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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND LAVERNE JONES, ET AL. v. GENUS CREDIT MANAGEMENT CORPORATION, ET AL. * * * Civil No. JFM-04-1036 * * * ***** MEMORANDUM Plaintiffs enrolled in a Debt Management Plan with Genus Credit Management Corp. They have now brought this suit against Genus and various other entities that they allege are affiliates of Genus and conspired with it to commit various violations of federal and state law. Plaintiffs assert individual claims on their own behalf and class claims on behalf of others similarly situated with them. Defendants have filed a motion to dismiss on the ground that plaintiffs' agreements with Genus contained a valid arbitration clause. Alternatively, defendants contend that if this action is permitted to proceed, plaintiffs' class action allegations should be stricken because the arbitration clause also contained a waiver of the right to proceed in a class action.1 The motion raises significant policy issues about which there can be fair debate. However, I am satisfied that under existing case law, defendants' contentions are well founded. Therefore, their motion will be granted.

Defendants further argue that the claims of plaintiffs Jones and Rawlings should be dismissed because they filed for bankruptcy and the bankruptcy trustees had not abandoned their claims before this action was filed. Although this is true, the trustees now have abandoned the claims. I am satisfied that the record does not show that either Jones or Rawlings made any misrepresentations during the course of the bankruptcy proceedings in order to obtain the trustees' decision to abandon. Accordingly, I do not find defendants' argument on this point to be persuasive.

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Because of the exigencies of my present schedule, I will merely address the issues in a summary manner.2 I. Did Plaintiffs Agree to Arbitrate? The arbitration clause upon which defendants rely is contained in a document styled "Terms of Debt Management -- EasyPay." This document was incorporated by reference into "EasyPay Client Agreements" signed by plaintiffs, but it was not itself signed by them. Plaintiffs first contend that the record does not establish that the "Terms of Debt Management" document was ever provided to them. The contention is unavailing. Defendants have submitted an affidavit in support of their motion to dismiss averring that plaintiffs did receive a "Terms of Debt Management" document identical to one attached as an exhibit to the affidavit. Defendants have also explained that the reason Genus does not have copies of the documents with plaintiffs' names on them is that the documents are electronically generated, sent out as a matter of course, and not stored for each client's account (because, to do so, would unnecessarily use computer memory). In response, plaintiffs have not submitted any affidavit denying that they received the "Terms of Debt Management" document. Accordingly, defendants have met their burden of proof on the issue. Plaintiffs next contend that assuming they received copies of the documents, they nevertheless did not agree to the arbitration clause because it was not contained in the "EasyPay Client Agreements" that they signed. In support of this contention, they rely upon Shaffer v. ACS Government Services, Inc., 321 F. Supp. 2d 682 (D. Md. 2004), in which Judge Williams of

Underlying the analysis of all of the issues presented is the question of whether federal or state law applies. However, because it appears that there is no material divergence between federal and state law on any of the issues, I need not decide that question. 2

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this court held that an employee had not agreed to an arbitration clause contained on page fiftysix of a seventy-one page employee guidebook. The clause also "conspicuously fail[ed] to mention that employees are required to submit employment--related matters to arbitration." Id. at 687. In this case, although the arbitration clause was included in a document that was incorporated by reference into the document signed by plaintiffs, both documents were only one page in length. Moreover, although the clause was not in bold or otherwise emphasized, its language clearly states that any dispute between the parties "shall be settled solely and exclusively by binding arbitration."3 II. Is the Arbitration Provision Unconscionable?4 There obviously is a great disparity between the bargaining power of the parties. Plaintiffs are consumers suffering from the burden of heavy debt, and Genus is a sophisticated

I am not suggesting that plaintiffs actually read the arbitration clause but only that they must be deemed to have done so. I also recognize that an appellate court might hold that where the bargaining positions between the parties are greatly disparate, an arbitration and/or waiver of class action clause is enforceable only if it is highlighted. Although such a holding might be satisfying to the conscience, its practical effect would be dubious, particularly where, as here, the weaker party is in an exceedingly vulnerable position Would persons like plaintiffs seeking to escape from heavy debt, harassing creditors, and attendant depression likely to be dissuaded from entering into debt management agreements simply because their attention is drawn to the presence of an arbitration/waiver of class action clause in the agreements? In my view, the more substantial question is whether such clauses are unconscionable as a matter of law, and as to that question, both the Fourth Circuit and the Maryland Court of Appeals has spoken, at least in the context of fee-shifting claims. Although plaintiffs claim that the agreements of which the arbitration clause were a part were obtained by fraud, they apparently concede that they cannot circumvent the arbitration clause on the basis of this allegation. Rather, they would have to allege (as they have not done) that the arbitration clause in particular was induced by fraud. See, e.g., Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967); Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999); Cheek v. United Healthcare of the Mid-Atlantic, Inc., 835 A.2d 656, 665 (Md. 2003). 3
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business entity. Therefore, I find that what has been called "procedural unconscionability" exists. See 8 Williston on Contracts

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