were moot since
arbitration was being granted was in error.

At the outset, it's clear . . . in my mind[]
that the defendant used the credit agreement
to make purchases and is now looking to
avoid payment on that agreement by use of
the procedural . . . requirements . . . of
the Fair Debt Collection Practices Act and
the fact that summary judgment should have
been granted . . . based on the statute of
limitations defense.

. . . .

The plaintiff's position is that the
defendant became bound to the agreement upon
the accepting of the purchases from Dell and
that the right to arbitrate has not been
waived, that very little discovery has been
exchanged, and no binding decision of the
[c]ourt has been rendered yet, since the
summary judgment denial was after the date
of the arbitration determination[;] and[]
therefore, there's been no showing that the
plaintiff has completely waived its right to
arbitrate.

The defendant, on the other hand, citing
Cole [v.] Jersey City Medical Center, 215
N.J. 265 [(2013)], feels that arbitration
should not have been granted.

In Cole, the proponent of the arbitration
provision moved to compel arbitration
[twenty-one] months after entering the case
as a party. Now, in that case, the
proponent had previously carried out

6 A-0850-14T3
discovery, including interrogatories and
depositions of at least [twelve] people, and
during the discovery period the proponent
failed to invoke the arbitration provision.

Now, the Supreme Court in Cole indicated
that . . . determining . . . whether or not
there's been a waiver is dependent on the
totality of the circumstances and the
[c]ourt should determine whether or not a
[party's] litigation conduct was consistent
with the reserve[d] right to arbitrate the
dispute.

The factors will be addressed by the [c]ourt
individually:

Number one is the delay . . . in making the
arbitration[.] [T]he defense in this
matter[,] I find[,] is not inordinate. It's
made during discovery in the accelerated
time periods of the Special Civil Part.

There's no indication that this is part of
[a] litigation strategy in moving to
arbitrate.

[The] [d]iscovery conducted is very sparse
in this matter.

The request was made before the date of
trial and . . . I don't see any prejudice to
the defendant in this case if the matter is
arbitrated.

The only motion concerning arbitration
wasn't filed until July 22nd, [2014], three
months after the complaint, which is not an
inordinate period of time.

Neither side has provided information
detailing the degree of discovery that was
carried out, because there was minimal
discovery since this is just a basic credit-
card collection case.

7 A-0850-14T3
 . . . .

Now, arbitration is a favored remedy in this
state, and, given that fact and that there
really has been no prejudice to the
defendant in this case by going to
arbitration, the [c]ourt is determining that
the matter should be sent to arbitration.

The appellate record shows that plaintiff's sole evidence

of the arbitration agreement's existence consists of two single-

spaced, photocopied pages. These pages contain a number of

provisions written in a font that is smaller than the size

required to be used in all appellate briefs pursuant to Rule

2:6-10. One of the pages contains an "Arbitration Notice."

This document does not reflect that defendant agreed to be bound

to any of the provisions listed therein, particularly the

arbitration clause at issue. Nor does the document bear

defendant's signature, or any other indicia of her assent. The

only thing that connects the document to this case is a

certification signed by a "Legal Specialist" employed by

plaintiff in St. Cloud, Minnesota.3

3
This individual did not identify herself as an attorney
admitted to practice in any jurisdiction. We thus infer that
she performs the duties ordinarily carried out by a paralegal.
See In re Opinion No. 24 of Comm. on Unauthorized Practice of
Law, 128 N.J. 114, 123 (1992) (holding that in New Jersey,
paralegals must perform their work under the supervision of
attorneys who assume "direct responsibility for the work that
the paralegals perform").

8 A-0850-14T3
 This individual certified that based on her "personal

knowledge" of account records maintained by plaintiff, the two

unnumbered and unsigned pages attached to her certification

reflect a "true and correct copy of the credit agreement

provided to plaintiff by its predecessor in interest as the

actual agreement applicable to Defendant's account."

Conspicuously missing from the certified statement are any

statements attesting that the two pages constitute the complete

credit application and that defendant agreed to be bound by the

provisions contained therein.

It is now settled law in this State that "[a]n agreement to

arbitrate, like any other contract, 'must be the product of

mutual assent, as determined under customary principles of

contract law.'" Atalese v. U.S. Legal Serv. Grp., L.P., 219

N.J. 430, 442 (2014), cert. denied, ___ U.S. ___, 135 S. Ct.

2804, 192 L. Ed. 2d 847 (2015) (quoting NAACP of Camden Cty. E.

v. Foulke Mgmt., 421 N.J. Super. 404, 424 (App. Div. 2011)). As

the party seeking to enforce this alleged contractual provision,

plaintiff has the burden to prove, by a preponderance of the

evidence, that defendant assented to it. Moreover, because the

arbitration clause constitutes a waiver of defendant's

constitutional right to adjudicate this dispute in a court of

law, plaintiff must prove that defendant had full knowledge of

9 A-0850-14T3
her legal rights and intended to surrender those rights. Id. at

442–43.

The record plaintiff presented to the trial court was

devoid of any evidence that satisfies the foregoing burden of

proof. Indeed, the arbitration clause plaintiff sought to

enforce expressly exempts small claims disputes from the class

of cases that were intended to fall within its scope: "We agree

not to invoke our right to arbitrate any individual Claim you

bring in small claims court or an equivalent court so long as

the Claim is pending only in that court." Plaintiff argues that

defendant's counterclaim removes the case from the small claims

court's jurisdiction, due to the $3000 cognizability limit. R.

6:1-2(a)(2). Although the record does not support such a claim,

we need not decide this issue.

We are satisfied that the record we have described

demonstrates plaintiff's failure to meet its burden of proving

that defendant agreed to arbitrate. We thus reverse the order

dismissing the case and ordering arbitration. We anticipate

that the court will engage counsel with more patience on remand.

Reversed and remanded.

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