Campbell v. Jacob

• Decision Date: 10 September 2019
• Docket Number: Consolidated Case No. 4:19-cv-179-JM,Consolidated Case No. 4:19-cv-267,Consolidated Case No. 5:19-cv-105,Consolidated Case No. 4:19-cv-208
• Parties: LAURA K. CAMPBELL, on behalf of herself and all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; JEFFERSON CAPITAL SYSTEMS, LLC, Defendants JEANNETTE WELCH, on behalf of herself and all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC. Defendants LILLIE BROWNLEE, on behalf of herself and all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC. Defendants BETTY JOHNSON, on behalf of herself and all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC. Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

LAURA K. CAMPBELL, on behalf of herselfand all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC;

JEFFERSON CAPITAL SYSTEMS, LLC, DefendantsJEANNETTE WELCH, on behalf of herselfand all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC;

MIDLAND FUNDING, LLC;

MIDLAND CREDIT MANAGEMENT, INC. DefendantsLILLIE BROWNLEE, on behalf of herselfand all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC;

MIDLAND FUNDING, LLC;

MIDLAND CREDIT MANAGEMENT, INC. DefendantsBETTY JOHNSON, on behalf of herselfand all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC;

MIDLAND FUNDING, LLC;

MIDLAND CREDIT MANAGEMENT, INC. Defendants.

Consolidated Case No. 4:19-cv-179-JM

Consolidated Case No. 5:19-cv-105

Consolidated Case No. 4:19-cv-208

Consolidated Case No. 4:19-cv-267

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF ARKANSAS WESTERN DIVISION

September 10, 2019

ORDER

Pending is the motion to compel arbitration and to strike class allegations of Plaintiff Betty Johnson filed on behalf of Defendants Midland Funding LLC and Midland Credit Management, Inc. (collectively "Midland"). (Docket # 76). Defendants Michael A. Jacob, II and Jacob Law Group, PLLC ( collectively "JLG") have joined the motion and filed a supporting brief. (Docket # 84 and 85). Plaintiff has filed a response and Defendants have filed replies. For the reasons stated herein, the motion is GRANTED.

Plaintiff Johnson filed this action alleging that Defendants Michael A. Jacob, II, Jacob Law Group, PLLC ("JLG"), Midland Funding, LLC ("Midland Funding") and Midland Credit Management, Inc. ("MCM") attempted to collect consumer debts from her and putative class members through standardized, form debt collection complaints filed in Arkansas state courts that fraudulently and falsely averred that Midland Funding LLC "holds in due course a claim. . . pursuant to a defaulted Citibank N.A. (Citibank) credit card account." Plaintiff asserts that Midland is not a holder in due course of Citibank accounts and that this representation violates the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C §1692 et seq. and the Arkansas Fair Debt Collection Practices Act ("AFDCA"), Ark. Code Ann. §17-24-501 et seq.

On or about July 30, 2014, Plaintiff Johnson opened a Citibank Sears credit card account with an account number ending in 876 ("the Account"). In 2016, the card agreement governing Plaintiff's account was amended and a copy was mailed to her. Plaintiff made purchases using the credit card. Plaintiff failed to make the required payments on the Account and on February 6, 2017, the account was charged-off.

The Cardholder Agreement is governed by South Dakota law and contains the following arbitration provision ("the Arbitration Provision"):

Covered Claims

You or we may arbitrate any claim, dispute or controversy between you and us arising out of or related to your account, a previous related account or our relationship (called "Claims").

If arbitration is chosen by any party, neither you nor we will have the right to litigate that Claim in court or have a jury trial on that Claim.

Except as stated below, all Claims are subject to arbitration. . . . This also includes Claims made by or against anyone connected with us or you or claiming through us or you, or by someone making a claim through us or you, such as a co-applicant, authorized user, employee, agent, representative or an affiliated/parent/subsidiary company.

(ECF 76-4, p. 17).

The Arbitration Provision also contains the following language in bold and all capital letters: "PLEASE READ THIS PROVISION OF THE AGREEMENT CAREFULLY. THIS SECTION PROVIDES THAT DISPUTES MAY BE RESOLVED BY BINDING ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO TO COURT, HAVE A JURY TRIAL OR INITIATE OR PARTICIPATE IN A CLASS ACTION. IN ARBITRATION, DISPUTES ARE RESOLVED BY AN ARBITRATOR, NOT A JUDGE OR JURY.ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN IN COURT. THIS ARBITRATION PROVISION IS GOVERNED BY THE FEDERAL ARBITRATION ACT (FAA), AND SHALL BE INTERPRETED IN THE BROADEST WAY THE LAW WILL ALLOW." (ECF 76-4, p. 17). Plaintiff does not claim to have rejected the Arbitration Provision. However, Plaintiff argues that the 2016 Cardholder Agreement, from which the above language is quoted, is more narrowly written than the 2012 Cardholder Agreement and specifically excludes the references to claims made by predecessors, successors or assignees in the definition of claims subject to arbitration. Plaintiff contends that the omission of assignees, successors and their agents from the arbitration provision precludes those persons from enforcing the arbitration agreement.

In April 2017, Midland Funding LLC purchased the Account from Citibank as part of a portfolio of charged-off debts. Citibank sold and Midland acquired all "rights title and interest of the Bank in and to the Account." (ECF #81, p. 4). Defendants argue that the assignment of Citibank's right, title, and interest in the Account was expressly contemplated by the Cardholder Agreement which states: "Assignment. We may assign any or all of our rights and obligations under this Agreement to a third party." (ECF #76-4, p. 19). Defendants argue this assignment included the assignment of the right to arbitration. Defendants move to compel arbitration and to strike the class allegations. Plaintiff disputes that the right to arbitration was transferred to Midland and opposes Defendants' motion.

Section 2 of the Federal Arbitration Act (FAA) states that an agreement to arbitrate "shall be 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. This provision reflects a liberal federal policy favoring arbitration. AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). Because "arbitrationis a matter of contract,....courts must rigorously enforce arbitration agreements according to their terms," American Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013) (internal quotations and citation omitted), including requirements to pursue claims through individual arbitration. Epic Systems Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018). 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).

When presented with matters outside the pleadings, the Eighth Circuit Court of Appeals has concluded that a motion to compel arbitration can be properly analyzed under Rule 56 of the Federal Rules of Civil Procedure. City of Benkelman, Nebraska v. Baseline Eng'g Corp., 867 F.3d 875, 881 (8th Cir. 2017). The Eighth Circuit set out the burden of the parties in connection with a summary judgment motion in Counts v. M.K. Ferguson Co., 862 F.2d 1338 (8th Cir. 1988):

[T]he burden on the party moving for summary judgment is only to demonstrate, i.e., '[to] point out to the District Court, that the record does not disclose a genuine dispute on a material fact. It is enough for the movant to bring up the fact that the record does not contain such an issue and to identify that part of the record which bears out his assertion. Once this is done, his burden is discharged, and, if the record in fact bears out the claim that no genuine dispute exists on any material fact, it is then the respondent's burden to set forth affirmative evidence, specific facts, showing that there is a genuine dispute on that issue. If the respondent fails to carry that burden, summary judgment should be granted.

Id. at 1339 (quoting City of Mt. Pleasant v. Associated Elec. Coop., 838 F.2d 268, 273-274 (8th Cir. 1988) (citations omitted) (brackets in original)). Only disputes over facts that may affect the outcome of the suit under governing law will properly preclude the entry of summary judgment. Anderson, 477 U.S. at 248.

Plaintiff does not dispute that the arbitration provision is valid, she is bound to it, and her claims fall within its scope. Relying in large part on Lamps...