Mounts v. Midland Funding LLC

• Decision Date: 28 June 2017
• Docket Number: No.: 3:15-CV-572-TAV-HBG.,: 3:15-CV-572-TAV-HBG.
• Citation: 257 F.Supp.3d 930
• Parties: Carlos MOUNTS and Randy T. Everhart, Jr., on behalf of plaintiffs and their proposed class, Plaintiffs, v. MIDLAND FUNDING LLC, and Midland Credit Management, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

257 F.Supp.3d 930

Carlos MOUNTS and Randy T. Everhart, Jr., on behalf of plaintiffs and their proposed class, Plaintiffs,

v.MIDLAND FUNDING LLC, and Midland Credit Management, Inc., Defendants.

No.: 3:15-CV-572-TAV-HBG.

United States District Court, E.D. Tennessee.

Filed June 28, 2017

Peter A. Holland, The Holland Law Firm, P.C., Annapolis, MD, Alan C. Lee, Talbott, TN, for Plaintiffs.

Alan D. Leeth, Robert Franklin Springfield, Burr & Forman LLP, Birmingham, AL, John Christopher Suedekum, Burr & Forman LLP, Nashville, TN, for Defendants.

MEMORANDUM OPINION AND ORDER

Thomas A. Varlan, CHIEF UNITED STATES DISTRICT JUDGE

This civil action is before the Court on defendants' Motion to Compel Arbitration and to Dismiss [Doc. 14]. Plaintiffs filed a response in opposition to defendants' motion [Doc. 17], and defendants replied [Doc. 21]. For the reasons discussed herein, the Court will grant in part and deny in part defendants' motion.

I. Background¹

Plaintiffs Carlos Mounts and Randy T. Everhart, Jr. filed this action against defendants Midland Funding LLC ("Midland Funding") and Midland Credit Management, Inc. ("Midland Credit"), alleging that defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. ("FDCPA"). Defendants now move to compel arbitration of plaintiffs' claims, alleging that plaintiffs agreed to arbitrate such claims when they assented to the terms of their credit card agreements. The Court will first address the facts associated with Mounts's credit account and will then turn to Everhart's credit account.

A. Mounts's Account

On or about April 28, 2004, Mounts opened a Citi Dividend Platinum Select MasterCard account (the "Citi Account") with Citibank (South Dakota), N.A. [Doc. 14–1 pp. 3–4]. A Citibank Card Agreement governs the account, which sets forth certain details regarding the account, including repayment terms, interest and fee clauses, and various other terms [Id. at 4, 16–19]. The Citibank Card Agreement also includes an arbitration clause [Id. at 18–19]. The agreement provides that it is "binding on you unless you close your account with 30 days after receiving the card and you have not used or authorized use of the card" [Id. at 16]. Mounts made purchases on the Citi Account after he opened it [Id. at 5, 21–64]. He made his last payment on the account in September 2010, and he continued charging purchases to the account until only a few months before the account was charged off in April 2011 [Id. ].

Pursuant to a Bill of Sale and Assignment dated March 28, 2013, Citibank sold a portfolio of charged-off accounts to Midland Funding, which included Mounts's Citi Account [Id. at 3–4, 8–14]. Midland Funding, a wholly-owned subsidiary of Midland Credit, thereafter placed and assigned the Citi Account to Midland Credit for servicing [Id. at 2, 4].

B. Everhart's Account

Everhart opened a Bass Pro Shops credit card account with GE Money Bank ("GEMB") on or about September 3, 2006 (the "GEMB Account") [Doc. 14–2 pp. 3–4]. The GEMB Credit Card Agreement governs the GEMB Account, which sets forth certain provisions applicable to the account, including repayment, interest, an arbitration provision, and other terms [Id. at 4, 7–10; Doc. 14–1 p. 7]. The GEMB Credit Card Agreement was mailed to Everhart when he opened the GEMB Account [Doc. 14–2 p. 4]. The agreement states: "Your signature on this application or sales slip for the initial purchase approved on this Account represents your signature on this Agreement and is incorporated by reference" [Id. at 9]. Everhart charged purchases at Bass Pro Shops for months after opening the GEMB Account [Id. at 4, 12–93].

Pursuant to a Bill of Sale dated February 23, 2010, GEMB sold a portfolio of charged-off accounts, which included Everhart's GEMB Account, to CACH, LLC [Id. at 5; Doc. 14–3 pp. 2–3]. Thereafter, pursuant to an Assignment and Bill of Sale dated February 24, 2010, CACH, LLC sold the pool of accounts to Asset Acceptance, LLC [Doc. 14–4 pp. 2, 5, 7–8]. Asset Acceptance, LLC later sold a portfolio of accounts, including the GEMB Account, to Midland Funding on October 14, 2013, which placed and assigned the GEMB Account to Midland Credit for servicing [Id. at 2, 10–14; Doc. 14–1 pp. 5–6].

II. Legal Standards

The Federal Arbitration Act ("FAA") "expresses a strong public policy favoring arbitration in a broad range of disputes." Cooper v. MRM, Inc. , 367 F.3d 493, 498 (6th Cir. 2004). It provides that agreements 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. If a valid arbitration agreement governs a claim, courts must compel arbitration. Id. §§ 3–4.

Federal law creates "a general presumption of arbitrability, and any doubts are to be resolved in favor of arbitration ‘unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.’ " Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc. , 350 F.3d 568, 576–77 (6th Cir. 2003) (quoting AT & T Techs., Inc. v. Commc'n Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ). "If parties contract to resolve their disputes in arbitration rather than in the courts, a party may not renege on that contract absent the most extreme circumstances." Stout v. J.D. Byrider, 228 F.3d 709, 715 (6th Cir. 2000).

"Before compelling an unwilling party to arbitrate, the court must engage in a limited review to determine whether the dispute is arbitrable." Javitch v. First Union Secs., Inc. , 315 F.3d 619, 624 (6th Cir. 2003). If the "validity of the agreement to arbitrate is ‘in issue,’ the court must proceed to a trial to resolve the question." Great Earth Cos. v. Simons , 288 F.3d 878, 889 (6th Cir. 2002). The burden is on the party opposing arbitration to show that the agreement is not enforceable. Green Tree Fin. Corp.–Ala. v. Randolph , 531 U.S. 79, 91–92, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). In order to meet this burden, "the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate, a showing that mirrors the summary judgment standard." Great Earth , 288 F.3d at 889.

As plaintiffs are opposing arbitration, they must offer "concrete evidence from which a reasonable juror could" find that this matter should not be compelled to arbitration. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "[M]ere conclusory and unsupported allegations, rooted in speculation, do not meet that burden." Bell v. Ohio State Univ. , 351 F.3d 240, 253 (6th Cir. 2003) (citation omitted).

III. Analysis

When considering a motion to compel arbitration, a court has four tasks. Stout, 228 F.3d at 714. The Court must determine: (1) "whether the parties agreed to arbitrate"; (2) "the scope of that agreement"; (3) "if federal statutory claims are asserted, ... whether Congress intended those claims to be nonarbitrable"; and (4) whether to dismiss the action or stay the remainder of the proceedings pending arbitration. See id. The Court will address these four tasks in turn.

A. Whether the Parties Agreed To Arbitrate

In determining whether parties agreed to arbitrate, courts "should apply ordinary state-law principles that govern the formation of contracts." First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Courts also look to state law to determine whether contract defenses may invalidate arbitration agreements. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). However, questions concerning the interpretation and construction of arbitration agreements are governed by federal substantive law. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

In determining whether the parties agreed to arbitrate, the Court will proceed by addressing: (1) whether defendants provided admissible evidence to support the existence of the arbitration agreements; (2) whether plaintiffs generally assented to the agreements; (3) the effect of delegation provisions; and (4) plaintiffs' challenges to the enforceability of the agreements.

1. Evidence of the Agreements

Plaintiffs assert that the documents defendants rely on to support the existence of the arbitration agreements are inadmissible hearsay. They also point out that the documents defendants submitted to support the existence of Mounts's arbitration agreement actually postdate Mounts's account by six years. Plaintiffs assert that this is evidence that the documents are not actually associated with Mounts's account and are, therefore, irrelevant. The Court will address these objections in turn.

i. Hearsay Objections

Plaintiffs argue that the Court should deny defendants' motion because the documents defendants attached to their motion are hearsay and because defendants have not shown that these documents meet the required elements of the business records exception set forth in Federal Rule of Evidence 803(b)(6). In support of their motion to compel, defendants attached a number of documents, including bills of sale and assignments, affidavits corresponding to such bills of sale and assignments, credit card agreements, and account statements [Docs. 14–1–14–4]. Plaintiffs generally argue that "the documents offered by Defendants to show written agreements are hearsay" [Doc. 17 p. 11].

As the underlying foundation for these documents, defendants submitted the declaration of Mike Burger, the Director, Operations, LC–Legal Collections Operations for Midland Credit. Mike Burger's declaration states:

Some of the business records I reviewed, including some of the business records attached hereto, were created by businesses other than Midland Credit. On information and belief, all of these records were made by, or from information

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