Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02133/USCOURTS-caed-2_05-cv-02133-5/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1692 Fair Debt Collection Act

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

ROBERT GALBRAITH,

Plaintiff, No. CIV S 05-2133 KJM

vs.

RESURGENT CAPITAL SERVICES, et al.,

Defendants. ORDER

 /

 Defendants’ petition to compel arbitration and stay this action came on regularly

for hearing September 27, 2006. Douglas Campion and Joshua Swigart appeared for plaintiff. 

Natalie Vance appeared for defendants. Upon review of the documents in support and

opposition, upon hearing the arguments of counsel, and good cause appearing therefor, THE

COURT FINDS AS FOLLOWS:

In this action, plaintiff alleges he incurred consumer debt with Household

Bank/Best Buy and that when he fell behind on payments, defendant Resurgent attempted to

collect the debt in violation of the law. Specifically, plaintiff alleges defendant Resurgent failed

to provide written notice of his right to dispute the debt or to request verification of the debt as

required under 15 U.S.C. § 1692g. Plaintiff further alleges that the affidavit sent by Resurgent to

plaintiff did not verify the debt and that the person who signed the affidavit was not an attorney. 

Case 2:05-cv-02133-KJM Document 56 Filed 10/19/06 Page 1 of 4
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Plaintiff purports to bring this action on behalf of himself and of a proposed class. Plaintiff has

not filed a motion for class certification, and has agreed that the motion to compel arbitration

should be resolved before any further litigation in this court. 

Defendants petition to compel arbitration, contending that under the agreement

plaintiff entered into with Household Bank, all claims arising from or relating to plaintiff’s

account are to be resolved in arbitration upon the election of either party. Plaintiff contends the

defendants here are not entitled to invoke the arbitration clause because they are not signatories

to the original contract. Defendants, however, are successors in interest and/or agents of the

successors in interest and as such are entitled to the benefits of the arbitration clause under the

ordinary principles of contract and agency and the doctrine of equitable estoppel. See Comer v.

Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006). Sherman Originator bought the account from

Household Bank and can enforce the arbitration clause as a successor in interest because it was

assigned all rights and obligations of Household Bank and it is obliged to defend lawsuits

concerning claims arising after the sale of the accounts. Sherman Originator, however, has since

transferred all rights, interests and obligations to Sherman Acquisition; thus, Sherman

Acquisition can invoke the arbitration clause as a successor in interest. Id. Resurgent is the

servicing agent of Sherman Acquisition and under agency principles also is entitled to the benefit

of the arbitration clause. Id. Finally, Sherman Financial, the named defendant in this action, is

entitled to invoke the arbitration clause under principles of equitable estoppel inasmuch as the

complaint alleges this defendant’s liability arises out of the conduct of Resurgent. Id.; see also

First Amended Complaint ¶ 31. 

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Case 2:05-cv-02133-KJM Document 56 Filed 10/19/06 Page 2 of 4
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1

 Specifically, the arbitration clause provides, in pertinent part: 

Any claim, dispute, or controversy (whether based upon contract;

tort, intentional or otherwise; constitution; statute; common law; or

equity and whether pre-existing, present or future), including

initial claims, counter-claims, cross-claims and third party claims,

arising from or relating to this Agreement or the relationships

which result from this Agreement, including the validity or

enforceability of this arbitration clause, any part thereof or the

entire Agreement (“Claim”), shall be resolved, upon the election of

you or us, by binding arbitration pursuant to this arbitration

provision and the applicable rules or procedures of the arbitration

administrator selected at the time the Claim is filed. 

Def’ts’ Mem. P. & A. in Supp. Mot. to Compel, Ex. B at 4. 

3

Plaintiff also contends this dispute is not covered by the arbitration agreement. 

The arbitration language is very broad and inclusive.1 This dispute arises directly out of

plaintiff’s failure to make the payments called for in the credit agreement. The wrongful conduct

alleged here flows directly from plaintiff’s breach and thus is subject to arbitration. See Simula,

Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999).

Plaintiff further contends the arbitration clause is unenforceable because it is both

procedurally and substantively unconscionable. The court finds that under both California and

Nevada law it is neither. Plaintiff signed a credit application, which noted the arbitration

provision, and the credit agreement plainly describes the terms of arbitration. Def’ts’ Ex. B, § 6. 

There is no procedural unconscionability in the circumstances presented here. Plaintiff also

contends the agreement contains a class action waiver and is therefore substantively

unconscionable. Plaintiff, however, does not allege any scheme to defraud; in fact, plaintiff does

not allege that the debt giving rise to the instant action was not incurred by him. In the context

of this case, the class action waiver does not render the arbitration clause substantively

unconscionable. See Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005). The court also

finds no substantive unconscionability in the arbitration fees provision.

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4

Accordingly, IT IS HEREBY ORDERED that: 

1. Defendants’ petition to compel arbitration is granted. 

2. This action is stayed. The parties shall notify the court within ten days of the

completion of arbitration proceedings.

3. The Clerk of Court is directed to administratively close this action pending

such notification.

DATED: October 19, 2006

006/galbraith.oah 

Case 2:05-cv-02133-KJM Document 56 Filed 10/19/06 Page 4 of 4