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Campbell v. Jacob

United States District Court, E.D. Arkansas, Western Division

August 26, 2019

LAURA K. CAMPBELL, on behalf of herself and all others similarly situated, Plaintiff
v.
MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; JEFFERSON CAPITAL SYSTEMS, LLC, Defendants JEANNETTE WELCH, on behalf of herself and all others similarly situated, Plaintiff
v.
MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC. Defendants LILLIE BROWNLEE, on behalf of herself and all others similarly situated, Plaintiff
v.
MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC. Defendants BETTY JOHNSON, on behalf of herself and all others similarly situated, Plaintiff
v.
MICHAEL A. JACOB, II; JACOB LAW GROUP, PLLC; MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC. Defendants.

          ORDER

          James M. Moody Jr. United States District Judge.

         Pending is the motion to compel arbitration and to strike class allegations of Plaintiff Lillie Brownlee filed on behalf of Defendants Midland Funding LLC and Midland Credit Management, Inc. (collectively “Midland”). (Docket # 41). Defendants Michael A. Jacob, II and Jacob Law Group, PLLC (collectively “JLG”) have joined the motion and filed a supporting brief. (Docket # 56 and 57). Plaintiff has filed a response and Defendants have filed replies. For the reasons stated herein, the motion is GRANTED.

         Plaintiff Brownlee filed this action alleging that Defendants Michael A. Jacob, II, Jacob Law Group, PLLC (“JLG”) and Midland Funding, LLC (“Midland Funding”) and Midland Credit Management, Inc. (“MCM”) attempted to collect consumer debts from her and putative class members through standardized, form debt collection complaints filed in Arkansas state courts that fraudulently and falsely averred that Midland Funding LLC “holds in due course a claim. . . pursuant to a defaulted Synchrony Bank credit card account.” Plaintiff asserts that Midland is not a holder in due course of Synchrony Bank accounts and that this representation violates the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C §1692 et seq. and the Arkansas Fair Debt Collection Practices Act (“AFDCA”), Ark. Code Ann. §17-24-501 et seq.

         On or about March 27, 2015, Plaintiff Brownlee opened a Synchrony JC Penny credit card account with an account number ending in 6793. (“the Account”). A letter containing the credit card and the cardholder agreement was mailed to her. Plaintiff made purchases using the credit card. Plaintiff failed to make the required payments on the Account and on April 2, 2017, the account was charged-off.

         The Cardholder Agreement is governed by Utah law and contains the following arbitration provision ("the Arbitration Provision"):

RESOLVING A DISPUTE WITH ARBITRATION
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 affiliate, agents and/or J.C. Penny Corporation Inc. 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 states equivalent court, so long as it remains an individual case in that court; or (2) a case we 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 section, only a court, not an arbitrator, will decide disputes about the validity, enforceability, coverage or scope of this section or any part thereof (including, without limitation, the next paragraph of this section 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 the court, to decide.
No Class Actions
YOU AGREE NOT TO PARTICIPATE IN A CLASS, REPRESENTATIVE OR PRIVATE ATTORNEY GENERAL ACTION AGAINST U.S. IN COURT OR ARBITRATION. ALSO, YOU MAY NOT BRING CLAIMS AGAINST U.S. ON BEHALF OF ANY ACCOUNTHOLDERWO IS NOT AN ACCOUNTHOLDER ON YOUR ACOUNT, AND YOU AGREE THAT ONLY ACCOUNTHOLDERS ON YOUR ACCOUNT MAY BE JOINED IN A SINGLE ARBITRATION WITH ANY CLAIM YOU HAVE . . . .

         The Arbitration Provision also contains the following language in bold and all capital letters: “PLEASE READ THIS SECTION CAREFULLY, IF YOU DO NOT REJECT IT, THIS SECTION WILL APPLY TO YOUR ACCOUNT, AND MOST DISPUTES BETWEEN YOU AND U.S. 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.” Plaintiff does not claim to have rejected the Arbitration Provision.

         In May 2017, Midland Funding LLC purchased the Account from Synchrony as part of a portfolio of charged-off debts. Synchrony “transfer[red], s[old], convey[ed], grant[ed], and deliver[ed] to [Midland Funding LLC], its successors and assign, . . . the Account.” (ECF #41-1, p. 14). Synchrony assigned to Midland Funding LLC all of its rights, title and interest in Brownlee's Account. (ECF #53 p. 9). Defendants argue that the assignment of Synchrony's right, title, and interest in the Account was expressly contemplated by the Cardholder Agreement which states: "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.” (ECF #41-2, p. 7). Defendants argue this ...


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