Debt collector seeking OK to compel arbitration.

Byline: Kris Olson

Consumer advocates are closely monitoring a case argued before the Supreme Judicial Court earlier this month in which a debt collection agency is attempting to avail itself of a creditor's agreement with its customer to compel arbitration and thwart a potential class action over its practices.

In Transworld Systems, Inc. v. Landry, at issue are the efforts by the appellant to collect a debt the appellee allegedly owes to Enterprise Rent-a-Car for returning a vehicle with significant damage.

Appellee Philip Landry alleges Transworld called more than twice within a seven-day period, in violation of 940 C.M.R., 7.04(1)(f), part of the attorney general's regulations that define unfair or deceptive acts or practices violating the state's consumer protection statute, Chapter 93A, in the debt collection context.

After Landry filed his lawsuit on behalf of himself and others who had been similarly inundated with collection calls, Transworld filed a motion to compel arbitration, citing a provision in Landry's agreement with Enterprise.

Round one went to Landry, with Superior Court Judge William J. Ritter in Worcester finding that Transworld was not a party to the arbitration agreement, which governs claims against "each other," meaning Landry and Enterprise, and that there was no "clear and unmistakable evidence" that Landry agreed to arbitrate his claims against a "different corporate entity acting as a contractual independent contractor" for Enterprise.

After Transworld appealed, the SJC transferred the case sua sponte from the Appeals Court.

Textual interpretation

While consumer rights attorneys agree with Landry that the limiting

language "against each other" should carry the day, Transworld Systems thinks there is support for its position in the text of the arbitration agreement as well.

Not only does the arbitration agreement say that it is to be "broadly interpreted," it states that it applies to "all claims Renter may bring against Owner's employees, agents, affiliates or representatives."

While it may have been referred to as an "independent contractor," Transworld asserts that it functioned as Enterprise's "agent" or at least as its "representative" in its dealings with Landry.

If only Landry or Enterprise can enforce the arbitration provision, the clause requiring arbitration of claims against Enterprise's "agents or representatives" would be rendered illusory, Transworld argues in its brief.

Transworld's attorneys cite a "particularly instructive" case out of the Eastern District of New York, Clarke v. Alltran Fin...