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Pearson v. United Debt Holdings, LLC

United States District Court, N.D. Illinois, Eastern Division

August 19, 2015

SAMUEL PEARSON, Plaintiff,
v.
UNITED DEBT HOLDINGS, LLC, Defendant

          For Samuel Pearson, for himself and a class, Plaintiff: Cathleen M. Combs, James O. Latturner, Thomas Everett Soule, Daniel A. Edelman, Edelman, Combs, Latturner & Goodwin LLC, Chicago, IL.

         For United Debt Holdings LLC, Defendant: Justin M Penn, LEAD ATTORNEY, Hinshaw Raven Elizabeth Burke, & Culbertson, Chicago, IL; Jason L Santos, Hinshaw & Culbertson, LLP, Chicago, IL.

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         MEMORANDUM OPINION AND ORDER

         Virginia M. Kendall, United States District Judge.

         Plaintiff Samuel Pearson filed a class action complaint against United Debt Holdings, LLC (" UDH" ) alleging that UDH violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., when it attempted to collect debts that Pearson alleges were void and unenforceable. UDH moved to compel arbitration on an individual basis and dismiss the Complaint. (Dkt. No. 27). Specifically, UDH argues that the loan agreement into which Pearson entered contained a binding arbitration provision and a class action waiver. In the alternative, UDH argues that that the Court should dismiss or stay the case based on the doctrine of tribal exhaustion because the loan itself was issued under the laws of the Chippewa Cree Tribe. For

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the reasons that follow, the motion is denied in its entirety.

         BACKGROUND

         In 2014, Pearson began to receive calls from UDH attempting to collect a debt that Pearson allegedly owed on a loan. (Compl. ¶ 8). The loan did not originate with UDH, but with a company called Plain Green. The underlying loan agreement is not attached to the Complaint. The Complaint is sparse on specifics with respect to the loan itself, but is clear that the interest rate on the loan exceeded 200% and Plain Green was not licensed by the Illinois Department of Financial and Professional Regulation to provide loans whose interest rates exceeded 20%. ( Id. ¶ 15). Because the interest rate on Pearson's loan exceeded the Illinois statutory limit, Pearson argues that it was void and unenforceable. ( Id. ¶ 18). UDH nonetheless attempted to collect on the illegal debt in violation of the FDCPA, according to Pearson. ( Id. ¶ 19). Pearson also seeks to represent a class of other individuals in Illinois from whom UDH attempted to collect debts made at interest rates exceeding the statutory limits.

         UDH responded by moving to compel arbitration on an individual basis. (Dkt. No. 27). UDH attached to its motion a document that it claims is the loan agreement into which Pearson entered. ( See Dkt. No. 27-1). That document states that Plain Green is a lender organized under the laws of the Chippewa Cree Tribe and that the loan is subject to the laws and courts of the Chippewa Cree Tribe.[1] ( Id. p. 2). The document also contains a provision requiring arbitration of " any controversy or claim between [Pearson] and [Plain Green], its marketing agent, collection agent, any subsequent holder of this Note, or any of their representative agents, affiliates, assigns, employees, officers, managers, members or shareholders." ( Id. p. 8). The document provides for arbitration conducted by the American Arbitration Association, JAMS, or any arbitration organization upon which the parties agreed. Arbitration under the agreement is " governed by the chosen arbitration organization's rules and procedures applicable to consumer disputes, to the extent that those rules and procedures do not contradict either the law of the Chippewa Cree Tribe or the express terms of" the agreement. ( Id. ). The document also contains a waiver of ability to participate in a class action. ( Id. p. 9).The validity, effect, and enforceability of that waiver " is to be determined solely by a court of competent jurisdiction located within the Chippewa Cree Tribe, and not by the arbitrator." ( Id. ).

         Pearson countered that UDH failed to provide sufficient evidence to authenticate the purported agreement and suggested that the document attached to UDH's motion to compel arbitration was not the loan agreement into which he entered. UDH did not provide an affidavit of an employee of UDH or Plain Green or any other evidence to authenticate the document attached to its motion to compel arbitration. Pearson submitted an affidavit acknowledging that he entered into a loan agreement, but disputing that he had ever seen any of the provisions of the document that UDH attached to its motion to compel arbitration. ( See Dkt. No. 34-1). Pearson is no longer in possession of any document containing the terms of the loan agreement into which he entered.

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         LEGAL STANDARD

         Congress enacted the Federal Arbitration Act (" FAA" ), 9 U.S.C. § 1 et seq., against " centuries of judicial hostility to arbitration agreements . . . to place arbitration agreements upon the same footing as other contracts." Volkswagen of Am., Inc. v. Sud's of Peoria, Inc., 474 F.3d 966, 970 (7th Cir. 2007) (citations and internal quotation marks omitted). Under the FAA, agreements to arbitrate are " 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. " Under the Federal Arbitration Act, arbitration may be compelled if the following three elements are shown: [1] a written agreement to arbitrate, [2] a dispute within the scope of the arbitration agreement, and [3] a refusal to arbitrate." Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005) (citing 9 U.S.C. ยง 4). The procedure ...


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