A recent decision by the Third Circuit examined the circumstances under which an arbitrator must decide gateway questions of arbitrability in cases involving challenged loan assignments.  In Zirpoli v. Midland Funding, LLC, the plaintiff took a loan pursuant to a contract that contained an arbitration agreement with a delegation clause.  The lender then assigned the contract to another company that purchased the plaintiff’s delinquent account from the lender.  The assignee tried to collect on the loan, prompting the plaintiff to file a putative class action alleging unlawful collection practices. 

The assignee moved to compel arbitration.  The district court denied the motion based on a finding that the assignment between the original lender and the assignee was invalid.  A panel of the Third Circuit disagreed, holding in a 2-1 decision that a challenge to the legality of the assignment was not a challenge to the formation of the arbitration agreement and did not permit a court to decide whether the arbitration agreement was enforceable.

In reaching this conclusion, the majority reasoned that a valid delegation clause existed because there was no question that the plaintiff had entered into an agreement to arbitrate disputes with the original lender and its assignees.  The majority refused to consider the potential invalidity of the assignment in this analysis, citing Supreme Court precedent prohibiting courts from denying effect to arbitration provisions in potentially enforceable contracts.  The majority also observed that deciding the validity of the assignment at this stage would render the threshold question of arbitrability meaningless insofar as it would necessarily decide the merits of the motion to compel arbitration and render any further decision by the arbitrator merely “performative”—a result that would be antithetical to the Federal Arbitration Act.

Photo of Andrew Soukup Andrew Soukup

Andrew Soukup has a wide-ranging complex litigation practice representing highly regulated businesses in class actions and other high-stakes disputes. He has built a successful record of defending clients from consumer protection claims asserted in class-action lawsuits and other multistate proceedings, many of which…

Andrew Soukup has a wide-ranging complex litigation practice representing highly regulated businesses in class actions and other high-stakes disputes. He has built a successful record of defending clients from consumer protection claims asserted in class-action lawsuits and other multistate proceedings, many of which were defeated through dispositive pre-trial motions.
Andrew is co-chair of the firm’s Class Action Litigation practice group.

Andrew has helped his clients achieve successful outcomes at all stages of litigation, including through trial and appeal. He has helped his clients prevail in litigation against putative class representatives, government agencies, and commercial entities. Representative victories include:

  • Delivered wins in multiple nationwide class actions on behalf of large financial companies related to fees, disclosures, and other banking practices, including the successful defense of numerous lenders accused of violating the Paycheck Protection Program’s implementing laws, which contributed to Covington’s recent recognition as a “Class Action Group Of The Year.”
  • Successfully defending several of the nation’s leading financial institutions in a wide variety of litigation and arbitration proceedings involving alleged violations of RICO, FCRA, TILA, TCPA, FCBA, ECOA, EFTA, FACTA, and state consumer protection and unfair and deceptive acts or practices statutes, as well as claims involving breach of contract, fraud, unjust enrichment, and other torts.
  • Successfully defended several of the nation’s leading companies and brands from claims that they deceptively marketed their products, including claims brought under state consumer protection and unfair deceptive acts or practices statutes.
  • Obtained favorable outcomes for numerous clients in commercial disputes raising contract, fraud, and other business tort claims.

Because many of Andrew’s clients are subject to extensive federal regulation and oversight, Andrew has significant experience successfully invoking federal preemption to defeat litigation.

Andrew also advises clients on their arbitration agreements. He has successfully helped numerous clients avoid multi-district class-action litigation by successfully enforcing the institutions’ arbitration agreements.

Clients praise Andrew for his personal attention to their matters, his responsiveness, and his creative strategies. Based on his “big wins in his class action practice,” Law360 named Mr. Soukup a “Class Action Rising Star.

Prior to practicing law, Andrew worked as a journalist.

Photo of Kanu Song Kanu Song

Kanu Song is a litigator specializing in complex commercial disputes, including intellectual property litigation, class actions, and claims brought under consumer protection and competition laws, such as California’s Unfair Competition Law (B. & P.C. § 17200).

She works with clients in the technology…

Kanu Song is a litigator specializing in complex commercial disputes, including intellectual property litigation, class actions, and claims brought under consumer protection and competition laws, such as California’s Unfair Competition Law (B. & P.C. § 17200).

She works with clients in the technology, entertainment, consumer brands, food, drug, and cosmetic industries through all stages of litigation, with a strong track record of success on early resolution and dispositive motions.