COA: Credit union’s arbitration request too late

Describing a financial institution’s appeal as “introducing an ambiguity,” the Court of Appeals of Indiana clearly saw the attempt to make a customer arbitrate a dispute as being both too late and barred by the contract language.

Financial Center First Credit Union became entangled in a lawsuit when it repossessed Miguel Rivera’s 2011 Mercedes-Benz and then tried to recover the $6,123.32 that was still owed after the vehicle had been sold. Rivera responded with a counterclaim, alleging the credit union failed to comply with the Uniform Commercial Code when selling the vehicle.

The credit union filed a motion for summary judgment on both its original complaint seeking recovery of the deficiency amount and on Rivera’s counterclaim. Rivera countered with an amended motion for leave to amend his counterclaim, wanting to establish a class action suit against Financial Center.

In October 2020, the Marion Superior Court denied the credit union’s motion for summary judgment and granted Rivera’s amended motion for leave to file an amended counterclaim.

The credit union subsequently pointed to the contract signed when the vehicle was sold that requires the parties to arbitrate any disputes. Financial Center filed a motion to dismiss Rivera’s class allegations and to compel arbitration of Rivera’s individual counterclaim.

After a hearing, the trial court denied the credit union’s motion to compel arbitration. The credit union then appealed, and the Court of Appeals affirmed in Financial Center First Credit Union v. Miguel Rivera, 21A-CC-845.

Specifically, the appellate panel found the credit union had waived arbitration because it had filed for summary judgment. Also, the panel highlighted the language of the contract that states a class action claim cannot be arbitrated.

“The focus of our inquiry is whether the claim is the type of claim that the parties agreed to arbitrate and not, as Financial Center’s argument suggests, whether it is a ‘claim’ as contemplated by the contract,” Judge Elizabeth Travitas wrote for the court. “As we have explained, if Financial Center was seeking to compel arbitration of Rivera’s individual claim, then it sought the impermissible second bite at the apple.

“If Financial Center sought to arbitrate Rivera’s class action claim (to the extent, if any, that claim is separable from Rivera’s individual claim, a suggestion about which we express skepticism) then that claim is expressly not of a type that the arbitration clause contemplates,” Tavitas continued. “The trial court, accordingly, properly denied the motion to compel arbitration of Rivera’s counterclaim.”