Hopkins v. LVNV Funding, LLC, ___ N.J. Super. ___ (App. Div. 2025). This appeal arose out of a Special Civil Part action by LVNV Funding, LLC on January 26, 2022 to collect an alleged $746.71 debt originally owed to Credit Bank One, N.A. LVNV alleged that it was the successor in interest and owner of the alleged debt, at the tail end of a long line of successors. Hopkins filed an Answer and a class action counterclaim on March 7, 2022, alleging that LVNV and the others in its chain of successors were not licensed to conduct business as consumer lenders or sales finance companies pursuant to the New Jersey Consumer Finance Licensing Act (“CFLA”), N.J.S.A. 17:11C-1 to -49.
LVNV answered the counterclaim with affirmative defenses on March 28, 2022. But LVNV did not include among those defenses that LVNV had a right to arbitrate the dispute. On the contrary, as Judge Gummer observed in her opinion for the Appellate Division today, LVNV’s “attorney certified pursuant to Rule 4:5-1(b)(2) that ‘the matter in controversy is not the subject of any . . . pending arbitration proceeding; and no other action or arbitration proceeding is contemplated.’”
On May 25, 2022, Hopkins filed a Law Division action alleging essentially the same claims as in the Special Civil Part counterclaim against LVNV and its predecessors (collectively, “LVNV”). Hopkins also moved to transfer the Special Civil Part case to the Law Division and consolidate it with the newly-filed Law Division class action. LVNV then cross-moved on June 16, 2022 to dismiss the Law Division case for failure to state a claim under Rule 4:6-2(e). On September 23, 2022, the Law Division granted the motion to transfer and consolidate, and granted LVNV’s motion to dismiss only as to one Count of the Complaint.
On November 11, 2022, Hopkins served paper discovery requests on LVNV. LVNV did not respond timely to those discovery requests, and in June 2023, Hopkins wrote to LVNV regarding that failure to respond.
According to Judge Gummer’s recitation of the procedural history, LVNV had not yet filed a response to the Complaint after the Law Division had ruled on its motion to dismiss in September 2022. On July 14, 2023, LVNV filed an Answer with thirteen affirmative defenses. Once again, however, LVNV did not list arbitration as one of those defenses, and its counsel again gave the Rule 4:5-1(b)(2) certification that no arbitration proceeding was pending or contemplated.
On September 20, 2023, Hopkins moved to compel responses to the discovery to which LVNV had still not responded. Two days later, on September 22, 2023, LVNV moved to compel arbitration, alleging (with the support of a Certification) that the credit agreement between Hopkins and Credit Bank One, N.A., had contained an arbitration clause. That clause relied exclusively on the Federal Arbitration Act, 9 U.S.C. §1 et seq. (“FAA”).
The Law Division granted LVNV’s motion to compel arbitration. “The court initially assumed defendants had included a demand for arbitration in their answer and observed defendants ‘[m]aybe’ should have moved to compel arbitration after their motion to dismiss ‘was denied a year ago.’ The court cited Cole v. Jersey City Medical Center, 215 N.J. 265 (2013), in which the Supreme Court identified several factors trial courts should consider when determining whether a party waived a right to arbitrate. But it did not evaluate the facts of this case under those factors. Believing the parties had done ‘nothing’ since the court decided defendants’ motion to dismiss, ‘except [the service of] paper discovery,’ the court found ‘there ha[d] not been the type of prolonged litigation’ that would require the court to deny defendants’ arbitration motion. The court granted the motion ‘due to the lack of litigation.’” Even after Hopkins advised the Law Division that LVNV had not, in fact, asserted a right to arbitration in its Answer, the Law Division adhered to its ruling.
Hopkins appealed, and LVNV defended on the basis that the Law Division had ruled correctly and that the Appellate Division lacked jurisdiction to rule otherwise “[b]ecause the arbitration agreement at issue is governed by the FAA.” Judge Gummer disagreed on both counts, applying de novo review.
Dealing first with the jurisdiction issue, the panel noted that Rule 2:2-3(b)(8), adopted after our Supreme Court in Wein v. Morris, 194 N.J. 364 (2008), deemed an order granting or denying arbitration to be immediately appealable as of right, expressly implemented that ruling.” Judge Gummer said that in cases brought in New Jersey state court, New Jersey procedural rules apply unless preempted by federal law because the state court procedural rule prohibits or discriminates on its face against arbitration. That was not so here, as the Rule operates neutrally. Thus, “[t]hat the arbitration agreement at issue is governed by the FAA isn’t a basis to disregard New Jersey procedural rules or New Jersey Supreme Court precedent.”
Judge Gummer then applied the Cole factors, which include “(1) the delay in making the arbitration request; (2) the filing of any motions, particularly dispositive motions, and their outcomes; (3) whether the delay in seeking arbitration was part of the party’s litigation strategy; (4) the extent of discovery conducted; (5) whether the party raised the arbitration issue in its pleadings, particularly as an affirmative defense, or provided other notification of its intent to seek arbitration; (6) the proximity of the date on which the party sought arbitration to the date of trial; and (7) the resulting prejudice suffered by the other party, if any.” Five of those seven factors favored a finding of waiver, as Judge Gummer explained in detail. The panel therefore reversed the Law Division’s order compelling arbitration.
This was the correct result. If the panel had ruled the other way, it would have been hard to imagine a case where a waiver could be found.