A complaint filed in federal court in Minnesota could subject the National Arbitration Forum — and eight of its card-issuing customers — to the type of class action the company once touted itself as helping defendants avoid.
In the complaint, filed July 24, plaintiffs attorneys from the Minneapolis firm Gustafson Gluek PLLC charge that their client, Kerry Sydnes, was financially harmed when Sydnes lost a consumer debt dispute arbitrated by the company. The suit seeks class-action status.
Gustafson Gluek attorneys were not available by press time, and a representative of the National Arbitration Forum declined to comment on the case. Documents filed in the U.S. District Court for the District of Minnesota do not specify the type of debt or the other parties involved in Sydnes' original dispute heard by the company.
Sydnes' charges are similar to those Minnesota Attorney General Lori Swanson brought before the company abruptly announced last month that it would cease hearing consumer-related arbitration cases.
The Sydnes complaint charges that in 2006 and 2007, a group of New York private-equity funds, called Accretive, formed several other equity funds under the name Agora, which invested $42 million in the National Arbitration Forum. In a second deal, three of the country's largest debt-collection law firms merged to create Mann Bracken. Accretive gained a majority interest in a debt-collection agency called Axiant, which had acquired Mann Bracken's collections operations, the Sydnes complaint said.
The Sydnes suit also cites claims from a federal employment bias suit filed by a former forum employee, Deanna Richert. She alleged that the forum fraudulently claimed neutrality, while favoring regular clients it referred to in-house as "famous parties." Forum employees "were instructed in management meetings to call arbitrators and tell them to change decisions in which they found against the 'famous parties,' prior to release of those decisions to the parties," the Sydnes suit alleges, citing Richert.
Sydnes' complaint names as defendants several card issuers that used the forum's arbitration services: American Express Co., Bank of America Corp. and its MBNA Corp., Wells Fargo & Co. as owner of Wachovia Corp., Capital One Financial Corp., JPMorgan Chase & Co., Citigroup Inc. and Discover Financial Services.