On Friday, March 24, 2017, the Maryland Court of Appeals, the highest court in Maryland, held that when a company files suit against a consumer in small claims court, the company cannot later force the consumer into arbitration if the consumer files a suit later against the company. The case, Cain v. Midland Funding, LLC, began when Midland Funding, a debt buying company that files hundreds of lawsuits each year against Maryland residents, filed suit against Mr. Cain in small claims court on a Citibank debt allegedly owed by Mr. Cain.
Midland obtained a judgment against him. Mr. Cain then filed a class action lawsuit against Midland in the Circuit Court for Baltimore City on the basis that Midland was not a licensed debt collection company when it obtained a judgment against him. Midland asked the court to send the case to arbitration, a usually secret proceeding with no right to an appeal where a single arbitrator makes a decision instead of a jury. The Circuit Court agreed to send the case to arbitration and Mr. Cain appealed. The Court of Special Appeals agreed with the Circuit Court, and so Mr. Cain appealed to the Court of Appeals.
The Court of Appeals reversed the decision of the Court of Special Appeals and held that because Midland had sued Mr. Cain in the district court, it had waived its right to arbitration. In reaching its decision, the Court noted that “Midland could choose whether to litigate or arbitrate its collection action against Cain—and it chose to litigate.”
We often see people who are being sued in district court for debts by creditors or debt buyers. Many times, these people not only have defenses, but they have affirmative claims – meaning that the creditor or debt buyer has done something illegal or unfair and deceptive, and they have a claim against the creditor. Before the Cain decision, these companies got away with suing consumers in court, and keeping its wrongdoing hidden from the legal system by seeking arbitration when the consumer sued the company. We are hopeful that this decision will prevent companies from using arbitration, the corporate get-out-of-jail-free card, in the future when a consumer is sued first.
If you are being sued for a debt, contact us today. Don’t wait until there is a judgment against you. Even if the amount is small or you think you cannot afford an attorney, we may be able to help you.