Midland Funding LLC v. Hilliker
68 N.E.3d 542
Ill. App. Ct.2017Background
- Hilliker obtained a Chase credit card in 2001. Midland Funding sued in 2013 for an unpaid balance (~$8,809), attaching an affidavit but not the written assignment documents required by statute.
- The case was assigned to St. Clair County’s nonbinding court-annexed arbitration docket (automatic based on amount). Hilliker answered and asserted counterclaims under the Illinois Collection Agency Act, Illinois Consumer Fraud Act, and FDCPA, alleging Midland lacked ownership/assignment and made misleading statements.
- Midland moved repeatedly to dismiss Hilliker’s counterclaims over 18 months and participated in litigation (motions to dismiss, discovery battles, change-of-judge request) without timely demanding arbitration. Midland first gave notice of intent to arbitrate about 18 months after filing suit and after Hilliker’s third amended counterclaim.
- Midland relied on a Chase Cardmember Agreement (exemplar/portfolio-level copy) to assert an arbitration clause with a class-action waiver; Midland did not produce a signed Cardmember Agreement or clear assignment documents tying Hilliker’s account to the sale.
- The trial court denied Midland’s motion to compel arbitration, finding Midland waived arbitration through substantial participation and that Hilliker was prejudiced by delay; the court also found unconscionability issues with the arbitration agreement but did not need to resolve them. Midland appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of right to arbitrate | Midland: filing in arbitration docket and limited court activity didn’t waive arbitration; participation was minimal. | Hilliker: Midland litigated for 18 months, filed dispositive motions, and engaged discovery, evidencing waiver. | Court: Midland waived arbitration by substantially participating in litigation inconsistent with intent to arbitrate. |
| Prejudice from delay | Midland: demand for arbitration was timely and caused no prejudice; Hilliker’s amended pleading justified delay. | Hilliker: she expended time, fees, and discovery effort that arbitration would have avoided. | Court: Hilliker was prejudiced (time, fees, discovery); supports finding of waiver. |
| Attempt to rescind waiver after third amended counterclaim | Midland: third amended counterclaim (class claims) materially changed litigation and justified rescinding waiver. | Hilliker: allegations were materially similar; potential class exposure was foreseeable; rescission inappropriate. | Court: third amended counterclaim did not present extraordinary change; rescission denied. |
| Enforceability of arbitration clause (unconscionability) | Midland: arbitration clause and class waiver enforceable under Cardmember Agreement. | Hilliker: clause unconscionable and unenforceable. | Court: did not decide on enforceability because waiver finding was dispositive. |
Key Cases Cited
- Woods v. Patterson Law Firm, P.C., 381 Ill. App. 3d 989 (discusses standard for appellate review of denial of motion to compel arbitration)
- LAS, Inc. v. Mini-Tankers, USA, Inc., 342 Ill. App. 3d 997 (waiver analysis where court determines whether actions constitute abandonment of arbitration right)
- Kostakos v. KSN Joint Venture No. 1, 142 Ill. App. 3d 533 (arbitration favored but right may be waived by inconsistent conduct)
- Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (Seventh Circuit) (delay in seeking arbitration may be excused only by extraordinary circumstances)
- Cabinet Service Tile, Inc. v. Schroeder, 255 Ill. App. 3d 865 (procedural posture guidance on appealability of nonfinal orders)