Magnuson refuses to dismiss claims against NAF
Mar 5th, 2010 by Michelle Lore
U.S. District Court Judge Paul Magnuson last week shot down the National Arbitration Forum’s attempt to get out from under a potential class action lawsuit.
As many of you will recall, last summer Minnesota Attorney General Lori Swanson sued the NAF, which was the country’s largest administrator of credit card and consumer collections arbitrations. The AG alleged that the company hid its extensive ties to the collection industry and worked behind the scenes to convince creditors to insert arbitration provisions in their customer agreements and then appoint the NAF to decide the disputes. The suit also alleged that the NAF has financial ties to the collection industry. The matter settled a week later, with the NAF agreeing that it would get out of the business of arbitrating credit card and other consumer collection disputes.
But the company’s problems didn’t end there.
The plaintiffs in the current lawsuit are a group of consumers with credit card debt, unpaid utility bills, consumer leases and health care debt whose claims were submitted to binding arbitration pursuant to pre-dispute arbitration clauses in the consumers’ debt agreements. Most of the arbitrations were conducted by NAF.
The plaintiffs contend the NAF was biased and corrupt, and are now challenging the validity of the arbitration awards. In an order dated Feb. 22, Magnuson allowed almost all of the plaintiffs’ claims to go forward, including several under various consumer protection statutes and one under the Racketeer Influenced and Corrupt Organizations Act.
“Although this Court has been critical of the overuse of civil RICO, according to Plaintiffs’ allegations, this case appears to be the rare case for which civil RICO is appropriate,” Magnuson wrote.
It looks like the NAF will be on the hot seat for while yet. This should be an interesting case to watch.
