New York Court Provides the “How-To” Process for Parties Seeking to Confirm a Credit Card Arbitration Award

A New York court recently established for future litigants the “statutory and constitutional framework for review of a petition to confirm a credit card arbitration award,” while denying MBNA’s petition to confirm an arbitration award against a cardholder.

In MBNA America Bank, NA v. Straub, 2006 N.Y. Slip Op. 26209, 2006 WL 1452772, (N.Y. City Civ. Ct. May 25, 2006), the Court explained that granting a motion to confirm an arbitration award involving credit card debt requires: “(1) submission of the written contract containing the provision authorizing arbitration; (2) proof that the cardholder agreed to arbitration in writing or by conduct; and (3) a demonstration of proper service of the notice of the arbitration hearing and of the award.” If the first two elements are established, the Court explained, the manner of service should be considered under the Federal Arbitration Act, and not New York law. Additionally, courts must consider any supplemental information provided regarding the history of the parties’ actions. These factors are the same regardless of whether the debtor fails to respond to the motion, the Court held.

The Court held that to obtain confirmation of any arbitration award, the moving party must attach to the petition a legible copy of the arbitration agreement. This requirement, it noted, is not unique to credit card arbitrations.

What is unique to credit card arbitrations, the Court found, was that the motion to confirm an award must establish the binding nature of the arbitration agreement. The Court acknowledged that cardholders rarely sign the credit card agreement. While this is legally acceptable, credit card companies must demonstrate an “intent to be bound” in some way, if not with the cardholder’s signature. This can be accomplished, the Court said, with a “simple affidavit” of a person with personal knowledge to present the relevant documents and supporting proof, such as a sales slip. When the debt has been assigned, the affidavit must sufficiently advance the business records of the original credit card issuer and establish that the assignee has taken over the assignor’s rights.

With respect to service of notice of the arbitration and subsequent award, the Court explained that the notice requirement will differ depending on whether the moving party can show that there was an agreement and intent to be bound by the cardholder. If the movant cannot satisfy this burden, service is determined by New York law. Under New York law, the arbitrator must notify the parties of the arbitration “in writing personally or by registered or certified mail not less than eight days before the hearing.” Arbitrators are required to notify parties of the award either in accordance with the agreement, personally, or by registered or certified mail.

When an agreement to arbitrate and intent to be bound are established, the FAA rules of service apply. Because the FAA has no specific service requirements, the Court will look to the arbitration agreement and any related arbitration rules agreed to by the parties to determine how service should be made. If the applicable agreement or rules provide for service by mail of the final award, then that service would be sufficient.

In this case, the Court denied the petition because MBNA did not include a copy of the arbitration agreement or an affidavit establishing that the agreement was binding. Because it failed to satisfy those prongs, MBNA failed to show that any service other than what New York law required would be adequate. Applying New York service rules, the Court concluded that MBNA failed to properly serve Straub, and denied MBNA’s motion to confirm the award.