Asset Acceptance, LLC v. Tyler

• Decision Date: 02 March 2012
• Docket Number: No. 1–09–3559.,1–09–3559.
• Citation: 966 N.E.2d 1039
• Parties: ASSET ACCEPTANCE, LLC, Plaintiff–Appellee, v. Terrence TYLER, Defendant–Appellant.
• Court: United States Appellate Court of Illinois

966 N.E.2d 1039

ASSET ACCEPTANCE, LLC, Plaintiff–Appellee,

v.Terrence TYLER, Defendant–Appellant.

No. 1–09–3559.

Appellate Court of Illinois, First District, Sixth Division.

March 2, 2012.

Theodore A. Woerthwein, John Miller, Woerthwein & Miller, Chicago, for Appellant.

Stephen R. Swofford, David M. Schultz, John P. Ryan, Hinshaw & Culbertson LLP, Chicago, for Appellee.

Justice GARCIA delivered the judgment of the court, with opinion.

¶ 1 The circuit court granted the motions of plaintiff Asset Acceptance, LLC (Asset), to confirm an arbitration award and to dismiss defendant Terrence Tyler's five-count counterclaim. In its complaint, Asset alleged it was assigned Tyler's credit card debt. In an arbitration proceeding in which Tyler did not appear, Asset was awarded the full amount of the debt of $4,356.99. In proceedings before the court to confirm the award, in addition to various affirmative defenses and counterclaims, Tyler denied the existence of an agreement to arbitrate. Asset moved to confirm the award and to dismiss the affirmative defenses and counterclaims, arguing the defenses were forfeited when he failed to raise them during the statutory limitations period to contest the arbitration award and his counterclaims were subject to dismissal because they were improperly pled in an action to confirm an arbitration award. The court granted both motions. We affirm the circuit court's ruling that the counterclaims could not be asserted in a summary proceeding to confirm an arbitration award. However, we reverse the order confirming the arbitration award where Asset failed to make out a prima facie case to confirm the arbitration award when it did not produce the parties' written agreement to arbitrate as required by statute.

¶ 2 BACKGROUND

¶ 3 On April 26, 2007, Asset filed its complaint, seeking a judgment based on an arbitration award it received against Tyler. The complaint attached the written arbitration decision. Asset's complaint alleged the following. MBNA America Bank, N.A. (MBNA), entered into a credit card agreement with Tyler and Tyler incurred charges on the card. Asset purchased Tyler's credit card account with MBNA. After Tyler failed to pay his balance of over $4,000, Asset filed a demand for arbitration on January 15, 2007, with the National Arbitration Forum. On March 12, 2007, an arbitration hearing was held; Tyler did not participate. The arbitration decision recited, "On or before 01/15/2007 the Parties entered into a written agreement to arbitrate their dispute." The decision stated, "No Party has asserted that this Arbitration Agreement is invalid or unenforceable." The arbitrator awarded Asset the full amount claimed. When Tyler failed to timely challenge the award under the Federal Arbitration Act (FAA) ( 9 U.S.C. § 1 et seq. (2006) ), Asset filed a complaint in the circuit court, requesting judgment against Tyler in the amount of the arbitration award. The complaint had attached Asset's legal support supervisor's sworn affidavit in which he attested to the truthfulness of the balance Tyler owed to Asset. Before Tyler responded to the complaint, Asset filed a motion to confirm the arbitration award. Asset did not attach an arbitration agreement between MBNA and Tyler to its motion to confirm filed on March 11, 2008.

¶ 4 On March 13, 2008, Tyler filed an answer with affirmative defenses and counterclaims. In his answer, Tyler denied entering into a credit card agreement with MBNA. Tyler also asserted other affirmative defenses and five counterclaims. For his counterclaim relief, Tyler sought damages in excess of $50,000.

¶ 5 On June 11, 2008, Asset moved to strike Tyler's affirmative defenses and dismiss each of Tyler's counterclaims on various grounds. Asset attached two purported bank card documents to its motion to dismiss, each containing an arbitration clause. Premised on its right to arbitrate the dispute over credit card debt, Asset argued all of Tyler's claims were unavailing. Asset argued that Tyler's affirmative defenses were insufficient as a matter of law and his counterclaims were subject to dismissal with prejudice because (1) none was raised at arbitration proceeding as required by the arbitration clause and (2) the claims were barred by the 90–day limitation period set by the Illinois Uniform Arbitration Act (Illinois Act) ( 710 ILCS 5/2(b) (West 2010))¹ and the 3-month limitation period set by the FAA ( 9 U.S.C. § 12 (2006) ).

¶ 6 In his June 30, 2008 response to Asset's motion to confirm the award, Tyler argued in part that Asset's motion should be denied because neither the arbitration decision nor the purported bank card agreements were authenticated.

¶ 7 In its reply, Asset asserted that Tyler was barred from challenging the arbitration award because he failed to move to vacate the award within the nearly identical limitation periods of the FAA and the Illinois Act. Further, Asset contended that the allegations in the complaint were verified by the legal support supervisor's affidavit attached to the complaint.

¶ 8 On July 18, 2008, Tyler filed a motion to strike Asset's motion to dismiss the counterclaims, arguing in part that Asset's motion, supported by the purported bank card agreements, was legally insufficient.

¶ 9 On March 12, 2009, the circuit court ordered Asset to file a supplemental brief "as to why the arbitration award bars Tyler's counterclaims." In its supplemental brief, Asset argued that Tyler's counterclaims were time barred because they were filed well beyond the FAA's 3-month limitation period to challenge an arbitration award. Asset claimed the limitation period began to run when notice of the arbitration award was mailed to Tyler on March 12, 2007; the counterclaims were not filed until March 13, 2008.

¶ 10 Asset also asserted it did not have to petition a court under section 4 of the FAA to compel Tyler to arbitrate the dispute. According to Asset, the arbitration agreement between MBNA and Tyler expressly provided that disputes are subject to arbitration pursuant to National Arbitration Forum (NAF) rules, which allow an arbitrator to issue an award even if the opposing party fails to appear at the arbitration hearing. Asset submitted Tyler's letter from February 2007 to confirm Tyler received notice of the arbitration proceeding, in which Tyler stated: "I'm very disturbed that I have received correspondence that you have filed an arbitration claim."

¶ 11 In Tyler's response to Asset's supplemental brief, he argued that Asset did not comply with the requirement in section 13 of the FAA that the underlying arbitration agreement be attached to the motion to confirm. Tyler also asserted section 4 of the FAA required Asset to file a court action to compel arbitration before it could proceed to an arbitration hearing. He argued that in the absence of a section 4 petition, Asset could not seek judicial confirmation of the arbitration award. Finally, Tyler contended the FAA's three-month limitation period did not apply to his claim that no agreement to arbitrate existed.

¶ 12 The circuit court dismissed all five counts of Tyler's counterclaim with prejudice, ruled Tyler's affirmative defenses were unavailable in a proceeding to confirm an arbitration award, and granted Asset's motion to confirm the arbitration award. The court denied Tyler's motion to reconsider. This timely appeal followed.

¶ 13 ANALYSIS

¶ 14 Tyler challenges the rulings below on various fronts. First, he contends no prima facie case for confirmation was established by Asset because Asset did not present sufficient proof of an agreement to arbitrate under section 13 of the FAA. Second, Tyler asserts Asset was required to file a petition under section 4 of the FAA before proceeding to an arbitration hearing. Third, Tyler argues that the FAA's three-month limitation period to vacate an arbitration award does not apply to a party contending that no agreement to arbitrate exists. Fourth, Tyler argues that the circuit court erred in dismissing his counterclaims because Asset failed to support its motion to dismiss with an affidavit. Fifth, Tyler argues that the award lacks trustworthiness because the NAF proceeding was a fraud. Finally, Tyler argues that the circuit court erred when the court dismissed his counterclaim alleging violations of the Fair Debt Collection Practices Act (FDCPA) ( 15 U.S.C. § 1692 et seq. (2006) ) because the claim was independent of the action to confirm the arbitration award.

¶ 15 We address only those issues necessary to resolve this appeal. We first address Tyler's challenge to the proceedings before the NAF. We then address whether Tyler's counterclaims were properly pled in a proceeding to confirm an arbitration award, including his claim under the FDCPA. Next, we address whether section 4 of the FAA applies to the instant case. We then address Tyler's contention that Asset did not make out a prima facie case to support its motion to confirm the arbitration award. Only if Asset made out a prima facie case to confirm the arbitration award would we need to address Tyler's claim that no arbitration agreement existed, a claim he contends he may assert beyond the statutory period for contesting arbitration awards under the FAA. We address each of the issues consistent with the briefs of the parties that focus on the FAA, rather than its counterpart the Illinois Act, which the parties do not dispute is for all practical purposes identical to the FAA on the issues presented.

¶ 16 1. Proceedings Under the NAF

¶ 17 Tyler argues that the entire proceeding before the NAF was a fraud. Tyler suggests that its fraudulent nature rendered futile any effort on his part to challenge the proceeding before the NAF. We disagree.

¶ 18 This is precisely the sort of claim that the FAA permits. Section 10 provides, in part, that an award may be vacated where the award was procured by fraud or where the arbitrators' misbehavior prejudiced the rights of a party. 9 U.S.C. § 10(a)(1), (a)(3) (...