After a debt collector filed suit to collect an expired debt, the U.S. Court of Appeals for the Fourth Circuit held that the debt collector could not later compel arbitration of the debtor’s class action because arbitration had been waived.
In Roper v. Oliphant Financial, LLC, Oliphant sued the plaintiff to collect on a debt that was barred by the statute of limitations. After the lawsuit was dismissed, the plaintiff filed a class action lawsuit against Oliphant and its law firm for violation of federal and state consumer protection laws for filing collections suits outside the statute of limitations. The defendants moved to compel arbitration, but the trial court denied the motion finding the defendants waived their right by filing the collection action. The Fourth Circuit affirmed.
When examining whether a party has waived the right to compel arbitration, a court determines whether the moving party knew the right to compel existed and acted inconsistently with the intention of enforcing that right. Under Maryland law, if a party litigates a case concerning the same claims that it wants to arbitrate, it has acted inconsistently with the intention to arbitrate. The Fourth Circuit found that once the defendants filed the collections action in state court, they waived the right to compel arbitration over claims challenging those debt collection practices. While the inclusion of claims that predate the collections suit may negate waiver, that was not the case here. The plaintiff’s lawsuit was solely based on the defendants suing debtors outside the statute of limitations. Therefore, the appellate court found that the defendants waived their right to compel arbitration.