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Tyrone Wilson, On Behalf of Plaintiff and A Class v. Palisades Collection

December 19, 2012

TYRONE WILSON, ON BEHALF OF PLAINTIFF AND A CLASS, PLAINTIFF,
v.
PALISADES COLLECTION, LLC, DEFENDANT.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge

MEMORANDUM OPINION

This matter comes before the Court on Defendant Palisades Collection, L.L.C.'s ("Palisades") motion to compel arbitration and stay proceedings. For the reasons set forth below, the motion to compel arbitration is granted and the motion to stay is granted.

BACKGROUND

In December 2004, Tyrone Wilson ("Wilson") entered into a retail installment contract with CarMax-Oak Lawn ("CarMax") for the purchase of a 2002 Chrysler Concorde. Wilson's automobile purchase was financed by Drive Financial Services ("Drive"). Within the retail installment contract was an arbitration agreement. The arbitration agreement states in pertinent part: "You and we and . . . assignees agree that any claim, dispute or controversy arising between us . . . relating to this Contract or the relationships that result from this Contract . . . [s]hall be resolved by neutral binding arbitration and not by a court action." The original signed installment contract was copied and retained by CarMax while the original was taken with Wilson after the car purchase was finalized. Drive received a copy of the signed installment contract from CarMax and maintained the copy as required to collect payments under the installment contract.

Wilson ceased making the required payments to Drive, and the loan was placed in default status. On or about June 28, 2007, Palisades purchased a pool of delinquent accounts from Santander Consumer USA Inc. ("Santander"), formerly known as Drive. Santander provided Palisades with a Bill of Sale for the transaction which transferred all the rights, title and interest in the pool of retail installment accounts financed by Drive. The transfer of the block of accounts was effectuated through a Forward Flow Debt Purchase, which laid out the terms of the acquisition and the timing of the transfer.

In late October 2007 Palisades sued Wilson in the Circuit Court of Cook County, Illinois (No. 11-M1-169199) for the unpaid principal balance of the retail installment account. Wilson answered the suit and asserted that the collection of the debt was time barred. Subsequently, Palisades non-suited the action.

On July 11, 2012, Wilson filed a two count complaint alleging violations of the Fair Debt Collections Practices Act, 15 U.S.C. § 1692 and the Illinois Consumer Fraud Act, 815 ILCS 505/2. On November 7, 2012 Palisades, eliciting the arbitration agreement in the installment contract, filed a motion to compel arbitration and stay the proceedings pending the completion of arbitration.

LEGAL STANDARD

The Federal Arbitration Act ("FAA") 9 U.S.C. § 2 et seq., indicates a strong federal policy in favor of enforcement of private arbitration agreements. See Nitro-Lift Techs., L.L.C. v. Howard, 133 S.Ct. 500, 501 (2012). The FAA declares that as a matter of federal law, arbitration agreements "shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2; Moses H. Cone Mem'l Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24 (1983). It is well-settled that arbitration is a favored means of dispute resolution, and the FAA established a clear policy favoring arbitration. See Kiefer Specialty Flooring, Inc. v. Tarkett Inc., 174 F.3d 907, 909 (7th Cir. 1999). To effect this policy, we construe any contractual language pertaining to arbitration and resolve doubts in favor of arbitrability. See Moses, 460 U.S. at 24-25. Where a contract includes an arbitration clause, the clause creates a presumption that the dispute should be arbitrated, unless the party opposing arbitration can show that the clause is incapable of an interpretation that could cover the dispute at hand. AT & T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 650 (1986).

DISCUSSION

Wilson does not contest the validity of the arbitration agreement or thecoverage of the arbitration agreement to Wilson's specific claims. Wilson'soverarching contention is that Palisades does not have a right to enforce the arbitration agreement contained in the installment contract due to the alleged faulty assignment of Wilson's account from Santander to Palisades. Wilson urges the Court to find that Illinois law prohibits Palisades from enforcing the arbitration agreement due to the assignment of less than the full balance of Wilson's account and the failure of Santander to transfer to Palisades the signed, original installment contract. Each argument will be dealt with in turn.

A. Assignment of the Debt

Wilson contends that Palisades's acquisition of 80% of the outstanding balance of Wilson's loan constitutes a partial assignment, which under Illinois law is ineffective absent Wilson's assent to the transfer. Under Illinois law, partial assignments are ineffective and not binding on the obligor of the instrument, unless consent is given to the transfer. Cincinnati Ins. Co. v. Amer. Hardware Mfrs. Assoc., 898 N.E.2d 216, 230 (Ill.App.Ct. 2008). An assignment takes place when some identifiable interest is transferred from the assignor to the assignee. Id. at 229-30. A valid assignment requires proof of intent to make the assignment and manifestation of that intent, and the assignor must have either actually or potential possession of the item which he attempts to assign. Id.

The creation and existence of an assignment is determined according to the intention of the parties and that intention is a question of fact derived from the instrument executed as well as the surrounding circumstances. Service Adjustment Co., Inc. v. Underwriters at Lloyd's London, 562 N.E.2d 1046, 1049 (Ill.App.Ct. 1990). Wilson points to the text of the Forward Flow Debt Purchase which states that Santander assigns to Palisades all rights, title and interest in 80% of the aggregate unpaid principle balance, involved in the transaction. In advocating for an ineffective assignment, Wilson provides only a portion of the relevant part of the Forward Flow Debt Purchase. The Forward Flow Debt Purchase provides for the transfer of aggregate unpaid principle balance of all initial fresh charged-off accounts. As defined in the Forward Flow Debt Purchase agreement an ...


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