United States District Court, N.D. Illinois, Eastern Division
ASHLEY NETTLES, individually and on behalf of similarly situated persons, Plaintiff,
BLATT, HASENMILLER, LEIBSKER & MOORE LLC, MIDLAND FUNDING LLC, and MIDLAND CREDIT MANAGEMENT, INC., Defendant.
MEMORANDUM OPINION AND ORDER
Honorable Edmond E. Chang United States District Judge
Nettles brings this proposed class action against Defendants
Midland Funding LLC and Midland Credit Management, Inc.,
alleging that they violated the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692 et
seq. Midland Funding and Midland Credit now
move to compel arbitration, arguing that Nettles' claim
is subject to a “valid and enforceable arbitration
agreement [that] exists between Plaintiff and
Defendants.” R. 19,  Defs.' Mot. to Compel at 9. For the
reasons explained below, the Defendants' motion to compel
arbitration is denied without prejudice.
only facts set out here are those needed to decide the
pending motion. The Defendants owned, by assignment, a credit
card account that Nettles had opened with Credit One Bank in
October 2015. See Defs.' Mot. to Compel at 2-4.
This account was subject to a Cardholder Agreement,
Disclosure Statement, and Arbitration Agreement (Credit Card
Agreement). Id. at 2. Nettles made her last payment
on the account in January 2016. Id. at 3. When the
credit card account was charged off around six months later,
in July 2016, the balance was $601.97. Id. In the
weeks that followed, the account-and all underlying rights,
title, and interest-was sold and assigned to multiple
entities. Id. Ultimately, in August 2016, Midland
Funding obtained ownership of the account. Id.
arbitration provision of the Credit Card Agreement, which was
assigned to the Defendants, covers (among other things)
“communications” and “collections
matters” relating to the account:
Claims subject to arbitration include, but are not limited to
… any disclosures or other documents or
communications relating to your Account; …
billing, billing errors, credit reporting, the posting of
transactions, payment or credits, or collections
matters relating to your Account … and any other
matters relating to your Account … .
Defs.' Mot. to Compel, Wiese Decl., Exh. C, Changes in
Terms at 6 (emphases added). The arbitration provision also
states that it survives any transfer or assignment of the
account, id. at 9, and that “disputes about
the validity, enforceability, coverage or scope of this
Arbitration Agreement or any part thereof are not subject to
arbitration and are for a court to decide[, ]”
id. at 7.
March 2017, Midland Funding filed a lawsuit against Nettles
in Michigan state court, demanding payment of the $601.97 due
on the account. R. 25, Pl.'s Resp. Br. at 2; id.
at Exh. A. A few months later, in June 2017, counsel for
Nettles and Midland Funding engaged in settlement
negotiations. Pl.'s Resp. Br. at 4. The case was
ultimately resolved in a Consent Judgment, entered by the
Michigan judge in July 2017, which set up a monthly payment
plan: “Defendant [Nettles] shall pay $50.00 per month
beginning in 08/01/2017 until paid in full. Should Defendant
fail to comply with this agreement in any manner, Plaintiff
may file an Affidavit of Non-Compliance and commence all
legal collection activity on the remaining balance.”
Id. at Exh. C. The total amount of the Consent
Judgment was $689.37, which included $87.40 in costs.
Id. It is worth noting that the Consent Judgment
explicitly disclaimed statutory interest, id., and
counsel for Midland Funding agreed during negotiations that
there would be no interest charged post-judgment,
id. at Exh. B (June 28, 2017 emails).
the Consent Judgment, Midland Funding's law firm withdrew
$50 from Nettles' bank account each month from August to
October 2017. Pl.'s Resp. Br. at 4. After this, Nettles
alleges, the law firm stopped accepting her payments.
Id. It turned out that the law firm later
permanently closed in mid-December 2017. Id. at Exh.
D. In any event, Nettles alleges that, as of October 3, 2017,
she only owed $593.37 on the Consent Judgment. Id.
at 5. Despite this, Nettles received a letter in June 2018
claiming that her current balance was $643.59 (and notifying
her that Midland Credit was the new servicer on the account).
Id. at Exh. E. The letter provided a “Legal
Collections Account Number” (No. 17-321241) and
identified the original creditor (Credit One Bank) and the
original account number (ending in -0849). Id. But
the letter did not refer to the Consent Judgment.
alleges that the Defendants violated the Fair Debt Collection
Practices Act (FDCPA) when they failed to properly credit the
payments she had made, and when they tried to collect a
larger amount of money than she actually owed. R. 1, Compl.
Federal Arbitration Act requires federal courts to enforce
valid arbitration agreements. 9 U.S.C. § 2.
“Although it is often said that there is a federal
policy in favor of arbitration, federal law places
arbitration clauses on equal footing with other contracts,
not above them.” Janiga v. Questar Capital
Corp., 615 F.3d 735, 740 (7th Cir. 2010) (citing
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63,
68 (2010)). That is, the Act enforces parties' agreements
to arbitrate and “put[s] arbitration on a par with
other contracts and eliminate[s] any vestige of old rules
disfavoring arbitration.” Stone v. Doerge, 328
F.3d 343, 345 (7th Cir. 2003).
parties have a valid arbitration agreement and the asserted
claims in a lawsuit are within its scope, then the
arbitration requirement must be enforced. 9 U.S.C.
§§ 3-4; Sharif v. Wellness Int'l Network,
Ltd., 376 F.3d 720, 726 (7th Cir. 2004) (citing
Kiefer Specialty Flooring, Inc. v. Tarkett, Inc.,
174 F.3d 907, 909 (7th Cir. 1999)). Whether the parties
entered into a binding arbitration agreement is determined
under principles of state contract law. Janiga, 615
F.3d at 742 (citing First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 934 (1995)). The party seeking to
compel arbitration has the burden of establishing an
agreement to arbitrate. 9 U.S.C. § 4; A.D. v. Credit
One Bank, N.A., 885 F.3d 1054, 1063 (7th Cir. 2018)
(“[A]s the party seeking to compel arbitration, Credit
One had the burden of showing that A.D. was bound by the
cardholder agreement as an authorized user”). At the
same time, the Act also “establishes that, as a matter
of federal law, any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration.”
Moses H. Cone Mem'l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24-25 (1983). Indeed, the party that
is resisting arbitration bears the burden of identifying a
triable issue of fact on the purported arbitration agreement.
See Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th
Cir. 2002). The opponent's evidentiary burden is akin to
that of a party opposing summary judgment under Federal Rule
of Civil Procedure 56. Id. “[A] party cannot
avoid compelled arbitration by generally denying the facts
upon which the right to arbitration rests; the party must
identify specific evidence in the record demonstrating a
material factual dispute for trial.” Id. Just
like at the summary judgment stage, the Court must view the
evidence in the light most favorable to the non-movant (that
is, the party opposing arbitration) and draw reasonable
inferences in the non-movant's favor. Id. If the
party opposing arbitration identifies a genuine issue of fact
as to whether an arbitration agreement was formed, “the
court shall proceed summarily to the trial thereof.” 9
U.S.C. § 4; see Tinder, 305 F.3d at 735.