GC Services Limited Partnership ("GC Services"), a debt collector hired by a bank to collect an allegedly unpaid balance on a credit card, advised plaintiff Francina Smith ("Smith") that it would commence a collection proceeding unless she disputed the debt in writing. In July 2016, Smith filed a class action suit in Indiana federal court against GC Services, alleging violations of the Fair Debt Collections Practices Act. The credit agreement between the creditor and Smith contained an arbitration clause and a class waiver for all disputes. In August 2016, GC Services filed a motion to dismiss the suit on several grounds but did not mention the arbitration clause in the agreement. Plaintiff then amended her complaint, to which GC Services responded and filed a second motion to dismiss that also did not mention the arbitration agreement. In March 2017, while several discovery disputes were ongoing, GC Services notified Smith of the arbitration agreement and demanded arbitration. In response, Smith refused to arbitrate. In April 2017, GC Services filed an answer to the complaint that again did not mention the arbitration agreement. In June 2017, the Indiana district court denied GC Services' motion to dismiss. Thereafter, in August 2017, GC Services then filed its motion to compel arbitration. The Indiana district court denied the motion to compel arbitration on two grounds: 1) as a non-signatory, GC Services could not enforce the arbitration agreement; and 2) GC Services waived its right to arbitrate "by not diligently asserting that right." GC Services appealed.

The Seventh Circuit initially noted that it did not need to address the issue of whether GC Services, a non-signatory to the underlying agreement, can compel arbitration if the district court was correct that the right to arbitrate was waived. Thus, the Seventh Circuit first analyzed whether GC Services waived the right to arbitrate. In analyzing the issue, the Court first found that "GC Services acted inconsistently with the right to arbitrate." It noted that GC Services did not demand arbitration until eight months after suit was brought and then waited another five months thereafter before moving to compel arbitration. The Seventh Circuit also noted that GC Services, a sophisticated debt collection agency, would be aware that credit card agreements usually include arbitration clauses and it could have found the agreement at issue by simply searching the internet. The Court also noted that even after GC Services discovered the existence of the arbitration agreement, it made no mention of it in its answer filed in court nor did it request to supplement its briefing on the pending motions to dismiss and for class certification. The Seventh Circuit found that such actions were "unjustified and manifestly inconsistent with an intention to arbitrate" and held that the district court's conclusion that GC Services waived its right to arbitrate was not erroneous. The Seventh Circuit also noted that Smith would be prejudiced if the case were to go to arbitration at that time because GC Services waited to move to compel arbitration until after it received the decisions on the motion to dismiss and class certification against it, which the Court noted was an attempt to "play heads I win, tails you lose." The Seventh Circuit affirmed the district court's decision that GC Services waived its right to compel arbitration.

Smith v. GC Services Limited Partnership, No. 18-1361 (7th Cir. Oct. 22, 2018).

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