Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-5_19-cv-00105/USCOURTS-ared-5_19-cv-00105-0/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 5:19-cv-00105-JM Document 21 Filed 09/09/19 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 

Jeanette Welch filed on behalf of Defendants Midland Funding LLC and Midland Credit 

Management, Inc. (collectively “Midland”). (Docket # 46). Defendants Michael A. Jacob, II 

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

brief. (Docket # 58 and 59). Plaintiff has filed a response and Defendants have filed replies. 

For the reasons stated herein, the motion is GRANTED. 

 Plaintiff Welch 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 Comenity Bank credit card account.” Plaintiff asserts that Midland is not 

a holder in due course of Comenity 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. 

Case 5:19-cv-00105-JM Document 21 Filed 09/09/19 Page 2 of 8
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 On or about May 3, 2016, Plaintiff Welch opened a Comenity Your Tuition Solution 

credit card account with an account number ending in 4763. (“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 January 25, 2017 the account was charged-off. 

The Cardholder Agreement is governed by Utah law and contains the following: 

Arbitration and jury trial waiver 

2. Parties Subject to Arbitration: Solely as used in this 

Arbitration Provision and not elsewhere in this Agreement), the 

terms "we," us" and "our" mean (a) Comenity Capital 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 as you assert a Claim 

against any Bank Party. 

3. Covered Claims: "Claim" means any claim, dispute or 

controversy between you [i.e., plaintiff] and us [i.e., Comenity] that 

in any way arises from or relates to this Agreement, [or] the 

Account. . . . "Claim" has the broadest possible meaning, and 

includes initial claims, counterclaims, cross-claims and third party 

claims. It includes disputes based on 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). 

4. Starting an Arbitration: Arbitration may be elected by any 

Party with respect to any claim, even if that party has already 

initiated a lawsuit with respect to a different Claim. 

The opening paragraph of the Cardholder Agreement explains that plaintiff would be bound by 

the Cardholder Agreement-including the Arbitration Provision-if she used the account to make 

purchases, which she concedes she did. The opening paragraph of the Cardholder Agreement 

Case 5:19-cv-00105-JM Document 21 Filed 09/09/19 Page 3 of 8
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also alerts plaintiff to the presence of the Arbitration Provision and informs her she had the right 

to opt out of it. The Arbitration Provision explains that plaintiff could do so by sending 

Comenity signed, written notice of her election to opt out within 30 days. Plaintiff did not send 

written rejection of the Arbitration Provision, timely or otherwise. The Arbitration Agreement 

also states in bold, capital letters that, if not rejected the Arbitration Provision “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.” 

 The Account Agreement also contains a class action waiver which states: 

7. Prohibition Against Certain Proceedings: 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.

In March 2017, Midland Funding LLC purchased the Account from Comenity as part of 

a portfolio of charged-off debts. Comenity sold and Midland purchased “all of [Comenity’s] 

rights, title and interest in and to those certain Charged-off Accounts. . . “ (ECF #54, p. 6). 

Comenity assigned to Midland Funding LLC all of its rights, title and interest in Welch’s 

Account. (ECF #54, p. 41). Defendants argue that the assignment of Comenity’s right, title, 

and interest in the Account was expressly contemplated by the Cardholder Agreement which 

Case 5:19-cv-00105-JM Document 21 Filed 09/09/19 Page 4 of 8
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states: " Transfer of Rights/Assignment. “ Your rights under this Agreement can’t be 

transferred by you, by operation of law or otherwise, but your obligations will be binding upon 

your estate or personal representatives. We may transfer or assign your Account and/or this 

Agreement, or any of our rights under this Agreement, to another person or entity at any time 

without prior notice to you or your consent.” (ECF #46-1, p. 9). 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 

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 

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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 

(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 statue 

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 

Case 5:19-cv-00105-JM Document 21 Filed 09/09/19 Page 6 of 8
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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 originally entered between Plaintiff and Comenity specifically 

provided that Comenity could assign or transfer any or all of its rights under the agreement 

without notice to the Plaintiff of such action. Comenity assigned all of its rights under the 

agreement to Midland Funding. That included the right to arbitration. Further, pursuant to the 

Credit Card Account Purchase Agreement, Comenity sold, assigned and transferred to Midland 

Funding “all rights, title and interest in and to . . . [the Accounts].” (ECF #54, p. 6). Plaintiff 

agreed that Comenity could sell or assign its rights in the Agreement. Comenity did just that by 

assigning it rights to Midland Funding. Accordingly, Midland Funding stands in the shoes of 

Comenity and both Midland Funding and MCM as its affiliate may enforce the arbitration 

provision of the Agreement. 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 Sunridge Development Corp. v. RB&G Engineering, Inc., 230 P. 3rd 1000, 

1003 (2010). (In Utah, it is “well recognized that the assignee stands in the shoes of the 

assignor.” )(citations and quotations omitted). 

 JLG may compel arbitration because the Plaintiff agreed to arbitrate any claims against 

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“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 as you assert a Claim 

against any Bank Party.” As stated above, Midland Funding and its affiliate MCM stands in the 

shoes of the Bank Parties by virtue of the assignment of the Agreement. Plaintiff sued both 

Midland and JLG in its Fair Debt Collection Practices action. The claims against JLG arise out 

of their efforts to collect the balance owed on the account pursuant to the Agreement. 

Accordingly, JLG may enforce the Arbitration Agreement. 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 

allegations is GRANTED, . The Court will administratively terminate Plaintiff Jeanette Welch’s 

cause of action in this consolidated case and in her individual case No. 5:19CV00105, pending 

arbitration of the claims herein. 

IT IS SO ORDERED this 9th day of September, 2019. 

___________________________________ 

James M. Moody Jr. 

United States District Judge 

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