The decision in Wood v. Palisades Collection LLC, No. 09-4627 (D.N.J), issued July 22, 2010, underscores the need for a debt buyer sued in a class action to review carefully the original credit card agreement and all change-in-terms notices to ascertain whether there is a binding arbitration agreement.

At issue in Wood was the express class action waiver—language precluding the parties from participating in a class action—contained in the arbitration agreement between the consumer and the credit card issuer. The putative class action, in which Ballard Spahr’s Alan S. Kaplinsky and Martin C. Bryce, Jr., represented Palisades, alleged that the debt buyer had violated the federal Fair Debt Collection Practices Act when it attempted to collect debt the plaintiff owed on a credit card account that it had purchased from the card issuer.

The U.S. District Court for the District of New Jersey compelled individual arbitration of the plaintiff’s claims concluding that Palisades could invoke the arbitration agreement between the plaintiff and the credit card issuer. The Court refused to apply New Jersey law (under which the plaintiff contended the class action waiver would be unenforceable). Instead, it concluded that Delaware law governed under the applicable choice-of-law rules because the credit card issuer was located in Delaware and the credit card agreement provided for the application of Delaware law.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). For more information, please contact group Chair Alan S. Kaplinsky, 215.864.8544 or, or Martin C. Bryce, Jr., 215.864.8238 or  

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