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Nettles v. Blatt, Hasenmiller, Leibsker & Moore LLC

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

September 30, 2019

ASHLEY NETTLES, individually and on behalf of similarly situated persons, Plaintiff,


          Honorable Edmond E. Chang United States District Judge

         Ashley Nettles brings this proposed class action against Defendants Midland Funding LLC and Midland Credit Management, Inc., [1] alleging that they violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.[2] 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, [3] Defs.' Mot. to Compel at 9. For the reasons explained below, the Defendants' motion to compel arbitration is denied without prejudice.

         I. Background

         The 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.

         The 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.

         In 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).

         Under 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. Id.

         Nettles 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. ¶¶ 44-53.

         II. Legal Standard

         The 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).

         If the 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.

         III. ...

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