Arbitration & Mediation

Debt Collection Claim by Debtor for Credit Card Co's Arbitration Win Dismissed... But Not Gone?

By Christopher B. Hopkins, Esq.

The Second District handed down a heady opinion on appealable orders, compulsory vs. permissive counterclaims, and how courts should view litigation actions over an arbitration award. The opinion turned in favor of the credit card company/defendant/claimant in arbitration based upon a finding that the appeal was premature. Although there is a dissent, we did not readily see a conflict among the intermediate courts for an immediate state supreme court appeal -- but the Panel did point out that the plaintiff-debtor still could appeal at the end of the case.

In the case of A.W. Cunningham, A/K/A Wayne Cunningham v. MBNA American N.A., a credit card holder was taken to arbitration over commercial debt before the National Arbitration Forum and declined to participate since he claimed that a third party, presumably an ex-wife, obtained a card in his name, rang up a bill, and never told him. MBNA then proceeded to file suit seeking to domesticate the arbitration award in Florida and confirm it. The debtor, now counter-claimant, sued for violations of Fair Debt Collection Practices Act (FDCPA, 15 USC 1692) and Florida Consumer Collection Practices Act (FCCPA, Chapter 559, Florida Statutes).

The Second DCA Panel (LaRose, Northcutt with Silberman dissenting) noted that this arbitration award was governed by the Federal Arbitration Act, not the Florida Arbitration Code, although we question whether there would be a difference. The trial court felt the counterclaim was a veiled attempt at a motion to vacate and therefore dismissed the counterclaim. Interestingly, the trial court also found that the debtor had not timely sought to vacate under the Florida Arbitration Code (an error which the Panel politely pointed out in a telling but non-judgmental footnote). The trial court had not confirmed the arbitration award before an appeal was taken.

The Panel considered the standards for compulsory vs. permissive counterclaims under Florida Rule of Civil Procedure 1.170 as well as the logical relationship test under a 1992 Florida Supreme Court decision and concluded, "simply stated, a compulsory counterclaim arises out of the same transaction or occurrence as the plaintiff's claim." The statutory debt collection claims attacked the alleged mis-use of arbitration and were deemed compulsory -- but a mere dismissal was not appealable. As to the negligence and defamation claims, these were deemed permissive since those claims arise out of events not necessarily related to the alleged arbitration efforts. The court held the plaintiff/debtor should have been able to amend.

The dissent offered that the negligence/defamation claims should not have been deemed permissive.

Bottom line? Well, for the parties, there is more litigation (and appeals?) ahead. Practitioners and courts should be wary of mixing and matching your arbitration rules between federal and state. Likewise, keep an eye on the rights to litigation after arbitration; the confusion over confirming, vacating, modifying, and flat our litigating (or re-litigating) arbitration awards has yet to truly become crystalized precedent.

Full post as published by Florida Arbitration Law on April 13, 2009 (boomark / email).