Midland Funding, LLC v. Raney
93 N.E.3d 724
Ill. App. Ct.2018Background
- Midland Funding sued Raney and Darnell on assigned Citibank credit-card debts, attaching account statements and servicer affidavits asserting ownership and balances.
- Raney and Darnell filed class-action counterclaims alleging unlawful collection practices and challenged Midland’s proof of ownership; they also asserted they never agreed to arbitration.
- Midland moved to dismiss the counterclaims and to compel arbitration based on a generic Card Agreement (with an arbitration clause and class-waiver) attached to its motion; Midland’s declarations said Citibank produced the agreement with account records.
- Discovery revealed the Card Agreement lacked names, signatures, or account numbers; Midland’s declarant (Burger) testified he had no personal knowledge that the Card Agreement had been sent to or received by Raney or Darnell.
- Raney’s November 2010 statement referenced a “Notice of Change in Terms and Right to Opt Out,” but the actual notice/agreement was not in the record for Raney or for Darnell.
- The circuit court denied Midland’s motion, finding Midland failed to prove the Card Agreement (and its arbitration clause) applied or had been communicated to Raney or Darnell; this interlocutory appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an enforceable arbitration agreement exists between Midland and each defendant | The Card Agreement (attached) includes an arbitration clause applicable to all account claims; Midland relied on servicer records showing Citibank assigned that Card Agreement with the accounts | Raney and Darnell: no competent evidence the Card Agreement was ever communicated to or accepted by them; they swore they never saw or agreed to it | Court held Midland failed to prove the Card Agreement applied or was communicated to Raney/Darnell, so no enforceable arbitration agreement existed |
| Whether the court must defer threshold arbitrability disputes to an arbitrator | Midland: Card Agreement clearly and unmistakably delegates arbitrability issues to arbitrator | Defendants: they specifically challenge formation/communication of the arbitration clause, which is for the court to decide | Court held that because formation/communication of the arbitration clause was disputed and Midland failed to show the clause applied, the court properly decided arbitrability rather than deferring to an arbitrator |
| Whether Midland’s affidavit/declaration evidence was sufficient to establish arbitration agreement | Midland: declarations and attached Card Agreement establish that Citibank produced the agreement as part of account records and thus it applies | Defendants: declarations lack personal knowledge that the agreement was mailed/received; deposition testimony contradicted declarant’s conclusory statements | Court held the declarations and exhibits were insufficient; deposition showed lack of personal knowledge, so Midland did not meet its burden |
| Whether the record shows notice of modified terms was provided and accepted by card use | Midland: Raney’s statement referenced a change-in-terms notice, indicating communication of arbitration modification | Defendants: the referenced notice was not in the record; no evidence they received the modification or used the card after receiving it | Court held the single statement reference without the actual notice/agreement or proof of receipt/use was insufficient to show communication and acceptance |
Key Cases Cited
- Keefe v. Allied Home Mortgage Corp., 393 Ill. App. 3d 226 (discusses standard for motions to compel arbitration)
- Vassilkovska v. Woodfield Nissan, Inc., 358 Ill. App. 3d 20 (arbitration agreement questions reviewed de novo when decided as a matter of law)
- United Cable Television Corp. v. Northwest Illinois Cable Corp., 128 Ill. 2d 301 (agreement to arbitrate is a matter of contract; courts enforce contract principles)
- Portfolio Acquisitions, L.L.C. v. Feltman, 391 Ill. App. 3d 642 (credit-card issuance is an offer; each card use forms a separate contract)
- Velocity Investments, LLC v. Alston, 397 Ill. App. 3d 296 (generic cardmember agreement lacking account-specific evidence insufficient to establish assent)
- Donaldson, Lufkin & Jenrette Futures, Inc. v. Barr, 124 Ill. 2d 435 (parties should not be forced into arbitration absent evidence they agreed to arbitrate)