MEMORANDUM OPINION
Plaintiff Charlene Novic (“Plaintiff’ or “Ms. Novic”) initially brought this action' against Defendants Credit One Bank, N.A. (“Credit One”), Midland Funding, LLC and Midland Credit Management, LLC (collectively, “Midland”), Trans' Union, LLC (“Trans Union”), Equifax Information Services, LLC, (“Equifax”), and Experian Information Solutions, Inc. (“Experian”)
BACKGROUND
Ms. Novic opened an account with Credit One in September of 2011. (ECF No. 23 at ¶ 6.) In August of 2013, unbeknownst to Ms. Novic, the mailing address on her account was switched from her Maryland address to an address in Oregon. (ECF No. 23 at ¶¶ 16-19; ECF No. 54-1 at 11.) One month later, fraudulent charges began accumulating on Ms. Novic’s account. (Id.) Ms. Novic, not yet realizing the fraud, continued to make monthly payments only in an amount sufficient to cover her usual spending. (ECF No. 23 at ¶ 25.) On March 22, 2014, Ms. Novic received a late notice from Credit One via email that stated “if you have, already made, your payment,
In late April of 2014, Midland began contacting Ms. Novic to collect the debt via letter and telephone calls. (ECF No. 23 at ¶¶ 28-29.) Ms. Novic, not yet aware of the fraud or that her account had been sold to Midland, initially thought the calls were a scam. (Id. at ¶ 31.) After the calls continued, Ms. Novic demanded proof that she owed the debt. (Id.) After speaking with 'Midland representatives and contacting Credit One, Ms. Novic finally received an account statement showing the fraudulent address and unauthorized charges. (Id. at ¶¶ 20, 32.) Ms. Novic immediately reported the fraudulent Oregon address and unauthorized transactions to Midland. (Id. at ¶ 32.) When she checked her credit reports, Ms. Novic saw that both Credit One and Midland were reporting the same fraudulent account. (Id. at ¶¶ 34, 39.) Ms. Novic then began to dispute the debt with Equifax, Trans Union, and Experian. (Id. at ¶¶ 35-39.) When Credit One and Midland continued to report that Ms. Novic owed money on the fraudulent account, however, the credit bureaus refused to remove the false reporting. (Id.)
Despite Ms. Novic’s disputes and reports of fraud, in 2016, Midland initiated collection proceedings against Ms. Novic in the District Court of Maryland for Washington County. (ECF No. 54-1 at 1-7.) Midland, in order to show that it was the successor-in-interest to Ms. Novic’s account, had documentation and affidavits from Credit One. (Id. at 12-14, 16-17.) To show that Credit One originated Ms. No-vic’s account, Credit One’s Vice President of Portfolio Services-Operations, Gary Harwood, noted on the bill from MHC to Sherman that Credit One acknowledged the sale and that the accounts were originated by Credit One and had previously been assigned to MHC. (Id. at 12.) Mr. Harwood also provided an affidavit detailing that Ms. Novic’s account was “originated by Credit One and owned by MHC immediately prior to the sale to Sherman” and the sale “represents] all rights to the accounts and receivables previously owned and serviced by Credit One.” (Id. at 13-14.) Midland then had a copy of the bills of sale from MHC to Sherman and from Sherman to Midland. (Id. at 8-25.) In addition, Credit One’s Senior Vice President and Chief Financial Officer provided an affidavit similar to Mr. Harwood’s detailing how Credit One assigns accounts and receivables “representing] all rights to the accounts.” (Id. at 16-17.)
Ms. Novic filed a notice of intention to defend on the grounds that someone had stolen her identity, changed the address on her account, and ran up charges. (ECF No. 54 at 2, ¶ 2; ECF No. 54-1 at 3.) The state district court, after a trial on the merits on October 3, 2016, entered judgment in favor of Ms. Novic. (ECF No. 23 at ¶¶ 46-52.)
On December 27, 2016, Ms. Novic filed the instant action in the Circuit Court for Anne Arundel County. (ECF No. 2.) Defendant Trans Union removed the case to federal court based on federal question jurisdiction. (ECF No. 1.) On June 15, 2017, this Court ordered a Stipulation of Dismissal with Prejudice between Ms. No-vic and Defendant Trans Union. (ECF No. 63.) On September 11, 2017, by agreement of the parties, this Court dismissed Defendants Equifax and Experian from this action. (ECF No. 93.)
STANDARD OF REVIEW
Defendant Credit One has filed the pending Motion to Compel Arbitration (ECF No. 52) pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. The standard of review on a Motion to Compel Arbitration pursuant to the FAA is-“ ‘akin to the burden on summary judgment.’ ”
A party seeking to apply the FAA must demonstrate four elements: ‘“(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute.’ ” Galloway,
ANALYSIS
Ms. Novic does not contest .that the Agreement between herself and the Defen
I. Defendant assigned its right to arbitrate
Ms. Novic first argues that there is no longer a binding and enforceable agreement to arbitrate as a result of Credit One's assignment of its right, title.and interest to her account. (ECF No. 79 at 5.) “[A]rbitrability is at bottom a question of contract interpretation; a party cannot tie required to arbitrate a dispute if it has not contractually agreed to do so.” Sierra Roach v. Navient Solutions, Inc.,
While the parties dispute what, if any, state law would control the issue of waiver, both parties apply Maryland law to the issue of assignment. (ECF No. 52-1 at 6; ECF No. 54 at 6.) In Maryland, ‘a contract cannot be enforced by or against a person who is not a party to it.’ ” Cecilia Schwaber Trust Two v. Hartford Acc. and Indem. Co.,
The Agreement sets out the rights initially created when Ms. Novic opened- an account with Credit One. The Agreement to Arbitrate provision states: “[y]ou and we agree that either you or we may, without the other’s consent, require that any controversy or dispute between you and
The subsequent bills of sale, gathered by Midland for it's suit against Ms. Novic, then show the extent of the assignments between the assignors, initially the Defendant Credit One, and subsequent assignees. The bill of sale from MHC to Sherman states that MHC “hereby transfers, sells, assigns, conveys, grants and delivers to Sherman Originator III LLC ... all of its right, title and interest" in and to [Ms. Novic’s account].” (ECF No. 54-1 at 12.) On the bill of sale is Credit One’s acknowl-edgement that “[t]he accounts assigned under the terms of th[e] Bill of Sale were originated by Credit One-Bank, N.A., and ha[d] previously been assigned to MHC pursuant to a series of self-executing agreements.” Id.
The Defendant Credit One provided two affidavits that further assisted Midland in the state court case in proving that it was the successor-in-interest to Ms. Novic’s account. The Vice President of Portfolio Services-Operations at Credit One provided an affidavit of sale stating that accounts and receivables, including Ms. Novic’s, originated by Credit One to MHC and subsequently Sherman “represent all rights to the accounts and receivables previously owed and serviced by Credit One.” (ECF No. 54-1 at 13.) Defendant’s Senior Vice President and Chief Financial Officer also provided similar information in his affidavit, stating that accounts purchased from MHC “represent all rights to the accounts previously owed and serviced by Credit One.” (ECF No. 54-1 at 17.)
Despite the language of the Agreement and bills of sale, Credit One argues that it maintains its right to arbitrate in the Agreement due to the Agreement’s Sever-ability and 'Survival provision. This provision states that the “arbitration provision shall survive.. .any transfer or assignment of your account, or any amounts owed on your account.” (ECF No. 52-5 at 6.) Defendant cites a case from the United States District Court from the Northern District of Georgia where the court held that “an arbitration provision may survive the termination of a contract because it is a ‘structural provision’ that relates to remedies and dispute resolution, and not an obligation concerning performance.” Goshawk Dedicated Ltd. v. Portsmouth Settlement Co. I, Inc.,
By its language, the Agreement gave “Credit One, its successors or assigns” (emphasis added) the right to arbitrate. Therefore, although Credit .One initially held the right to arbitrate, when Credit One transferred its rights and interests in the Agreement it transferred} that right to the assignee. This Court has previously held with respect to Defendant Midland that as the “assignee of all right, title, and interest” in individuals’ accounts, Midland could enforce an arbitration provision contained in agreements between the individuals and Citibank. Bey v. Midland
As the Defendant Credit One emphasized in its Supplemental Memorandum, “Credit One is the entity that assigned and sold via a third party Ms. Novic’s account to Midland. Credit One has no relationship with Midland.... Midland then, on its own behalf and without Credit One as a party or beneficiary of the action, pursued the state court litigation.” (ECF No. 76 at 1.) In light of this acknowledgement by Credit One, Ms. Novic has aptly noted that “there is no basis in the text to conclude that the surviving arbitration provision lives not only with the assignees but also with the assignor.” (ECF No. 79 at 3.) For this Court to hold otherwise could mean that each assignee to Ms. Novic’s account, despite having transferred all its rights to a subsequent assignee, still maintain the right to compel the Plaintiff to arbitrate. When Credit One assigned all right, title and interest to Ms. Novic’s account, it ceased to be a party to the contract. Therefore, Defendant no longer holds the right to compel Ms. Novic to arbitrate this case.
II. Even if Defendant maintained its right to arbitrate, Defendant defaulted that right
In the alternative, Ms. Novic argues that even if Credit One retained the right to compel arbitration, that right was waived by Midland’s state court suit against her. The parties dispute whether the Federal Arbitration Act, which applies the doctrine of default, or Maryland state law, which applies the doctrine of waiver, applies to this issue. That dispute is of no moment, however, in this case. As discussed below, the United States Court of Appeals for the Fourth Circuit has specifically held that utilizing “litigation machinery” may preclude application of binding arbitration. Maxum Founds. Inc. v. Salus Corp.,
The Federal Arbitration Act “applies to arbitration clauses in contracts ‘evidencing a transaction involving commerce.’” See Iraq Middle Market Development Foundation v. Harmoosh,
Defendant- claims the Agreement evidences a transaction involving commerce because the Agreement is between Credit One, a national banking association with its headquarters in Nevada, and Ms. Novic, a resident of Maryland. In addition, the arbitration agreement provides that “[t]his arbitration provision is made pursuant to a transaction involving interstate commerce.” (ECF No. 52-5 at 5.) Ms. No-vic argues that' the issue of waiver addresses whether an agreement to arbitrate still exists. The Fourth Circuit, however, has made it clear that the FAA 'governs whether a party has waived the right to arbitrate. See Harmoosh,
Under the FAA “a party loses its right to a stay of court proceedings in order to arbitrate if it is ‘in default in proceeding with such arbitration.’” Forrester v. Penn Lyon Homes, Inc.,
In this case, Credit One has lost its right to a stay of these proceedings in order to arbitrate as a result of its assignment of Ms. Novic’s account, which set forth a chain of events resulting in the “litigation machinery” of Midland to be applied against her. In proceeding with a trial in the District Court of Maryland for Washington County, Midland not only showed that it was the successor-in-interest -to Ms. Novic’s account, it also barred its subsequent demand for arbitration in this case.
Given that Midland - sought to recover the underlying debt on the contract now in dispute, Midland’s litigation was based on the same issues as Plaintiffs current complaint. As this Court noted in Barbagallo v. Niagara Credit Solutions, Inc.,
Although not binding, thé recent Maryland Court of Appeals case Cain v. Midland Funding, LLC,
In this case, the actions of the Defendant Credit One in setting forth a chain of assignments resulting in litigation “‘defeat[s] one of the reasons behind the federal policy favoring arbitration.’ ” Forrester v. Penn Lyon Homes, Inc.,
CONCLUSION
For the reasons stated above, Defendant Credit One Bank’s Motion to Compel Arbitration and Stay the Litigation (ECF No. 52) is-DENIED..
A separate Order follows. ‘
Notes
. As indicated infra, the claims against the Defendants TransUnion, Equifax, and Expelí-an have now been dismissed and Credit One and Midland are Ae only remaining defendants.
. Although the Fourth Circuit has characterized the standard of review on a Motion to Compel Arbitration as “akin to the burden on summary judgment,”' the pending motion will not be converted to or treated as a motion for summary judgment. On the contrary, the remedies available to a defendant moving to compel árbitration arb limited to a'stay or dismissal of the action." See Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001) ("[T]he FAA requires a district court, upon motion by any party, to stay judicial proceedings involving issues covered by written arbitration agreements [citing 9 U.S.C. § 3],.. .Notwithstanding the terms of § 3, however, dismissal is a proper remedy when all of the issues presented in a lawsuit are arbitrable, [citing Alford v. Dean Witter Reynolds, Inc.,
. In Plaintiffs initial Response in Opposition to Defendant's Motion to Compel, Plaintiff also argued that if Defendant retained any right to compel arbitration, that right merged into the state court judgment entered against .Midland. (ECF No. 54 at 7, 12.) Because this Court finds that Defendant did not maintain any right to arbitrate, it does not reach this issue,
. The other cases Defendant cites can be similarly distinguished. See Rhodall v. Verizon-Wireless of the E., L.P., No. 1:10-3195;
. Following this Court’s grant of leave to Defendants Midland and Credit One to file Supplemental Memorandum in Support of their Motions to Compel Arbitration concerning the Maryland Court of Appeals’ decision in Cain, Midland filed a Consent Motion to Withdraw its Motion to Compel Arbitration and Stay Proceedings, ECF No. 75, which this Court granted. (ECF No. 77.)
. In concluding its Memorandum in support of its Motion to Compel (ECF No. 52-1), Defendant cites a North Carolina case, Rice v. Credit One Financial, No. 5:15-CV-130-BO,
. On July 3, 2017, Midland filed a Consent Motion to Withdraw its Motion to Compel Arbitration and Stay Proceedings, ECF No. 75, which this Court granted. (ECF No. 77.)