Midland Credit Management Collections Suit Must Be Arbitrated

A federal court order compelling arbitration in a lawsuit against Midland Credit Management and law firm Schreiber Cohen LLC over allegedly unlawful debt collection practices stands, after the U.S. Court of Appeals for the First Circuit concluded Wednesday that debt buyer Midland Funding holds all the same rights that Barclays held under its “Cardmember Agreement” with the plaintiff-debtor.

When Midland Funding purchased bundled debt from Barlcays that included plaintiff Jackeline Barbosa’s delinquent account, the bank assigned all of its rights and interests, including the right to invoke the cardmember agreement’s arbitration provision, Judge O. Rogeriee Thompson wrote for the court.

Barbosa argued that Midland Funding couldn’t be “both Barclays’ assignee and standing in for Barclays itself,” but offered no basis for deviating from the “long-standing given in contract law” that “an assignee stands in the shoes of the assignor,” Thompson said.

Just like the arbitration provision extended to Barclays’ agents, it extends to Midland Funding’s agents, MCM and Schreiber Cohen.

Midland Funding is a shell corporation that acquires charged-off consumer debt from entities offloading delinquent accounts, according to the Wednesday ruling. MCM is its servicer and authorized agent, and Schreiber Cohen is its law firm.

Barbosa argued that the term “agent” excluded law firms, because separate language in the arbitration provision extended the right only to “service providers” and “marketing partners” when “included in proceedings in which Barclays is a party.”

But that part of the definition “is simply extending the list of entities that may be authorized to elect arbitration,” not limiting it, Thompson said.

Barbosa claims that MCM and the firm have filed suits against debtors in state court even though the statute of limitations has expired in violation of the Federal Debt Collection Practices Act and Massachusetts state law. Originally filed as a proposed class action, the U.S. District Court for Massachusetts struck class allegations.

Judges Kermit V. Lipez and William J. Kayatta Jr. joined in the decision.

Barbosa is represented by Greater Boston Legal Services and National Consumer Law Center Inc.

Midland Credit Management is represented by Holland & Knight LLP. Schreiber Cohen is represented by Hinshaw & Culbertson LLP.

The case is Barbosa v. Midland Credit Mgmt., 4th Cir., No. 19-1896, 11/25/20.