Stockman v. Midland Credit Mgmt.
| Decision Date | 12 May 2022 |
| Docket Number | 21-cv-5396 |
| Parties | KATHLEEN STOCKMAN, on behalf of herself and all others similarly situated, Plaintiffs, v. MIDLAND CREDIT MANAGEMENT, INC., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Midland Credit Management, Inc. moves to compel arbitration in this putative class action brought by Kathleen Stockman under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p (“FDCPA”). For the reasons stated herein, the motion to compel arbitration [8] is granted.
On or about December 16, 2017, Plaintiff Kathleen Stockman applied for and was issued a Pottery Barn credit card account (“the Account”) by Comenity Bank. [1] Ex. A at 4; [9] at 2; Declaration of Matthew Blosco (“Blosco Decl.”) [9-1] ¶7, Ex. A. Pursuant to Comenity's policies and procedures, a copy of the Account Agreement (“the Agreement”) was mailed to Stockman via U.S. Mail at the address Comenity had on record for the account. [9] at 2; Blosco Decl. ¶8. Comenity has no record that the Agreement was returned as undeliverable. Id.
The Agreement contains provisions addressing arbitration and class actions. [9] at 2; Blosco Decl. ¶9, Ex. A. The Arbitration Provision permits Comenity to elect mandatory arbitration of “any claim, dispute or controversy that in any way arises from or relates to this Agreement, the Account, the issuance of any Card, any rewards program, any prior agreement or account.” Blosco Decl. Ex. A § “Covered Claims.” In addition, claims subject to arbitration “ha[ve] the broadest possible meaning, and include[] initial claims, counterclaims, cross-claims and third-party claims.” Id. It also covers “disputes based upon 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).” Id.
The first page of the Agreement states, in bold:
Blosco Decl. Ex. A at 1. The Arbitration Provision states in bold capital letters:
READ THIS ARBITRATION PROVISION CAREFULLY. IF YOU DO NOT REJECT THIS ARBITRATION PROVISION IN ACCORDANCE WITH PARAGRAPH C.1. BELOW, IT 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.
Blosco Decl. Ex. A § “Arbitration Provision.” The Arbitration Provision further states in bold:
6. Court and Jury Trials Prohibited; Other Limitations on Legal Rights: IF YOU OR WE ELECT TO ARBITRATE A CLAIM, YOU WILL NOT HAVE THE RIGHT TO PURSUE THAT CLAIM IN COURT OR HAVE A JURY DECIDE THE CLAIM. ALSO, YOUR ABILITY TO OBTAIN INFORMATION FROM U.S. IS MORE LIMITED IN AN ARBITRATION THAN IN A LAWSUIT. OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION.
Blosco Decl. Ex. A § “Court and Jury Trials Prohibited; Other Limitations on Legal Rights.”
The Agreement also contains a class action waiver, which prohibits participation in a class action in court or at arbitration:
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.
Blosco Decl. Ex. A § “Prohibition Against Certain Proceedings.”
Under the Agreement, Stockman could opt out of the arbitration and/or class action waiver provisions by notifying Comenity in writing of her intent to opt out within thirty (30) days after the date Comenity provided her with a copy of the Agreement or written notice of the right to opt out. [9] at 2; Blosco Decl. ¶9, Ex. A. Comenity did not receive such correspondence. Blosco Decl. ¶10. The Agreement also notified Stockman that: “Your use of the account, or failure to close the account within the 30 days of receiving this document, indicates your acceptance of the terms of this agreement.” Id. Exh. A.
The Arbitration Provision also states under “Parties Subject to Arbitration” that, “[s]olely as used in this Arbitration Provision (and not elsewhere in this Agreement), the terms ‘we,' ‘us,' and ‘our' mean (a) Comenity 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 you assert a Claim against any Bank Party.” Id.
Stockman last made a purchase using the Comenity credit card on January 24, 2019. Blosco Decl. ¶11, Ex. B. The last payment posted to the Account on June 24, 2019. Id., ¶12, Ex. C. When Stockman did not pay, the account defaulted. [2-1] at 4.
In February 2020, Comenity sold and assigned all rights, title, and interest in Stockman's credit card account to Defendant Midland Credit Management, Inc. (“MCM”) pursuant to the Bill of Sale and Portfolio Level Affidavit of Sale by Original Creditor. [9] at 5; Blosco Decl. ¶14, Ex. E; see also Declaration of Mike Burger (“Burger Decl.”), ¶¶5, 6. The Bill of Sale states, “[Comenity] . . . hereby assigns . . . all rights, title and interest of [Comenity] in and to those certain Accounts described in the Credit Card Account Purchase Agreement and Schedule 1 . . . for all purposes, to [MCM].” Blosco Decl. Ex. E. The Bill of Sale was followed by a document titled “Schedule 1 to Bill of Sale”. Id. at 2. As part of the sale, Comenity transferred its records of Stockman's account to MCM. [9] at 5; Burger Decl. ¶6. In a February 12, 2020 letter, Comenity informed Stockman that it had sold her account to MCM and that, “[a]s the new owner of the account, [MCM] is entitled to pursue the collection activities and other legal remedies to collect the unpaid balances on your charged-off account, now due to [MCM].” [9] at 5; Blosco Decl. ¶15, Ex. F. On or about April 28, 2021, MCM mailed Stockman a letter in an attempt to collect the Account from her. [2-1] at 4.
On August 26, 2021, Stockman sued MCM in Cook County Circuit Court. [2-1]. On October 12, 2021, MCM removed the case to this court, and thereafter filed the instant motion to compel arbitration. [2], [9].
Under the Federal Arbitration Act (“FAA”), “[a] written provision in . . . a contract . . . to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. The Act “mandates that district courts shall direct parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). It reflects a “liberal federal policy favoring arbitration agreements, ” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), and places “arbitration agreements on an equal footing with other contracts, ” Gore v. Alltel Comm'ns, LLC, 666 F.3d 1027, 1032 (7th Cir. 2012) (quoting Concepcion, 563 U.S. at 339). “When deciding whether parties agreed to arbitrate a certain matter, courts generally should apply ordinary state-law principles that govern the formation of contracts.” Druco Rest., Inc. v. Steak N Shake Enterp., Inc., 765 F.3d 776, 781 (7th Cir. 2014). “Whether enforcing an agreement to arbitrate or construing an arbitration clause, courts and arbitrators must give effect to the contractual rights and expectations of the parties.” Smith v. Bd. of Directors of Triad Mfg., Inc., 13 F.4th 613, 619 (7th Cir. 2021) (cleaned up).
Under the FAA, in response to an opposing party's refusal to arbitrate despite a written agreement for arbitration, a party “may petition any United States district court . . for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. The party seeking to compel arbitration bears the burden to show an agreement to arbitrate. Id.; see A.D. v. Credit One Bank, N.A., 885 F.3d 1054, 1063 (7th Cir. 2018). “The court may consider exhibits and affidavits regarding the arbitration agreement in question.” Friends for Health: Supporting N. Shore Health Ctr. v. PayPal, Inc., No. 17 CV 1542, 2018 WL 2933608, at *3 (N.D. Ill. June 12, 2018). Once the moving party makes its initial showing, the party resisting arbitration bears the burden of identifying a triable issue of fact on the purported arbitration agreement. See Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002). The resisting party's evidentiary burden is like that of a party opposing summary judgment. Id. “[A] party cannot avoid compelled arbitration by generally denying the facts upon which the right to arbitration rests; the party must identify specific evidence in the record demonstrating a material factual dispute for trial.” Id. As with summary judgment, the court views...
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