Midland Funding, LLC v. Briesmeister

• Decision Date: 02 February 2022
• Docket Number: CV-20-671
• Citation: Midland Funding, LLC v. Briesmeister, 2022 Ark.App. 52, 640 S.W.3d 672 (Ark. App. 2022)
• Parties: MIDLAND FUNDING, LLC; and Midland Credit Management, Inc., Appellants v. Jennifer BRIESMEISTER, on Behalf of Herself and All Others Similarly Situated, Appellees
• Court: Arkansas Court of Appeals

2022 Ark. App. 52

640 S.W.3d 672

MIDLAND FUNDING, LLC; and Midland Credit Management, Inc., Appellants

v.Jennifer BRIESMEISTER, on Behalf of Herself and All Others Similarly Situated, Appellees

No. CV-20-671

Court of Appeals of Arkansas, DIVISION III.

Opinion Delivered February 2, 2022

Quattlebaum, Grooms & Tull PLLC, Little Rock, by: Michael N. Shannon and Sarah Keith-Bolden, for appellants.

Corey D. McGaha PLLC, by: Corey D. McGaha ; and Edelman, Combs, Latturner & Goodwin LLC, by: Daniel A. Edelman, pro hac vice; and Cathleen Combs, pro hac vice, for appellee.

KENNETH S. HIXSON, Judge

Midland Funding, LLC(Midland Funding), and Midland Credit Management, Inc.(Midland Credit), (collectively appellants or Midland) appeal after the Independence County Circuit Court denied their motion to compel arbitration and strike class allegations in favor of appelleeJennifer Briesmeister on behalf of herself and all others similarly situated.On appeal, appellants argue that the circuit court erred in denying their motion.We reverse and remand.

I.Relevant Facts

Much of the facts of this case are undisputed.In December 2015, Briesmeister opened an Amazon-branded credit card issued by Synchrony Bank (Synchrony).She made purchases on the credit card, and the last payment she made on the account was on May 18, 2018, leaving a balance of $1,108.61.Synchrony charged off the account on September 25, 2018, and subsequently sold the account to Midland Funding on October 20, 2018.The bill of sale between Synchrony and Midland Funding stated the following in pertinent part:

For value received and in further consideration of the mutual covenants and conditions set forth in the Forward Flow Accounts Purchase Agreement (the "Agreement"), dated as of the 9th day of February, 2018 by and between Synchrony Bank formerly known as GE Capital Retail Bank; RFS Holding, L.L.C.; and Retail Finance Credit Services, LLC(collectively "Seller") and Midland Funding LLC("Buyer"), Seller hereby transfers, sells, conveys, grants, and delivers to Buyer, its successors and assigns, without recourse except as set forth in the Agreement, the Accounts as set forth in the Notification Files, delivered by Seller to Buyer on October 20, 2018 , and as further described in the Agreement.

(Emphasis added.)

The credit-card agreement between Synchrony and Briesmeister in effect at the time of sale contained the following pertinent provisions:

ABOUT THE CREDIT CARD AGREEMENT

This Agreement.This is an Agreement between you and Synchrony Bank ... for your credit card account shown above.By opening or using your account, you agree to the terms of the entire Agreement.The entire Agreement includes the four sections of this document and the application you submitted to us in connection with the account.These documents replace any other agreement relating to your account that you or we made earlier or at the same time.

Parties To This Agreement.This Agreement applies to each accountholder approved on the account and each of you is responsible for paying the full amount due, no matter which one uses the account.We may treat each of you as one accountholder and may refer to each of you as "you" or "your."Synchrony Bank may be referred to as "we,""us" or "our."

....

IMPORTANT INFORMATION ABOUT THIS AGREEMENT

Assignment.We may sell, assign or transfer any or all of our rights or duties under this Agreement or your account, including our rights to payments.We do not have to give you prior notice of such action.You may not sell, assign or transfer any of your rights or duties under this Agreement or your account.

Enforceability.If any part of this Agreement is found to be void or unenforceable, all other parts of this Agreement will still apply.

Governing Law.Except as provided in the Resolving a Dispute with Arbitration section, this Agreement and your account are governed by federal law and, to the extent state law applies, the laws of Utah without regard to its conflicts of law principles.This Agreement has been accepted by us in Utah.

Waiver.We may give up some of our rights under this Agreement.If we give up any of our rights in one situation, we do not give up the same right in another situation.

RESOLVING A DISPUTE WITH ARBITRATION

PLEASE READ THIS SECTION CAREFULLY, IF YOU DO NOT REJECT IT, THIS SECTION WILL APPLY TO YOUR ACCOUNT, AND MOST DISPUTES BETWEEN YOU AND US WILL BE SUBJECT TO INDIVIDUAL ARBITRATION.THIS MEANS THAT: (1) NEITHER A COURT NOR A JURY WILL RESOLVE ANY SUCH DISPUTE; (2) YOU WILL NOT BE ABLE TO PARTICIPATE IN A CLASS ACTION OR SIMILAR PROCEEDING; (3) LESS INFORMATION WILL BE AVAILABLE; AND (4)APPEAL RIGHTS WILL BE LIMITED.

• What claims are subject to arbitration

1.If either you or we make a demand for arbitration, you and we must arbitrate any dispute or claim between you or any other user of your account, and us, our affiliates, agents and/or Amazon.com if it relates to your account, except as noted below.

2.We will not require you to arbitrate: (1) any individual case in small claims court or your state's equivalent court, so long as it remains an individual case in that court; or (2)a casewe file to collect money you owe us.However, if you respond to the collection lawsuit by claiming any wrongdoing, we may require you to arbitrate.

3.Notwithstanding any other language in this provision, only a court not an arbitrator, will decide disputes about the validity, enforceability, coverage or scope of this provision or any part thereof (including, without limitation, the next paragraph of this provision and/or this sentence).However, any dispute or argument that concerns the validity or enforceability of the Agreement as a whole is for the arbitrator, not a court, to decide.

• No Class Actions

YOU AGREE NOT TO PARTICIPATE IN A CLASS, REPRESENTATIVE OR PRIVATE ATTORNEY GENERAL ACTION AGAINST US IN COURT OR ARBITRATION.ALSO, YOU MAY NOT BRING CLAIMS AGAINST US ON BEHALF OF ANY ACCOUNTHOLDER WHO IS NOT AN ACCOUNTHOLDER ON YOUR ACCOUNT, AND YOU AGREE THAT ONLY ACCOUNTHOLDERS ON YOUR ACCOUNT MAY BE JOINED IN A SINGLE ARBITRATION WITH ANY CLAIM YOU HAVE.

....

• Governing Law for Arbitration

This Arbitration section of your Agreement is governed by the Federal Arbitration Act (FAA).Utah law shall apply to the extent state law is relevant under the FAA.The arbitrator's decision will be final and binding, except for any appeal right under the FAA.Any court with jurisdiction may enter judgment upon the arbitrator's award.

• How to reject this section

You may reject this Arbitration section of your Agreement.If you do that, only a court may be used to resolve any dispute or claim.To reject this section, you must send us a notice within 60 days after you open your account or we first provided you with your right to reject this section....This is the only way you can reject this section.

(Bold font in original.)

After the account was sold, Midland Funding filed a complaint against Briesmeister in Independence County District Court on January 27, 2020, requesting a judgment for the past unpaid balance, interest, and costs.A summons was subsequently served on Briesmeister on February 4, 2020, informing her that she had thirty days after service of the summons to file a written answer to the complaint.Three days after service of summons, Midland Credit (an affiliate of Midland Funding that manages and acts as a "servicer" for the consumer debt purchased by Midland Funding) sent Briesmeister a letter on behalf of Midland Funding, stating the following:

You were served with a copy of the lawsuit Midland Funding LLC filed against you.Call (866) 300-8750 to discuss your options.

If we can't resolve this out of court, we intend to continue with this lawsuit and will request the judge grant Midland Funding LLC a judgment for the full balance owed.

Reply by: March 08, 2020

It is this letter that precipitated the current litigation.¹

On March 23, 2020, Briesmeister filed her complaint against appellants in the Circuit Court of Independence County.(The Midland Funding collection suit was filed in district court.)She claimed that appellants’ actions violated the Arkansas Fair Debt Collection Practices Act (AFDCPA).Specifically, Briesmeister alleged that the collection letter sent by Midland Credit is misleading because the letter contains a "reply by" date to resolve the claim amicably that is after the date she was required to file an answer in circuit court.Briesmeister further alleged that the letter did not disclose that the deadlines in the summons must be complied with regardless of the date given in the letter.In other words, Briesmeister alleged that she would have been in default in the lawsuit filed by Midland Funding prior to the "reply by" date in Midland Credit's letter.Briesmeister claimed that these actions violated the AFDCPA and filed her complaint on behalf of herself and on behalf of a class of individuals similarly situated.

Thereafter, appellants moved to compel arbitration and strike class allegations under the terms of the credit-card agreement between Synchrony and Briesmeister as quoted above.Appellants argued that "[a]s servicer for Synchrony's assignee and current owner of Synchrony's defaulted Synchrony account, [appellants are] entitled to enforce Briesmeister's agreement to arbitrate her claims against [appellants] on an individual (as opposed to class-wide) basis."Appellants further argued that "[b]ecause Briesmeister's claims are premised upon [appellants’] alleged conduct in attempting to collect her defaulted Synchrony account, those claims necessarily relate to her Synchrony account and are precisely the type of claims encompassed by the arbitration provision and class-action waiver included in the applicable agreement."

Briesmeister filed her response to the motion to compel arbitration and strike class allegations on June 11, 2020.She argued that appellants were not covered by the arbitration clause because the...