470 F.Supp.3d 81
D. Mass.2020Background:
- MIT Federal Credit Union (MA) made a Graduate Private Education line of credit to Michael C. Cordisco (CT) on Dec. 3, 2014 for $195,000; the Agreement required timely payments and listed failure to pay as an event of default.
- The Agreement contains an arbitration clause but expressly permits the lender to "bring a dispute regarding collections in a court." It also provides that the Agreement is governed by federal law and the law of the state where the lender's principal place of business (Massachusetts).
- Cordisco defaulted on payments; Rosen Legal (on behalf of MIT) sent a demand letter in May 2019 and MIT sued in the District of Massachusetts in June 2019 seeking $185,459.73 plus interest, costs, and attorneys' fees.
- In April 2020 Cordisco moved to dismiss under Fed. R. Civ. P. 12(b)(6), arguing MIT lacked standing to sue because the debt had allegedly been assigned to collection agencies.
- He also moved under Fed. R. Civ. P. 12(b)(3) (improper venue), arguing the arbitration clause required arbitration of the dispute.
- The court denied both motions: it found dismissal on the pleadings premature as assignment was not apparent on the face of the complaint, and it held the arbitration clause expressly carved out collections disputes for court litigation.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Rule 12(b)(6): Should the complaint be dismissed for lack of standing because MIT assigned the debt? | MIT: it did not assign the debt and properly brings suit. | Cordisco: MIT lacks standing because the debt was assigned to collections agencies. | Denied — assignment not evident on the face of the complaint; affirmative defense cannot be resolved at pleading stage. |
| 2) Venue/arbitration: Does the arbitration clause require arbitration, rendering this forum improper? | MIT: the Agreement expressly permits lender to litigate collections disputes in court. | Cordisco: the arbitration clause covers disputes between the parties and requires arbitration. | Denied — clause unambiguously excludes collection disputes from arbitration; litigation is permitted. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for Rule 12(b)(6))
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state plausible claim)
- Blackstone Realty LLC v. FDIC, 244 F.3d 193 (1st Cir. 2001) (affirmative defense dismissal must be clear on face of complaint)
- First Allmerica Fin. Life Ins. Co. v. Minnesota Life Ins. Co., 188 F. Supp. 2d 101 (2002) (apply state contract law and federal arbitration principles to scope issues)
- Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (parties may define arbitration scope and exclude claims)
- Salls v. Dig. Fed. Credit Union, 349 F. Supp. 3d 81 (D. Mass. 2018) (unambiguous contract terms control arbitration scope)