Pearson v. United Debt Holdings, LLC

• Decision Date: 19 August 2015
• Docket Number: 14 C 10070
• Citation: 123 F.Supp.3d 1070
• Parties: Samuel Pearson, Plaintiff, v. United Debt Holdings, LLC, Defendant.
• Court: U.S. District Court — Northern District of Illinois

123 F.Supp.3d 1070

Samuel Pearson, Plaintiff,

v.United Debt Holdings, LLC, Defendant.

14 C 10070

United States District Court, N.D. Illinois, Eastern Division.

Signed August 19, 2015

Cathleen M. Combs, James O. Latturner, Thomas Everett Soule, Daniel A. Edelman, Edelman, Combs, Latturner & Goodwin LLC, Chicago, IL, for Plaintiff.

Justin M. Penn, Jason L. Santos, Raven Elizabeth Burke, Hinshaw & Culbertson, LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Virginia M. Kendall, United States District Court Judge, Northern District of Illinois

Plaintiff Samuel Pearson filed a class action complaint against United Debt Holdings, LLC ("UDH") alleging that UDH violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., when it attempted to collect debts that Pearson alleges were void and unenforceable. UDH moved to compel arbitration on an individual basis and dismiss the Complaint. (Dkt. No. 27). Specifically, UDH argues that the loan agreement into which Pearson entered contained a binding arbitration provision and a class action waiver. In the alternative, UDH argues that that the Court should dismiss or stay the case based on the doctrine of tribal exhaustion because the loan itself was issued under the laws of the Chippewa Cree Tribe. For the reasons that follow, the motion is denied in its entirety.

BACKGROUND

In 2014, Pearson began to receive calls from UDH attempting to collect a debt that Pearson allegedly owed on a loan. (Compl. ¶ 8). The loan did not originate with UDH, but with a company called Plain Green. The underlying loan agreement is not attached to the Complaint. The Complaint is sparse on specifics with respect to the loan itself, but is clear that the interest rate on the loan exceeded 200% and Plain Green was not licensed by the Illinois Department of Financial and Professional Regulation to provide loans whose interest rates exceeded 20%. (Id. ¶ 15). Because the interest rate on Pearson's loan exceeded the Illinois statutory limit, Pearson argues that it was void and unenforceable. (Id. ¶ 18). UDH nonetheless attempted to collect on the illegal debt in violation of the FDCPA, according to Pearson. (Id. ¶ 19). Pearson also seeks to represent a class of other individuals in Illinois from whom UDH attempted to collect debts made at interest rates exceeding the statutory limits.

UDH responded by moving to compel arbitration on an individual basis. (Dkt. No. 27). UDH attached to its motion a document that it claims is the loan agreement into which Pearson entered. (See Dkt. No. 27–1). That document states that Plain Green is a lender organized under the laws of the Chippewa Cree Tribe and that the loan is subject to the laws and courts of the Chippewa Cree Tribe.¹ (Id. p. 2). The document also contains a provision requiring arbitration of "any controversy or claim between [Pearson] and [Plain Green], its marketing agent, collection agent, any subsequent holder of this Note, or any of their representative agents, affiliates, assigns, employees, officers, managers, members or shareholders." (Id. p. 8). The document provides for arbitration conducted by the American Arbitration Association, JAMS, or any arbitration organization upon which the parties agreed. Arbitration under the agreement is "governed by the chosen arbitration organization's rules and procedures applicable to consumer disputes, to the extent that those rules and procedures do not contradict either the law of the Chippewa Cree Tribe or the express terms of" the agreement. (Id. ). The document also contains a waiver of ability to participate in a class action. (Id. p. 9). The validity, effect, and enforceability of that waiver "is to be determined solely by a court of competent jurisdiction located within the Chippewa Cree Tribe, and not by the arbitrator." (Id. ).

Pearson countered that UDH failed to provide sufficient evidence to authenticate the purported agreement and suggested that the document attached to UDH's motion to compel arbitration was not the loan agreement into which he entered. UDH did not provide an affidavit of an employee of UDH or Plain Green or any other evidence to authenticate the document attached to its motion to compel arbitration. Pearson submitted an affidavit acknowledging that he entered into a loan agreement, but disputing that he had ever seen any of the provisions of the document that UDH attached to its motion to compel arbitration. (See Dkt. No. 34–1). Pearson is no longer in possession of any document containing the terms of the loan agreement into which he entered.

LEGAL STANDARD

Congress enacted the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., against "centuries of judicial hostility to arbitration agreements ... to place arbitration agreements upon the same footing as other contracts." Volkswagen of Am., Inc. v. Sud's of Peoria, Inc., 474 F.3d 966, 970 (7th Cir.2007) (citations and internal quotation marks omitted). Under the FAA, agreements to arbitrate are "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. "Under the Federal Arbitration Act, arbitration may be compelled if the following three elements are shown: [1] a written agreement to arbitrate, [2] a dispute within the scope of the arbitration agreement, and [3] a refusal to arbitrate." Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir.2005) (citing 9 U.S.C. § 4 ). The procedure to determine whether a factual dispute as to any of these elements precludes compelled arbitration mirrors summary judgment analysis. See Tinder v. Pinkerton Security, 305 F.3d 728, 735 (7th Cir.2002).

DISCUSSION

I. UDH has failed to demonstrate the existence of an agreement to arbitrate

The party seeking to compel arbitration must establish that an agreement to arbitrate exists. See Gen. Ass'n of Regular Baptist Churches v. Scott, 549 Fed.Appx. 531, 533 (7th Cir.2013) ; see also, e.g., Conway v. Done Rite Recovery Servs., Inc., No. 14 C 5182, 2015 WL 1989665, at *3 (N.D.Ill. Apr. 30, 2015) (Dow, J.) (citing Fed.R.Evid. 901(a) ). The bar for authentication of an arbitration agreement is not high. "In determining authenticity [the Court follows] Fed.R.Evid. 901(a), which requires evidence sufficient to support a finding that the matter in question is what its proponent claims." Smith v. City of Chicago, 242 F.3d 737, 741 (7th Cir.2001) (internal quotation marks and citation omitted). Only after the proponent has introduced such evidence document does the burden shift to the opponent of the evidence to rebut the evidence of authenticity. Id. The failure to properly authenticate evidence is sufficient to preclude the Court from considering it, even if the evidence would have been admissible but for the failure to authenticate. See Estate of Brown v. Thomas, 771 F.3d 1001, 1005–6 (7th Cir.2014). Compulsion of arbitration is inappropriate where the proponent of arbitration fails to produce evidence that an agreement to arbitrate existed. See Scott, 549 Fed.Appx. at 532.

The Court is without sufficient evidence to find that there exists an agreement to arbitrate. The Complaint makes no mention of an arbitration provision in the underlying loan agreement and the loan agreement itself is not attached to the Complaint. Support for the existence of an arbitration provision is found exclusively in the document attached to UDH's motion. District courts routinely consider agreements containing arbitrations provisions referred to within, but not attached to, the complaint, but only if the proponent of arbitration properly authenticates the document containing an arbitration provision through an affidavit or otherwise. E.g. Conway, 2015 WL 1989665 ; Achey v. BMO Harris Bank, N.A., 64 F.Supp.3d 1170, 1175–76 (N.D.Ill.2014) ; see also Citadel Grp. Ltd. v. Wash. Reg'l Med. Ctr., 692 F.3d 580, 591 (7th Cir.2012) (documents referred to in the pleading and central to claim may be considered by district court on motion to dismiss). Here, however, the record is devoid of evidence supporting the conclusion that the document attached to UDH's motion is the agreement into which Pearson entered and reference in the Complaint.² The document is not physically signed. No witness affirms that the documents were found in Plain Green or UDH's business records, that they were presented to Pearson when he took out his loan, or that the document actually bears Pearson's electronic signature.³ UDH does not argue that the agreement constitutes any type of evidence that is self-authenticating under Rule 902 of the Federal Rules of evidence.

Nor has Pearson admitted through statements or conduct that the document attached to the motion to compel arbitration is the agreement into which he entered. Pearson agrees, of course, that he entered into an agreement with Plain Green; Pearson's theory of the case relies on the proposition that the terms of the agreement between Pearson and Plain Green were illegal. Contrary to UDH's characterizations, though, nowhere in either his affidavit or his brief does Pearson concede that he entered into this agreement. Even if UDH is correct that Pearson's affidavit does not specifically deny or provide evidence to dispute the document, it was not yet his burden to provide such information; the proponent of the document bears the initial burden of establishing the authenticity of the document. Smith, 242 F.3d at 741 ; cf. Estate of Brown, 771 F.3d at 1006 (failure to authenticate potentially dispositive evidence was "a fatal procedural error"). UDH failed to provide that evidence.

As they are unsupported by affidavits or other evidence, UDH's assertions in its brief that the document attached is the agreement into which Pearson entered are insufficient to authenticate the document. Unsworn statements by attorneys in briefs are not evidence on which the Court can rely. See Mitze v. Colvin, 782 F.3d 879, 882 (7th Cir.2015) ("assertions in...