Lopez v. Am. Legal Funding LLC
| Decision Date | 25 March 2013 |
| Docket Number | No. 1-12-0763,No. 1-12-2393,No. 1-12-0878,1-12-0763,1-12-0878,1-12-2393 |
| Citation | 2013 IL App (1st) 120763 |
| Parties | EDDIE LOPEZ and SANDY LOPEZ, Plaintiffs-Appellees, Appellants, and Cross-Appellees, v. AMERICAN LEGAL FUNDING LLC, and ALFUND LIMITED PREFERRED LLC, Defendants-Appellants, Appellees, and Cross-Appellants. |
| Court | United States Appellate Court of Illinois |
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the
Circuit Court of
Cook County.
¶ 1 Held: In these consolidated appeals, we conclude that: (1) this court is without appellate jurisdiction to consider the majority of the issues raised by the parties; (2) the circuit court had subject matter jurisdiction to consider plaintiffs' motion to confirm a partial arbitration award; and (3) the circuit court improperly enjoined defendants from prosecuting related litigation.
¶ 2 These consolidated appeals arise out of a dispute between plaintiffs-appellees, appellants, and cross-appellees, Eddie Lopez and Sandy Lopez, and defendants-appellants, appellees, and cross-appellants, American Legal Funding LLC and Alfund Limited Preferred LLC. The dispute involvedan agreement between the parties whereby defendants provided plaintiffs with $35,000 in "pre-settlement funding" in exchange for the repayment of that amount, plus fees, from any proceeds plaintiffs might recover in a separate personal injury lawsuit. On appeal, we are presented with challenges to a host of orders entered by the circuit court involving: (1) the subject matter jurisdiction of the circuit court over a portion of this litigation, as well as the circuit court's status as the proper venue for this matter; (2) the propriety of a partial arbitration award entered pursuant to an arbitration clause contained in the parties' agreement; and (3) a motion to enjoin defendants from prosecuting a related suit in Arizona.
¶ 3 For the following reasons, we find: (1) this court is without appellate jurisdiction to consider the majority of the issues raised by the parties, and two of the appeals before this court must, therefore, be dismissed; (2) the circuit court had subject matter jurisdiction to consider the partial arbitration award; and (3) the circuit court improperly enjoined defendants from prosecuting related litigation.
¶ 5 Plaintiffs are both residents of Illinois, while defendants are both Arizona limited liability companies. The record reflects that some time prior to November of 2007, plaintiffs initiated a separate lawsuit to recover damages resulting from injuries to Mr. Lopez. On November 30, 2007, and while that personal injury suit was still pending, plaintiffs entered into a "CONSENSUAL EQUITY LIEN AND SECURITY AGREEMENT" (lien agreement) with defendants.1 Pursuant tothat agreement, defendants paid plaintiffs $35,000 "in order to afford TRANSFEROR sufficient funds to adequately pay for the necessities of life during the pendency of the [personal injury suit]." In exchange, the lien agreement provided that "TRANSFEROR hereby grants to TRANSFEREE a security interest in the future Proceeds of the [personal injury suit]." That security interest in future proceeds would range from a minimum of $58,800, if the defendants were paid by April 4, 2008, to a maximum of $219,765, if payment was made after June 4, 2010. The lien agreement further indicated that the funds advanced to plaintiffs were "an investment, not a loan," and that no repayment of that investment would be required if plaintiffs were not successful in the personal injury lawsuit.
¶ 6 In addition, the lien agreement contained a number of other relevant terms. Of particular relevance, paragraph 16 of the lien agreement stated that Paragraph 17 of the lien agreement also provided that "TRANSFEROR agrees that any and all disputes that may arise concerning the terms, conditions, interpretation, orenforcement of this agreement shall be determined through arbitration pursuant to the Rules and Methods outlined by the American Arbitration Association in Arizona at the election of either party."
¶ 7 Pursuant to the arbitration clause in the lien agreement, defendants filed a demand for arbitration with the American Arbitration Association (AAA) on December 12, 2008. In describing the nature of the dispute, defendants' arbitration demand stated that defendants had
¶ 8 On December 18, 2008, the AAA sent a letter to the parties which noted that the lien agreement provided for arbitration by the AAA and acknowledged defendants' arbitration demand. The letter further noted that the AAA would apply its "Supplementary Procedures for Consumer-Related Disputes" (Consumer Rules) and its "Consumer Due Process Protocol" (Consumer Protocol) to any such arbitration. However, the AAA also indicated that the provision in the lien agreement specifying Arizona as the proper venue for any disputes was "a material or substantial deviation" from the AAA's Consumer Rules and/or Consumer Protocol. As such, the AAA's letter further indicated that it might decline to administer the arbitration unless defendants would waive this provision and "agree to have this matter administered under the Consumer Rules and Protocol." Defendants were instructed that they could "confirm [their] agreement by signing and returning a copy of this letter no later than December 29, 2008."
¶ 9 It does not appear that defendants responded to this waiver request in December of 2008. The record contains a number of emails exchanged between defendants and the AAA in January of 2009, indicating that the AAA had not yet received such a waiver. On January 13, 2009, defendants sent the AAA an email in which they stated that "[i]f you forward the protocol waiver, we will signit so the case can move forward." The AAA responded with an email that apparently included such a waiver as an attachment, but there is no indication in the record that this attachment was ever executed.
¶ 10 What the record does contain is a copy of the AAA's December 18, 2008, letter that was signed by a representative of defendants-Mr. William Downey-in a manner consistent with the AAA's original instructions on how defendants might indicate their waiver of the offending venue provision of the lien agreement. In correspondence between counsel for plaintiffs and defendants regarding this issue, defendants' counsel indicated his understanding that
¶ 11 Any issues as to when and for what reason the AAA ultimately agreed to proceed with the arbitration aside, on January 22, 2009, the AAA sent the parties another letter indicating that defendants had requested that the arbitration hearing be held in Phoenix, Arizona, and further indicating that this request would be automatically honored unless plaintiffs objected. Plaintiffs thereafter filed a "special and limited appearance" in the arbitration proceedings objecting to the jurisdiction of the AAA to arbitrate defendants' claim in Arizona. Plaintiffs specifically argued: (1) there was no enforceable contract containing an arbitration clause because defendants had never signed the lien agreement; (2) the lien agreement was "void and unenforceable as against public policy as a contract of champerty and maintenance;" and (3) arbitration in Illinois was required pursuant to the Fair Debt Collections Practices Act (Fair Debt Act) (15 U.S.C. § 1692, et seq. (2008)). Defendants filed a written response to plaintiffs' arguments on February 20, 2009. On March 9, 2009, the AAA sent the parties a letter stating that "[a]fter careful consideration of theparties' contentions, the Association has determined the administration of this matter shall be conducted by the Central Case Management Center and hearings will be held in Chicago, IL."
¶ 12 In June of 2009, plaintiffs filed a class action counterclaim against defendants in the arbitration proceeding. In that counterclaim, plaintiffs asked the AAA to declare the lien agreement illegal and unenforceable, enjoin defendants from enforcing that agreement, award plaintiffs damages for defendants' purported violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2008)), and to do the same on behalf of a class of similarly situated individuals that had entered into similar agreements with defendants. On October 29, 2009, an AAA arbitrator based in Chicago, Illinois-Mr. Joel Chupack-conducted a preliminary hearing with the parties via telephone and thereafter entered a scheduling order. That order indicated that the parties had agreed that the arbitration would be heard by Mr. Chupack as the sole arbitrator,2 and further provided the parties with the opportunity to file briefs with respect to plaintiffs' class action counterclaim.
¶ 13 Defendants responded with a motion seeking either the dismissal of the arbitration proceeding or, in the alternative, a "clause construction award." With respect to the request for dismissal, defendants asserted...
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