## Facts

- Carol Kulig allegedly incurred credit-card debt on an account originally issued by Chase Bank USA, N.A.
- Midland Funding, LLC purchased the charged-off debt and attempted to collect it by filing a New York state-court collection action.
- The state-court action was unsuccessful because it was treated as time-barred under New York law.
- Kulig filed a putative federal class action alleging defendants systematically filed and litigated time-barred debt-collection suits, asserting claims under the FDCPA and related New York statutes.
- Defendants demanded individual arbitration and moved to compel arbitration and stay the federal action under the FAA.
- Defendants relied on a generic, undated Chase cardmember agreement containing an arbitration clause and a Delaware choice-of-law provision, but provided no account-specific proof that Kulig received or assented to those terms or any amendments.

## Issues

1. Whether defendants met their burden under the FAA to show a valid, enforceable agreement requiring arbitration of Kulig’s claims.
2. Whether contract formation (including any choice-of-law clause) should be evaluated under New York or Delaware law, and whether an enforceable arbitration agreement existed under either.

## Decision

- The court denied defendants’ motion to compel arbitration and to stay the action.
- The court held defendants failed to prove a binding arbitration agreement between Kulig and Chase (and thus by assignment Midland) under either New York or Delaware law.
- The court ordered defendants to answer the complaint within fourteen days.
- The court denied as moot Kulig’s request for leave to file a sur-reply because it was not relied on to decide the motion.

## Legal Principles

- Under the FAA, arbitration may be compelled only if the moving party proves an enforceable agreement to arbitrate; contract formation is governed by state law.
- A court cannot treat a choice-of-law clause as controlling when the formation of the contract containing that clause is itself disputed.
- Generic or form agreements, without competent account-specific evidence of notice and assent, are insufficient to establish a consumer’s agreement to arbitrate.
- The federal policy favoring arbitration does not permit compelling arbitration absent proof of mutual assent under ordinary state contract-formation principles.

## Conclusion

Because defendants relied on a generic cardmember agreement and failed to present account-specific evidence that Kulig received and accepted the arbitration provision (or any amendments), the court found no enforceable arbitration agreement under New York or Delaware law and denied the request to compel arbitration and stay the case.


Kulig v. Midland Funding, LLC, 2013 WL 6017444 (S.D.N.Y. 2013)