N.D. Texas Orders Debt Collection Case to Arbitration Based on Nonsignatory’s Motion

Originally published by Beth Graham.

The Northern District of Texas has ordered a lawsuit between a debtor and a nonsignatory debt collector to arbitration.  In Bow v. Ad Astra Recovery Servs., Inc., No. 18-0510-G, (N.D. Tex. July 18, 2018), a Texas woman, Bow, secured an $850 loan from a short-term lending company, Speedy Cash, in January 2016.  Bow signed an arbitration agreement as part of the loan process.  About one year after Bow received the loan funds, Speedy Cash submitted Bow’s account to a collection agency, Ad Astra Recovery.

Over the course of the next few months, Ad Astra Recovery allegedly contacted Bow on her mobile phone using an auto-dialing system multiple times despite Bow’s request that the company stop calling her.  Eventually, Bow filed a lawsuit against Ad Astra Recovery claiming the company violated the Telephone Consumer Protection Act of 1991 and other state and federal laws.  The collection agency responded to the case by filing a motion to compel the dispute to arbitration based on the loan agreement Bow entered into with Speedy Cash.

In a memorandum opinion, the Dallas court first examined whether the arbitration agreement at issue applied to a nonsignatory such as Ad Astra Recovery.  Because the language of the arbitration provision that was included in the loan documents specifically stated Ad Astra Recovery was a related party, the federal district court concluded “there exists a valid and enforceable arbitration agreement between the parties in this case.”

Next, the court stated Bow’s lawsuit fell within the scope of the arbitration agreement because the arbitral provision applied to “all federal or state law claims, disputes or controversies, arising from or relating directly or indirectly to” Bow’s loan.  After that, the United States District Court for the Northern District of Texas dismissed Bow’s evidentiary objections before ultimately granting Ad Astra Recovery’s motion to compel the debt collection dispute to arbitration.

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