Campbell v. Jacob

• Decision Date: 09 September 2019
• Docket Number: Consolidated Case No. 5:19-cv-105,Consolidated Case No. 4:19-cv-208,Consolidated Case No. 4:19-cv-179-JM,Consolidated Case No. 4:19-cv-267
• 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 herself and all others similarly situated, Plaintiff v. MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; JEFFERSON CAPITAL SYSTEMS, LLC, DefendantsJEANNETTE 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. DefendantsLILLIE 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. DefendantsBETTY 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.

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 9, 2019

ORDER

Pending is the motion to compel arbitration and to strike class allegations of Plaintiff Jeanette Welch filed on behalf of Defendants Midland Funding LLC and Midland Credit Management, Inc. (collectively "Midland"). (Docket # 46). Defendants Michael A. Jacob, II and Jacob Law Group, PLLC ( collectively "JLG") have joined the motion and filed a supporting brief. (Docket # 58 and 59). Plaintiff has filed a response and Defendants have filed replies. For the reasons stated herein, the motion is GRANTED.

Plaintiff Welch 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 Comenity Bank credit card account." Plaintiff asserts that Midland is not a holder in due course of Comenity Bank 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 May 3, 2016, Plaintiff Welch opened a Comenity Your Tuition Solution credit card account with an account number ending in 4763. ("the Account"). A letter containing the credit card and the cardholder agreement was mailed to her. Plaintiff made purchases using the credit card. Plaintiff failed to make the required payments on the Account and on January 25, 2017 the account was charged-off.

The Cardholder Agreement is governed by Utah law and contains the following:

Arbitration and jury trial waiver

2. Parties Subject to Arbitration: Solely as used in this Arbitration Provision and not elsewhere in this Agreement), the terms "we," us" and "our" mean (a) Comenity Capital Bank, any parent, subsidiary or affiliate of the Bank and the employees, officers and directors of such companies ("the Bank Parties"); and (b) any other person or company that provides any services in connection with this Agreement if you assert a Claim against such other person or company at the same time as you assert a Claim against any Bank Party.

3. Covered Claims: "Claim" means any claim, dispute or controversy between you [i.e., plaintiff] and us [i.e., Comenity] that in any way arises from or relates to this Agreement, [or] the Account. . . . "Claim" has the broadest possible meaning, and includes initial claims, counterclaims, cross-claims and third party claims. It includes disputes based on contract, tort, consumer rights, fraud and other intentional torts, constitution, statute, regulation, ordinance, common law and equity (including any claim for injunctive or declaratory relief).

4. Starting an Arbitration: Arbitration may be elected by any Party with respect to any claim, even if that party has already initiated a lawsuit with respect to a different Claim.

The opening paragraph of the Cardholder Agreement explains that plaintiff would be bound by the Cardholder Agreement-including the Arbitration Provision-if she used the account to make purchases, which she concedes she did. The opening paragraph of the Cardholder Agreement also alerts plaintiff to the presence of the Arbitration Provision and informs her she had the right to opt out of it. The Arbitration Provision explains that plaintiff could do so by sending Comenity signed, written notice of her election to opt out within 30 days. Plaintiff did not send written rejection of the Arbitration Provision, timely or otherwise. The Arbitration Agreement also states in bold, capital letters that, if not rejected the Arbitration Provision "will be part of this agreement and will have a substantial impact on the way you or we will resolve any claim which you or we have against each other now or in the future."

The Account Agreement also contains a class action waiver which states:

7. Prohibition Against Certain Proceedings: IF YOU OR WE ELECT TO ARBITRATE A CLAIM: (1) NEITHER YOU NOR WE MAY PARTICIPATE IN A CLASS ACTION IN COURT OR IN CLASS-WIDE ARBITRATION, EITHER AS A PLAINTIFF, DEFENDANT OR CLASS MEMBER; (2) NEITHER YOU NOR WE MAY ACT AS A PRIVATE ATTORNEY GENERAL IN COURT OR IN ARBITRATION; (3) CLAIMS BROUGHT BY OR AGAINST YOU MAY NOT BE JOINED OR CONSOLIDATED WITH CLAIMS BROUGHT BY OR AGAINST ANY OTHER PERSON; AND (4) THE ARBITRATOR SHALL HAVE NO POWER OR AUTHORITY TO CONDUCT A CLASS-WIDE ARBITRATION, PRIVATE ATTORNEY GENERAL ARBITRATION OR MULTIPLE-PARTY ARBITRATION.

In March 2017, Midland Funding LLC purchased the Account from Comenity as part of a portfolio of charged-off debts. Comenity sold and Midland purchased "all of [Comenity's] rights, title and interest in and to those certain Charged-off Accounts. . . " (ECF #54, p. 6). Comenity assigned to Midland Funding LLC all of its rights, title and interest in Welch's Account. (ECF #54, p. 41). Defendants argue that the assignment of Comenity's right, title, and interest in the Account was expressly contemplated by the Cardholder Agreement which states: " Transfer of Rights/Assignment. " Your rights under this Agreement can't be transferred by you, by operation of law or otherwise, but your obligations will be binding upon your estate or personal representatives. We may transfer or assign your Account and/or this Agreement, or any of our rights under this Agreement, to another person or entity at any time without prior notice to you or your consent." (ECF #46-1, p. 9). 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 "arbitration is 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

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