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.

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Photo of Andrew Soukup Andrew Soukup

Andrew Soukup serves as co-chair of the firm’s Class Action Litigation Practice Group. He specializes in representing heavily regulated businesses in class actions, multidistrict litigation, and other high-stakes disputes.

Praised for achieving “big wins in his class action practice,” Andrew has defeated a…

Andrew Soukup serves as co-chair of the firm’s Class Action Litigation Practice Group. He specializes in representing heavily regulated businesses in class actions, multidistrict litigation, and other high-stakes disputes.

Praised for achieving “big wins in his class action practice,” Andrew has defeated a variety of advertising, consumer protection, privacy, and product defect and safety claims, with exposure ranging from millions to billions of dollars. Based on his “proven record,” Andrew has been recognized as an “attorney you want on your side in a bet-the-company case.”

Andrew’s clients include those in the consumer products, life sciences, financial services, technology, automotive, gaming, and media and communications industries. He has consistently helped his clients prevail in litigation in federal and state courts across the country against putative class representatives, government agencies, state attorneys general, and commercial entities.

With a long history of representing companies subject to extensive federal regulation and oversight, Andrew has a unique ability to help courts understand the complex environment that governs clients’ businesses. Clients turn to Andrew because of his successful outcomes at all stages of litigation, his responsiveness and attention to their matters and his deep understanding of their businesses.

Andrew’s recent successes include:

Leading the successful defense of several of the world’s leading companies and brands in class actions accusing them of engaging in deceptive marketing or selling defective products, including claims brought under state consumer protection and unfair deceptive acts or practices statutes.
Defeating claims against one of the nation’s leading consumer products companies in industry-wide, multidistrict class-action litigation challenging the company’s marketing and advertising of over-the-counter medicine containing allegedly ineffective ingredients, which earned Andrew recognition by American Lawyer as a “Litigator of the Week.”
Delivered wins in multiple nationwide class actions on behalf of leading financial institutions related to fees, disclosures, and other banking practices, including defending several financial institutions accused of violating the Paycheck Protection Program’s implementing laws, which contributed to Covington’s recognition as a “Class Action Group of the Year.”
Represented several consumer product and life sciences companies from lawsuits seeking economic damages arising out of the sale of products that allegedly caused personal injuries.
Helping several of the world’s most prominent companies from ESG-related claims accusing them of misrepresenting their practices.

Andrew has also achieved favorable outcomes for clients in commercial and indemnification disputes involving contracts, fraud, and other business tort claims. He helps companies navigate contractual and indemnification disputes with their business partners. Additionally, he provides guidance on arbitration agreements and has helped numerous clients avoid multi-district and class-action litigation by enforcing their arbitration agreements.

As a recognized thought leader on issues impacting class action litigation, Andrew regularly contributes to the firm’s blog, Inside Class Actions, and was recently featured in an interview with Litigation Daily on class-action litigation issues. In recognition of his achievements, he has been recognized by The American Lawyer as a Lawyer of the Week, and the Daily Journal recently included him on their list of Leading Commercial Litigators (2025).

Watch: Andrew shares insights on class action litigation, as part of our Navigating Class Actions video series.

 

Photo of Kanu Song Kanu Song

Kanu Song is a litigator who represents clients in the technology and life sciences industries in complex, high-stakes matters, including data privacy class actions, trade secret litigation, copyright and trademark disputes, and actions brought under unfair competition and consumer protection laws. She has…

Kanu Song is a litigator who represents clients in the technology and life sciences industries in complex, high-stakes matters, including data privacy class actions, trade secret litigation, copyright and trademark disputes, and actions brought under unfair competition and consumer protection laws. She has substantive experience in all stages of litigation, including arbitrations and appeals, with a strong track record of success on dispositive motions.

Kanu also maintains an active pro bono practice focused on serving women and children, and assisting individuals and small businesses with intellectual property disputes.