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Kelly v. Whitehaven Settlement Funding

February 26, 2010

SHEILA KELLY, INDIVIDUALLY AN ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
WHITEHAVEN SETTLEMENT FUNDING, LLC, A/K/A WHITEHAVEN S.F., LLC.,*FN1 DEFENDANT.



The opinion of the court was delivered by: Herndon, Chief Judge

MEMORANDUM and ORDER

I. Introduction and Background

Now before the Court is Whitehaven Sherwood Forrest, LLC's motion to transfer (Doc. 17).*fn2 Whitehaven Sherrwood Forrest, LLC ("Whitehaven") argues that the case should be transferred to the District Court for the Southern District of New York as the contract entered between the parties provides that New York law governs and that the contract also contains an arbitration clause that requires the parties to arbitrate in New York. Thus, the under the mandate of the Federal Arbitration Act and the contract, only the Southern District of New York has the authority to compel arbitration. Obviously, Kelly opposes the motion (Doc. 22). After reviewing the pleadings and the applicable law, the Court finds that this action does not belong in the Southern District of Illinois and lifts the stay on the December 7, 2009 Order transferring this matter to the Southern District of New York.

On June 12, 2009, Plaintiff Sheila Kelly, individually and on behalf of all others similarly situated, filed a three count complaint against Whitehaven in the Madison County, Illinois Circuit Court (Doc. 2-2).*fn3 According to the complaint, Kelly's cause of action arises out of a contract she entered into with Whitehaven for the "loan" of $25,000. Kelly alleges that the contract is illegal and void and that Whitehaven through fraud engaged in illegal and "Champertous" behavior in violation of the Illinois Consumer Fraud Act, 815 ILCS 505/1 et. seq. Kelly seeks a declaration, an injunction, actual and treble damages in an amount in excess of $50,000.00 and reasonable attorney fees and costs. Thereafter, on July 20, 2009, Whitehaven removed the case to this Court based on diversity jurisdiction, 28 U.S.C. § 1332 (Doc. 2). Prior to the removal in this case, Whitehaven filed a petition to compel arbitration in the Southern District of New York against Kelly pursuant to the arbitration agreement contained in the contract. See Whitehaven Sherwood Forest, LLC v. Kelly, 09-06203-LTS (S.D.N.Y. July 10, 2009).

The contract entered between the parties on June 7, 2008 provides in part:

Plaintiff has the right to prosecute a lawsuit(s), claim(s) and/or case(s) arising out of a incident/accident/transaction resulting from medical malpractice by Gitersonky Foot Clinic and Alan Gitersonky, D.P.M.; and for which Plaintiff has retained The Lakin Law Firm, 301 Evans Avenue, Wood River, Il 62095, to prosecute same; ... 5. (a) In consideration for Whitehaven S.F. LLC agreeing to advance funds in the sum of $25,000.00, prior to settlement or judgment(s) of Plaintiff's lawsuit, claim(s) or case(s) arising from the accident/incident/transaction as outlined above, Plaintiff agrees to pay and instructs his/her counsel to pay Whitehaven S.F. LLC the sum of $25,000.00 together with an application fee of $500.00 and an origination fee of $2,500.00 plus 4.99% percent interest, compounded monthly from the date of funding to the date of payment, at the conclusion of the lawsuit(s), claim(s) or case(s), whether by settlement, judgment or otherwise from the proceeds of recovery of said lawsuit(s), claim(s) or case(s), if any.

(b) Notwithstanding the foregoing, there shall be a minimum payment due and owing to Whitehaven S.F. LLC of $42,500.00 As to the applicable law and arbitration forum selection clauses, the contract contains the following:

26. Plaintiff acknowledges and agrees that the laws of the State of New York shall control interpretation of this agreement and all terms conditions, relationships and duties of the parties.

27. Any controversy or claim arising out of or relation to this contract, including without limitation, the interpretation, validity, enforceability or breach thereof, shall be settled by final, binding arbitration administered by the American Arbitration Association (hereinafter referred to as "AAA") in accordance with Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a practicing attorney or retired judge licensed to practice in the State of New York. The parties also agree that the AAA Optimal Rules for Emergency Measures of protection shall apply to the proceedings. The arbitrator shall award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees. "Costs and fees" mean all pre-award expenses of the arbitration, including the arbitrator's fees, administrative fees, travel expenses, out-of-pocket expenses such as copying and telephone, court costs, witness fees, and attorney's fees. The award shall be in writing, shall be signed by the arbitrator, and shall include a statement regarding the reasons for the disposition of any claim. Arbitration pursuant to this paragraph shall be filed and held in the New York Regional Office located in the county, city and State of New York.

The contract contains Kelly's signature, a signature of someone from The Lakin Law Firm and references Charles Armbruster, Esq., and The Lakin Law Firm throughout the contract.

II. Analysis

The Federal Arbitration Act ("FAA"), governs arbitration agreements involving interstate commerce. See 9 U.S.C. § § 1-2. It provides that a "written provision in any contract to settle by arbitration" any future controversy arising out of such contract." 9 U.S.C. § 2. Congress designed the FAA "to reverse the longstanding judicial hostility to arbitration agreements ... and to place [them] on the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). Any doubt with respect to arbitrability therefore should be resolve in favor of arbitration." James v. McDonald's Corp., 417 F.3d 672, 677 (7th Cir. 2005) (citing Moses H Cone Mem'l Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).

Further, Section 4 of the FAA states in relevant part:

A party aggrieved by the alleged failure, neglect or refusal of another to arbitrate under a written agreement for arbitration may petition the United States district court which, save for such agreement, would have jurisdiction under Title 28.... The hearing and the proceedings, under such agreement, shall be within ...


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