Rights and Duties Affiliated with Arbitration Agreement Properly Assigned and Enforceable

SWEIGER v. CALVARY PORTFOLIO SERVICES, LLC (No. 2:11-cv-1631, May 29, 2012)

On May 29, 2012, the United States District Court for the Western District of Pennsylvania granted the motion to compel arbitration of defendants Calvary Portfolio Services, LLC (Calvary) and Gordon & Weinberg, P.C. (Gordon).

This case arose after the plaintiff, Charles Sweiger, filed claims against the defendants in the Court of Common Pleas of Allegheny County, Pennsylvania. He alleged that the defendants had violated the Fair Debt Collection Practices Act and had committed wrongful use of civil proceedings under Pennsylvania law.

On December 3, 2010, Gordon, on behalf of Calvary, filed a state court civil action against Sweiger, seeking to recover on an outstanding debt allegedly owed by Sweiger to Calvary. The complaint against Sweiger relied upon the affidavit of Kristina Pagni, one of Calvary’s agents. In this affidavit, Pagni stated that she had personal knowledge of the facts and circumstances surrounding the debt collection issue. Sweiger contested the use of this affidavit, arguing that the statement was false, and not properly sworn.

The defendants removed the case to the district court on the basis of federal question jurisdiction on December 22, 2011. The defendants filed a motion to compel arbitration and stay further proceedings including discovery, claiming that Sweiger was bound by the terms of an arbitration agreement referenced in Sweiger’s original credit agreement.

In response Sweiger argued that the defendants could not definitively show that they held his account by assignment, and therefore could not prove that a valid arbitration agreement was in effect between the parties of the case. Sweiger’s account was originally with creditor CitiFinancial Services, Inc., who then assigned accounts to Calvary SPV I, LLC, who finally assigned the accounts to defendant Calvary. At the time of oral argument, the defendants’ exhibits related to the series of assignments were heavily redacted to protect confidential information, so it was difficult to determine the chain of assignment. Due to the strong federal policy favoring arbitration, the defendants were permitted to amend their motion with supporting documents filed under seal and with the confidential information in unredacted form.

Using this information, the court applied relevant state law regarding contract formation to determine if a valid arbitration agreement existed. The court noted that a district court should place arbitration agreements on “equal footing with other contracts,” and should “resolve all doubts in favor of arbitration.” According to Pennsylvania contract law, a party to a contract can assign all or some of the rights and duties established by the contract to another person, and the assignee then “stands in the shoes of the assignor” with regard to the right or duty assigned.

The court determined that the record containing the unredacted information demonstrated that the defendant Calvary was the valid assignee of the contract by which Sweiger agreed to binding arbitration. Despite Sweiger’s contentions that additional verification of the assignment was required, the court determined that the record supported a “chain of title” of Sweiger’s arbitration agreement.

Noting that “[t]he strong federal policy favoring arbitration of disputes covered by the FAA directs the enforcement of the parties’ commitment to arbitrate,” the court granted the defendants’ motion to compel arbitration.

IMPACT—REINSURANCE: This case supports the federal policy favoring arbitration of disputes and demonstrates that the rights and duties following an arbitration agreement can be assigned to another party under Pennsylvania law.