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Huser v. Midland Funding, LLC

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

September 13, 2019

JONATHAN HUSER, and STEPHEN WELCH on behalf of themselves and the class members described below, Plaintiffs,
v.
MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC. and ENCORE CAPITAL GROUP, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          JOAN B. GOTTSCHALL, JUDGE

         Defendants Midland Credit Management, Inc., Midland Funding LLC, and Encore Capital Group, Inc., move to compel arbitration of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., claims of one of the two plaintiffs in this putative class action, Jonathan Huser (“Huser”). Huser and Welch respond that defendants have waived their right to compel arbitration by participating in this case and that his claims are outside the scope of the applicable arbitration clause. For the following reasons, the court grants the motion to compel.

         I. Background

         Defendants seek to enforce an arbitration clause in a credit card member agreement (“agreement”) between Huser and Juniper Bank Delaware (“Juniper”). See “Agreement 1, ” ECF No. 96-2 Ex. 3 to Mulcahy Aff. at 11-12. The paragraph beneath the heading "Arbitration" reads[1]:

Any claim, dispute or controversy ("Claim") by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or your Account, or any transaction on your Account including (without limitation) Claims based on contract, tort (including intentional torts), fraud, agency, negligence, statutory or regulatory provisions or any other source of law and Claims regarding the applicability of this arbitration clause or the validity of the entire Agreement, shall be resolved exclusively and finally by binding arbitration under the rules and procedures of the arbitration Administrator selected at the time the Claim is filed. The Administrator selection process is set forth below For purposes of this provision, "you" includes any authorized user on the Account, agents, beneficiaries or assign of you; and "we" or "us" includes our employees, parents, subsidiaries, affiliates, beneficiaries, agents and assigns. Claims made and remedies sought as part of a class action, private attorney general or other representative action are subject to arbitration on an individual basis, not on a class or representative basis.

         ECF No. 96-2 at 12 (excerpt containing this language) (emphasis in original); ECF No. 102-1 Ex. 1 at 5 (same); see also ECF No. 103-1 Ex. 7 at 9 (containing additional terms of arbitration clause).

         A. Juniper Changes Its Name; Defendants Purchase Huser's Account

         Except where otherwise noted, Huser does not dispute the following facts. Huser opened the consumer credit card account at issue here with Juniper on February 7, 2006. Aff. of Sean Mulcahy ¶ 14, ECF No. 96-2; Aff. of Matt Hadfield ¶ 5, ECF No. 96-4. Juniper renamed itself Barclay's on May 25, 2006. ECF No. 96-1 Ex. A at 1. Barclay's sold Huser's account to defendants as one of a group of allegedly delinquent accounts on December 14, 2012. Mulcahy Aff. ¶ 8; Hadfield Aff. ¶¶ 7, 9; Aff. of Keith Walch ¶ 4, ECF No. 96-3 Ex. C.

         B. Procedural History

         The plaintiffs here allege that the defendants sent them misleading form dunning letters seeking to collect credit card debts. See 2d Am. Compl. ("SAC") ¶¶ 24-35, ECF No. 59. Huser's claims stem from a collection letter dated March 8, 2017. SAC Ex. A., ECF No. 59-1.

         The original complaint filed June 14, 2017, named Mary T. Janetos (“Janetos”) as the sole plaintiff. ECF No. 1. Defendants did not answer the original complaint before it was amended on July 20, 2017 (“First Amended Complaint” or “FAC”). The FAC added Huser as a plaintiff, see ECF No. 22 at 1.

         Defendants answered the FAC on August 30, 2017. ECF No. 40. They asserted as an affirmative defense that “[u]pon information and belief” the plaintiffs' claims “may be” subject to a binding arbitration clause. Id. at 16. Janetos voluntarily dismissed her claims that same day, August 30, 2017, leaving Huser as the sole plaintiff. The period of court-authorized discovery began in September 2017. See Minute Entry, Sept. 8, 2017, ECF No. 46. In pre-discovery correspondence, defendants' lawyer agreed to begin discovery so long as it was clear that defendants' claim of arbitrability was not waived. See ECF No. 103-2, Ex. B. As the parties proposed, the court set August 31, 2018, as the deadline to complete fact discovery. Id. Huser served written discovery requests in October 2017, and defendants responded on December 8, 2017. Resp. to Mot. to Compel Arb. 2, ECF No. 102; Reply 10, ECF No. 103. For their part, defendants represent (this appears to be undisputed) that they have not "initiated any discovery." Mot. to Compel Arb. 4, ECF No. 96.

         Defendants have been negotiating with Huser about the arbitration of his claims since at least April 2018. Mot. to Compel. Arb. 4 (citing ECF No. 90 at 4). Correspondence between counsel confirm this. See ECF No. 102-1 Ex. 5 at 15-18 (email thread recorded in message dated Apr. 12, 2018). Plaintiffs' lawyer expressed confusion about the fact that the agreement involved Juniper rather than Barclay's, responding that defendants would need to provide an affidavit before Huser would agree to arbitrate his claims. See Id. at 2. One was immediately provided.

         Instead the parties attempted to settle this and three other cases pending in this court from July-September 2018. Plaintiffs filed a motion in Pierre v. Midland Credit Management, Inc., No. 16-CV-2895, ECF No. 127 (N.D. Ill. July 5, 2018), to reassign this and three other cases for the purpose of holding a settlement conference before a magistrate judge. Judge Leinenweber entered and continued the motion but ordered the parties in the four cases to attend the settlement conference. In anticipation of that conference, the parties here jointly moved this ...


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