Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_19-cv-00267/USCOURTS-ared-4_19-cv-00267-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1692 Fair Debt Collection Act

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IN THE UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF ARKANSAS 

WESTERN DIVISION 

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 

Consolidated Case No. 4:19-cv-179-JM 

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 

Consolidated Case No. 5:19-cv-105 

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 

. 

Consolidated Case No. 4:19-cv-208 

Case 4:19-cv-00267-JM Document 13 Filed 09/10/19 Page 1 of 8
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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. 

Consolidated Case No. 4:19-cv-267 

ORDER 

Pending is the motion to compel arbitration and to strike class allegations of Plaintiff 

Betty Johnson filed on behalf of Defendants Midland Funding LLC and Midland Credit 

Management, Inc. (collectively “Midland”). (Docket # 76). Defendants Michael A. Jacob, II 

and Jacob Law Group, PLLC ( collectively “JLG”) have joined the motion and filed a supporting 

brief. (Docket # 84 and 85). Plaintiff has filed a response and Defendants have filed replies. 

For the reasons stated herein, the motion is GRANTED. 

 Plaintiff Johnson filed this action alleging that Defendants Michael A. Jacob, II, Jacob 

Law Group, PLLC (“JLG”), 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 Citibank N.A. (Citibank) credit card account.” Plaintiff asserts that 

Midland is not a holder in due course of Citibank 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. 

Case 4:19-cv-00267-JM Document 13 Filed 09/10/19 Page 2 of 8
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 On or about July 30, 2014, Plaintiff Johnson opened a Citibank Sears credit card account 

with an account number ending in 876 (“the Account”). In 2016, the card agreement governing 

Plaintiff’s account was amended and a copy was mailed to her. Plaintiff made purchases using 

the credit card. Plaintiff failed to make the required payments on the Account and on February 

6, 2017, the account was charged-off. 

 The Cardholder Agreement is governed by South Dakota law and contains the following 

arbitration provision ("the Arbitration Provision"): 

Covered Claims 

You or we may arbitrate any claim, dispute or controversy between 

you and us arising out of or related to your account, a previous 

related account or our relationship (called “Claims”). 

If arbitration is chosen by any party, neither you nor we will 

have the right to litigate that Claim in court or have a jury trial 

on that Claim. 

Except as stated below, all Claims are subject to arbitration. . . . 

This also includes Claims made by or against anyone connected 

with us or you or claiming through us or you, or by someone 

making a claim through us or you, such as a co-applicant, 

authorized user, employee, agent, representative or an 

affiliated/parent/subsidiary company. 

(ECF 76-4, p. 17). 

The Arbitration Provision also contains the following language in bold and all capital 

letters: “PLEASE READ THIS PROVISION OF THE AGREEMENT CAREFULLY. THIS 

SECTION PROVIDES THAT DISPUTES MAY BE RESOLVED BY BINDING 

ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO TO COURT, HAVE A 

JURY TRIAL OR INITIATE OR PARTICIPATE IN A CLASS ACTION. IN ARBITRATION, 

DISPUTES ARE RESOLVED BY AN ARBITRATOR, NOT A JUDGE OR JURY. 

Case 4:19-cv-00267-JM Document 13 Filed 09/10/19 Page 3 of 8
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ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN IN COURT. 

THIS ARBITRATION PROVISION IS GOVERNED BY THE FEDERAL ARBITRATION 

ACT (FAA), AND SHALL BE INTERPRETED IN THE BROADEST WAY THE LAW WILL 

ALLOW.” (ECF 76-4, p. 17). Plaintiff does not claim to have rejected the Arbitration 

Provision. However, Plaintiff argues that the 2016 Cardholder Agreement, from which the 

above language is quoted, is more narrowly written than the 2012 Cardholder Agreement and 

specifically excludes the references to claims made by predecessors, successors or assignees in 

the definition of claims subject to arbitration. Plaintiff contends that the omission of assignees, 

successors and their agents from the arbitration provision precludes those persons from enforcing 

the arbitration agreement. 

 In April 2017, Midland Funding LLC purchased the Account from Citibank as part of a 

portfolio of charged-off debts. Citibank sold and Midland acquired all “rights title and interest of 

the Bank in and to the Account.” (ECF #81, p. 4). Defendants argue that the assignment of 

Citibank’s right, title, and interest in the Account was expressly contemplated by the Cardholder 

Agreement which states: "Assignment. We may assign any or all of our rights and obligations 

under this Agreement to a third party.” (ECF #76-4, p. 19). Defendants argue this assignment 

included the assignment of the right to arbitration. Defendants move to compel arbitration and to 

strike the class allegations. Plaintiff disputes that the right to arbitration was transferred to 

Midland and opposes Defendants’ motion. 

Section 2 of the Federal Arbitration Act (FAA) states that an agreement to arbitrate “shall 

be 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. This provision reflects a liberal federal policy favoring 

arbitration. AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). Because “arbitration 

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is a matter of contract,....courts must rigorously enforce arbitration agreements according to their 

terms,” American Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013) (internal quotations 

and citation omitted), including requirements to pursue claims through individual arbitration. 

Epic Systems Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018). Any doubts concerning the scope of 

arbitrable issues should be resolved in favor of arbitration. Moses H. Cone Mem’l Hosp. v. 

Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). 

When presented with matters outside the pleadings, the Eighth Circuit Court of Appeals 

has concluded that a motion to compel arbitration can be properly analyzed under Rule 56 of the 

Federal Rules of Civil Procedure. City of Benkelman, Nebraska v. Baseline Eng'g Corp., 867 

F.3d 875, 881 (8th Cir. 2017). The Eighth Circuit set out the burden of the parties in connection 

with a summary judgment motion in Counts v. M.K. Ferguson Co., 862 F.2d 1338 (8th Cir. 

1988): 

[T]he burden on the party moving for summary judgment is only to 

demonstrate, i.e., ‘[to] point out to the District Court, that the record does 

not disclose a genuine dispute on a material fact. It is enough for the 

movant to bring up the fact that the record does not contain such an issue 

and to identify that part of the record which bears out his assertion. Once 

this is done, his burden is discharged, and, if the record in fact bears out the 

claim that no genuine dispute exists on any material fact, it is then the 

respondent’s burden to set forth affirmative evidence, specific facts, 

showing that there is a genuine dispute on that issue. If the respondent fails 

to carry that burden, summary judgment should be granted. 

Id. at 1339 (quoting City of Mt. Pleasant v. Associated Elec. Coop., 838 F.2d 268, 273-274 (8th 

Cir. 1988) (citations omitted) (brackets in original)). Only disputes over facts that may affect the 

outcome of the suit under governing law will properly preclude the entry of summary judgment. 

Anderson, 477 U.S. at 248. 

 Plaintiff does not dispute that the arbitration provision is valid, she is bound to it, and her 

claims fall within its scope. Relying in large part on Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407 

Case 4:19-cv-00267-JM Document 13 Filed 09/10/19 Page 5 of 8
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(2019) Plaintiff argues that the right to enforce the arbitration provision was not assigned to 

Midland and neither Midland or JLG have the right to require arbitration. In Lamps Plus, the 

Supreme Court held that the FAA bars a court order compelling class arbitration if the arbitration 

agreement is ambiguous about the availability of class arbitration Emphasizing the difference 

between class wide arbitration and individual arbitration the Court concluded that the statute 

requires more than ambiguity to ensure that the parties “actually agreed to arbitrate on a 

classwide basis.” Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1415 (2019) (“Class arbitration is 

not only markedly different from the ‘traditional individualized arbitration’ contemplated by the 

FAA, it also undermines the most important benefits of that familiar form of arbitration. 

(citations omitted). The statute therefore requires more than ambiguity to ensure that the parties 

actually agreed to arbitrate on a classwide basis.”) The Court does not agree, as argued by 

Plaintiff, that the holding in Lamps Plus precludes the assignment of the agreement to arbitrate in 

this case. 

 The Cardholder agreement entered between Plaintiff and Citibank specifically provided 

that Citibank could assign any or all of its rights under the Agreement to a third party. Citibank 

sold and transferred its rights under the agreement to Midland Funding. That included the right 

to arbitration. Further, pursuant to the Forward Flow Midland Funding LLC Purchase and Sale 

Agreement, Citibank sold and Midland Funding bought “all right, title and interest of the Bank in 

and to the Account.” (ECF #81, p. 4). Plaintiff agreed that Citibank could assign its rights in 

the Agreement. Citibank did just that by assigning it rights to Midland Funding. Accordingly, 

Midland Funding stands in the shoes of Citibank and both Midland Funding and MCM as its 

affiliate may enforce the arbitration provision of the Agreement. (“If arbitration is chosen by any 

party, neither you nor we will have the right to litigate that Claim in court or have a jury trial on 

Case 4:19-cv-00267-JM Document 13 Filed 09/10/19 Page 6 of 8
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that Claim.” (ECF #76-4, p.17). See, Clemons v. Midland Credit Mgmt., Inc., 2019 WL 

3336421, at *4 (D.N.J. July 25, 2019)( Finding that “Comenity sold all of its rights under the 

agreement to Midland [Funding, LLC]. This caused Midland to substitute for Comenity in [the 

arbitration] provision, with MCM [Midland Credit Management, Inc.] serving as Midland’s 

affiliate. Thus, MCM is one of the “Parties Subject to Arbitration.” The failure of the “Parties 

Subject to Arbitration” provision to refer expressly to assignees is not a legal bar to an otherwise 

valid assignment.”). See also, Lance v. Midland Credit Mgmt, Inc., 2019 WL 1318542, *6 (E.D. 

PA, Mar. 22, 2019) and Ramirez v. Midland Funding, LLC, 2019 WL 2568478, *6 (N.D. Ill. 

June 21, 2019), citing Anderson v. Aesoph, 697 N.W.2d 25, 33 (S.D. 2005). Because Citibank 

sold all of its rights under the agreement to Midland, this caused Midland to substitute for 

Citibank in the arbitration provision, accordingly, the omission of successors or assigns in the 

2016 cardholder agreement is not a legal bar to Midland’s enforcement of the arbitration 

provision. 

 JLG may compel arbitration because the Plaintiff agreed to arbitrate any claim, dispute or 

controversy between you and us arising out of or related to your account. . . (ECF 76-4, p.17). 

As stated above, Midland Funding stands in the shoes of the Citibank by virtue of the assignment 

of the Agreement. Midland Funding, its affiliate, MCM and JLG as an agent of Midland in the 

collection of the debt are all entitled to enforce the terms of the Arbitration Provision. These 

defendants’ right to enforce the terms of the Arbitration Provision includes the right to enforce 

the Class Action prohibition. See, May v. Midland Funding, LLC, 595 B.R. 894, 903 (E.D. Ark, 

2019)( enforcing a class action waiver contained in an arbitration provision, stating “[t]his court 

must respect the parties’ valid and voluntary agreement to waive class actions. . . .”) 

 For these reasons, Defendants’ motion to compel arbitration and to strike Plaintiff’s class 

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allegations is GRANTED, . The Court will administratively terminate Plaintiff Betty Johnson’s 

cause of action in this consolidated case and in her individual case No. 4:19CV00267, pending 

the arbitration of the claims herein. 

IT IS SO ORDERED this 10th day of September, 2019. 

___________________________________ 

James M. Moody Jr. 

United States District Judge 

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