First Circuit Affirms That Assignee May Compel Arbitration

Carlton Fields

Carlton Fields

The First Circuit Court of Appeals recently affirmed that a debt collection company defendant could compel arbitration where it was assigned rights from a credit card company.

Jackeline Barbosa opened a credit card with Barclays Bank Delaware. She later had an overdue, unpaid balance. Barclays bundled Barbosa’s unpaid balance with other such balances and sold it to Midland Funding LLC, a shell entity that assigned its rights to Midland Credit Management Inc. (MCM), which retained the law firm of Schreiber/Cohen LLC “to assist in MCM’s debt collection efforts.” Midland Funding filed a claim for the debt in Boston Municipal Court, but that court held that “Midland Funding had not proved it owned the subject debt” and ruled in favor of Barbosa. Barbosa and two other plaintiffs then brought a federal putative class action against MCM and Schreiber/Cohen alleging, among other things, violations of the Fair Debt Collection Practices Act. MCM and Schreiber/Cohen moved to compel arbitration. A magistrate judge recommended the court compel arbitration and the district court agreed. Barbosa appealed.

The First Circuit affirmed. It rejected Barbosa’s claim that MCM and Schreiber/Cohen did not have the contractual authority to compel arbitration. The court explained that Barclays had expressly assigned its rights to Midland Funding and that MCM “is the servicer and agent of Midland Funding” and “Schreiber/Cohen is Midland Funding’s agent.” The cardmember agreement Barbosa had signed “included an assignment provision giving Barclays permission to ‘at any time assign or sell [Barbosa’s] Account’” and that “‘the person(s) to whom [Barclays] make[s] any such assignment or sale shall be entitled to all of our rights under [the] Agreement.’”

Barbosa v. Midland Credit Management, Inc., No. 19-1896 (1st Cir. Nov. 25, 2020).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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