Wednesday, April 25, 2007

Supreme Court holds that aggressive debt collection practices defeat arbitration clause

In Chassereau v. Global-Sun Pools, Chassereau purchased an above ground pool but stopped making payments when Global-Sun refused to make certain repairs. Agents of Global-Sun allegedly repeatedly phoned Chassereau at her workplace; disclosed private information to Chassereau’s friends, relatives, and co-workers; and also made false and defamatory statements about Chassereau to these same people. Ultimately, Chassereau sued Global-Sun for defamation, intentional infliction of emotional distress, and unlawful communication. Global-Sun moved to compel arbitration. The trial court and the court of appeals both denied arbitration. The Supreme Court affirmed relying on its opinion in Aiken v. World Finance.

Although the Court recognized that Chassereau certainly knew that she would be required to make payments on the pool she purchased and that Global-Sun employees would contact her and request that she make payments on the pool if she ceased doing so, the Court held that "a reasonable person would not have foreseen and would not have expected (and ought not to expect) Global-Sun employees to commit acts historically associated with the common law tort of outrage in seeking to collect an overdue debt." Hence, the arbitration clause was unenforceable.

This is yet another opinion restricting arbitration. Taking the allegations of any complaint as true, under the Court's reasoning, does anyone ever really expect a contract to be breached or any tort to be committed? No. If you did expect a breach or tort, you would not enter into the business relationship. The Court's reasoning could easily be extended far beyond "outrage" to defeat arbitration in all cases.

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