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Rejecting arguments that a debt collector waived its right to arbitrate by engaging in discovery, an Arizona federal court held that merely responding to discovery requests did not amount to waiver of the right to arbitrate.
In Balezos v. Cavalry Portfolio Services, LLC, No. CV 06-1952-PHXSMM, 2007 WL 2330861 (D. Ariz. Aug. 15, 2007), Balezos defaulted on his Discover Card debt. Discover sold the delinquent account, which Cavalry eventually purchased. Cavalry obtained a small claims judgment against Balezos. Balezos then sued Cavalry for various Fair Debt Collection Practices Act claims. In response, Cavalry filed a motion to compel arbitration. In opposing the motion, Balezos argued that Cavalry had waived its right to arbitrate.
The Court granted Cavalry’s motion to compel arbitration, holding that it had not waived its right to arbitrate. According to Ninth Circuit jurisprudence, a party waives its right to arbitrate if (1) the waiving party has knowledge of its right to arbitrate, (2) its acts are inconsistent with its right to arbitrate, and (3) there is prejudice resulting from the waiving party’s acts.
The Court found that Cavalry knew of its right to arbitrate, thus satisfying the first prong of the test. However, the Court concluded that Cavalry’s actions were consistent with its right to arbitrate. Cavalry initially raised its right to arbitrate in its answer. Additionally, Cavalry had not conducted any depositions. Finally, the Court found that Cavalry’s actions did not prejudice Balezos, as Cavalry did not benefit from any discovery available in court but not available in arbitration. Cavalry’s discovery was limited and only in response to a judicial order requiring it to produce a witness.
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