United States District Court, D. Maryland
Richard D. Bennett, United States District Judge.
Charlene Novic (“Plaintiff” or “Ms.
Novic”) initially brought this action against
Defendants Credit One Bank, N.A. (“Credit One”),
Midland Funding, LLC and Midland Credit Management, LLC
(collectively, “Midland”), Trans Union, LLC
(“Trans Union”), Equifax Information Services,
LLC, (“Equifax”), and Experian Information
Solutions, Inc. (“Experian”) alleging
violations of the Federal Credit Reporting Act
(“FCRA”), 15 U.S.C. § 1681, et seq.
(Am. Compl. ECF No. 23.) Currently pending before this Court
is Defendant Credit One's Motion to Compel Arbitration
and Stay the Litigation. (ECF No. 52.) The parties'
submissions have been reviewed, and no hearing is necessary.
See Local Rule 105.6 (D. Md. 2016). For the reasons
stated herein, Defendant's Motion to Compel Arbitration
and Stay the Litigation (ECF No. 52) is DENIED.
Novic opened an account with Credit One in September of 2011.
(ECF No. 23 at ¶ 6.) In August of 2013, unbeknownst to
Ms. Novic, the mailing address on her account was switched
from her Maryland address to an address in Oregon. (ECF No.
23 at ¶¶ 16-19; ECF No. 54-1 at 11.) One month
later, fraudulent charges began accumulating on Ms.
Novic's account. (Id.) Ms. Novic, not yet
realizing the fraud, continued to make monthly payments only
in an amount sufficient to cover her usual spending. (ECF No.
23 at ¶ 25.) On March 22, 2014, Ms. Novic received a
late notice from Credit One via email that stated “if
you have already made your payment, please ignore this
notice.” (Id. at ¶ 26.) Believing that
she had already paid her account, Ms. Novic ignored the
notice. (Id.) Eight days later, Credit One sold Ms.
Novic's account. (Id. at ¶ 27). Over the
next month, Ms. Novic's account was sold from Credit One
to MHC Receivables, LLC (“MHC”), from MHC to
Sherman Originator III LLC (“Sherman”), and then
from Sherman to Midland. (ECF No. 54-1 at 9.)
April of 2014, Midland began contacting Ms. Novic to collect
the debt via letter and telephone calls. (ECF No. 23 at
¶¶ 28-29.) Ms. Novic, not yet aware of the fraud or
that her account had been sold to Midland, initially thought
the calls were a scam. (Id. at ¶ 31.) After the
calls continued, Ms. Novic demanded proof that she owed the
debt. (Id.) After speaking with Midland
representatives and contacting Credit One, Ms. Novic finally
received an account statement showing the fraudulent address
and unauthorized charges. (Id. at ¶¶ 20,
32.) Ms. Novic immediately reported the fraudulent Oregon
address and unauthorized transactions to Midland.
(Id. at ¶ 32.) When she checked her credit
reports, Ms. Novic saw that both Credit One and Midland were
reporting the same fraudulent account. (Id. at
¶¶ 34, 39.) Ms. Novic then began to dispute the
debt with Equifax, Trans Union, and Experian. (Id.
at ¶¶ 35-39.) When Credit One and Midland continued
to report that Ms. Novic owed money on the fraudulent
account, however, the credit bureaus refused to remove the
false reporting. (Id.)
Ms. Novic's disputes and reports of fraud, in 2016,
Midland initiated collection proceedings against Ms. Novic in
the District Court of Maryland for Washington County. (ECF
No. 54-1 at 1-7.) Midland, in order to show that it was the
successor-in-interest to Ms. Novic's account, had
documentation and affidavits from Credit One. (Id.
at 12-14, 16-17.) To show that Credit One originated Ms.
Novic's account, Credit One's Vice President of
Portfolio Services-Operations, Gary Harwood, noted on the
bill from MHC to Sherman that Credit One acknowledged the
sale and that the accounts were originated by Credit One and
had previously been assigned to MHC. (Id. at 12.)
Mr. Harwood also provided an affidavit detailing that Ms.
Novic's account was “originated by Credit One and
owned by MHC immediately prior to the sale to Sherman”
and the sale “represent[s] all rights to the accounts
and receivables previously owned and serviced by Credit
One.” (Id. at 13-14.) Midland then had a copy
of the bills of sale from MHC to Sherman and from Sherman to
Midland. (Id. at 8-25.) In addition, Credit
One's Senior Vice President and Chief Financial Officer
provided an affidavit similar to Mr. Harwood's detailing
how Credit One assigns accounts and receivables
“represent[ing] all rights to the accounts.”
(Id. at 16-17.)
Novic filed a notice of intention to defend on the grounds
that someone had stolen her identity, changed the address on
her account, and ran up charges. (ECF No. 54 at 2, ¶ 2;
ECF No. 54-1 at 3.) The state district court, after a trial
on the merits on October 3, 2016, entered judgment in favor
of Ms. Novic. (ECF No. 23 at ¶¶ 46-52.)
December 27, 2016, Ms. Novic filed the instant action in the
Circuit Court for Anne Arundel County. (ECF No. 2.) Defendant
Trans Union removed the case to federal court based on
federal question jurisdiction. (ECF No. 1.) On June 15, 2017,
this Court ordered a Stipulation of Dismissal with Prejudice
between Ms. Novic and Defendant Trans Union. (ECF No. 63.) On
September 11, 2017, by agreement of the parties, this Court
dismissed Defendants Equifax and Experian from this action.
(ECF No. 93.)
March 24, 2017, Credit One filed a Motion to Compel
Arbitration and Stay the Litigation. (ECF No. 52.) Initially,
Midland also filed a Motion to Compel Arbitration and Stay
the Proceedings. (ECF No. 61.) Following a teleconference
with the parties, this Court granted Credit One and Midland
leave to file Supplemental Memorandum in Support of their
Motions to Compel Arbitration regarding the Maryland Court of
Appeals' March 24, 2017 decision in Cain v. Midland
Funding, LLC, 452 Md. 141 (2017). (ECF Nos. 72, 74.)
Five days after the teleconference, Midland filed a Consent
Motion to Withdraw its Motion to Compel Arbitration and Stay
Proceedings, ECF No. 75, which this Court granted. (ECF No.
Credit One has filed the pending Motion to Compel Arbitration
(ECF No. 52) pursuant to the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1 et seq. The
standard of review on a Motion to Compel Arbitration pursuant
to the FAA is “‘akin to the burden on summary
judgment.'” Galloway v. Santander Consumer USA,
Inc., 819 F.3d 79, 85 (4th Cir. 2016) (quoting
Chorley Enterprises, Inc. v. Dickey's Barbecue
Restaurants, Inc., 807 F.3d 553, 564 (4th Cir. 2015)).
Therefore, motions to compel arbitration “shall [be]
grant[ed] … if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a); Rose v. New Day Financial, LLC, 816 F.Supp.2d
245, 251-52 (D. Md. 2011).
seeking to apply the FAA must demonstrate four elements:
“‘(1) the existence of a dispute between the
parties, (2) a written agreement that includes an arbitration
provision which purports to cover the dispute, (3) the
relationship of the transaction, which is evidenced by the
agreement, to interstate or foreign commerce, and (4) the
failure, neglect or refusal of the defendant to arbitrate the
dispute.'” Galloway, 819 F.3d at 84
(quoting Rota- McLarty v. Santander Consumer USA,
Inc., 700 F.3d 690, 696 n. 6 (4th Cir. 2012)).
Therefore, “although arbitration has a favored place,
there still must be an underlying agreement between the
parties to arbitrate.'” Adkins v. Labor Ready,
Inc., 303 F.3d 496, 501 (4th Cir. 2002) (quoting
Arrants v. Buck, 130 F.3d 636, 640 (4th Cir. 1997)).
The Supreme Court has directed courts to “apply
ordinary state-law principles that govern the formation of
contracts” and “federal substantive law of
arbitratbility.” Hill v. Peoplesoft USA, Inc.,
412 F.3d 540, 543 (4th Cir. 2005); see also Heller v.
TriEnergy, Inc., 877 F.Supp.2d 414, 423-24 (N.D.W.V.
2012) (explaining that the “one important caveat to the
reach of the FAA” is that state law governs the
formation of the contract (citing Hill, 412 F.3d at
Novic does not contest that the Agreement between herself and
the Defendant Credit One once contained a valid agreement to
arbitrate. Rather, Ms. Novic's argument is two-fold:
First, that Credit One ceased to be a party to the
arbitration agreement when it assigned all of its right,
title and interest to Ms. Novic's account. Therefore, it
no longer holds the right to compel arbitration. Second, that
even if the arbitration agreement between Ms. Novic and
Credit One survived the ...