UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

JACOB J. DANLEY and

JEFFREY J. MACINTYRE, JR.,

Plaintiffs,

Case No. 15-CV-11535

vs.

HON. GEORGE CARAM STEEH

ENCORE CAPITAL GROUP, INC.,

MIDLAND FUNDING, LLC, and

MIDLAND CREDIT MANAGEMENT, INC.,

Defendants.

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OPINION AND ORDER GRANTING DEFENDANTS’ MOTION TO COMPEL

ARBITRATION AND DISMISS ACTION WITHOUT PREJUDICE [DOC. 39]

Plaintiffs filed this case under the Fair Debt Collection Act and Michigan

Collection Practices Act. Defendants purchase credit card debts from banks and other

debt buyers after the bank has charged off the debts. Plaintiffs maintain that

defendants did not purchase the right to add or reassess or collect interest once it had

been waived and extinguished by the bank. Nonetheless, defendants made efforts to

collect the post charge-off interest from the debtors whose accounts they purchased. 

For those debtors who did not pay in response to the telephonic and mail collection

actions, defendants filed lawsuits against the debtors. 

In this lawsuit, plaintiffs allege defendants violated various sections of the federal

and Michigan collection statutes by adding and attempting to collect interest that has

been waived by the original owner of the debt. The matter is presently before the court

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on defendants’ renewed motion to compel arbitration and dismiss the action without

prejudice. 

1. Plaintiff Danley’s Citibank Credit Card Account

Plaintiff Jacob J. Danley opened a credit card account issued by Citibank on April

6, 2009, with an account number ending in 5718. Following the court’s December 1,

2015 order denying defendants’ original motion to compel arbitration, Citibank submitted

a supplemental response to the Midland defendants’ August 6, 2015 subpoena which

includes a Declaration authenticating the Card Agreement that governs Danley’s

Citibank account. Attached to the Declaration of Catherine Reinecke, Vice President of

Citibank, is an exemplar of the Card Agreement for the account that was sent to Danley

when he opened the account in April 2009. The May 2009 statement transaction detail

for the Danley account is also attached, and shows that Danley used the account after

receiving the Card Agreement, which included an arbitration agreement. 

The Card Agreement provides, “This Agreement is binding on you unless you

close your account within 30 days after receiving the card and you have not used or

authorized use of the card.” Danley used his Citibank Account by making purchases,

and stopped making payments on the account on July 23, 2009. The account was

charged off on March 16, 2010. 

The exemplar credit card agreement contains an arbitration provision: 

Either you or we may, without the other’s consent, elect mandatory,

binding arbitration for any claim, dispute, or controversy between you and

us (called “Claims”).

* * * 

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All Claims relating to your account, a prior related account, or our

relationship are subject to arbitration, including Claims regarding the

application, enforceability, or interpretation of this Agreement and this

arbitration provision. All Claims are subject to arbitration, no matter what

legal theory they are based on or what remedy (damages, or injunctive or

declaratory relief) they seek. . . .

* * *

Not only ours and yours, but also Claims made by or against anyone

connected with us or you or claiming through us or you, such as a coapplicant or authorized user of your account, an employee, agent,

representative, affiliated company, predecessor or successor, heir,

assignee, or trustee in bankruptcy.

Any questions about whether Claims are subject to arbitration shall be

resolved by interpreting this arbitration provision in the broadest way the

law will allow it to be enforced.

The arbitration provision also contains a class action waiver provision: “Claims

and remedies sought as part of a class action . . . are also subject to arbitration on an

individual (non-class, non-representative) basis, and the arbitrator may award relief only

on an individual (non-class, non-representative) basis.” 

The arbitration agreement provides that it is “governed by the Federal Arbitration

Act (the “FAA”).” (Ex. C, p. 214). The Credit Card Agreement provides that Citibank

may assign the Agreement: “We may assign any or all of our rights and obligations

under this Agreement to a third party.” (Ex. C, p. 217). The arbitration provision states

that it “shall survive: (I) termination or changes in the Agreement, the account, or the

relationship between you and us concerning the account; (ii) the bankruptcy of any

party; and (iii) any transfer, sale or assignment of your account, or any amounts owed

on your account, to any other person or entity.” (Ex. C, p. 217). 

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On March 29, 2013, Citibank sold and assigned Danley’s Citibank Account to

Thunderbolt Holdings. On the same day, Danley’s Citibank Account was sold by

Thunderbolt to Midland Funding by way of Assignment and Bill of Sale. These

documents are attached to the Michael Burger Declaration, which was submitted to

plaintiffs as part of defendants’ supplemental response on March 14, 2016. Burger is

the Senior Manager of Operations for Midland Credit Management, which is in turn the

servicer and authorized agent for Midland Funding. Midland Funding purchased “all

rights, title and interests in and to each and every one of the Purchased Accounts

described in the related Purchased Accounts File . . . “ (Burger Declaration ¶ 3, and

Exhibit A thereto). Exhibit B to the Burger Declaration identifies Danley’s Citibank

Account as one of the accounts sold to Midland Funding. The Account Purchase

Agreement is attached as Exhibit C to the Burger Declaration. 

2. Plaintiff McIntyre’s Citibank Home Depot Credit Card Account

Jeffrey J. McIntyre, Jr. opened a Home Depot branded credit card account

issued by Citibank on September 25, 2003, with an account number ending in 8762. 

The Citibank Home Depot Account was governed by a Credit Card Agreement. (Berger

Dec. ¶ 12). Citibank’s Supplemental Response includes a Declaration authenticating

the Card Agreement that governs McIntyre’s Citibank Home Depot Account. (Reinecke

Declaration ¶¶ 5, 6). Attached as Exhibit 3 to the Reinecke Declaration is a copy of the

January 2009 statement transaction detail that was sent to McIntyre. This statement

contains the complete Card Agreement governing McIntyre’s Home Depot Credit Card

Account, including an arbitration agreement. Exhibit 4 includes the statement

transaction detail for March and April 2009, which show that McIntyre continued to use

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the Account. McIntyre stopped making payments on the Citibank Home Depot Account

by August 31, 2009. The Account was charged off on April 6, 2010. 

The Citibank Home Depot Account Credit Card Agreement contains an

arbitration provision that is the same as that contained in the Danley Citibank Account

quoted above. The Agreement also contains the same language in its class action

waiver, Federal Arbitration Act, Assignment, and arbitration survival provisions. 

A true and correct copy of the Bill of Sale and Assignment between Citibank and

Midland Funding, dated March 23, 2011, is attached as Exhibit G to the Burger

Declaration. The relevant portion of the Final Electronic File referenced in the Bill of

Sale and Assignment identifying McIntyre’s Citibank Home Depot Account is attached

as Exhibit H to the Burger Declaration. The Purchase and Sale Agreement is Exhibit I,

and shows Midland Funding purchased “all right, title and interest of Bank in and to the

Accounts.” 

3. McIntyre’s Chase Credit Card Account

Plaintiff McIntyre opened a credit card account issued by Chase Bank on

September 20, 2007, with an account number ending in 3359. The Chase Account was

governed by a Credit Card Agreement. (Berger ¶ 17). Between the time the Account

was opened and August 31, 2010 when the Account was charged off by Chase, Chase

issued five changes to the Cardmember Agreement. (Burger ¶ 18). None of the

changes altered the Arbitration Agreement or the class action waiver provision. 

The Credit Card Agreement provides, “Any use of your account is covered by this

agreement. . . . Whether you use your account or not, you will be bound by this

agreement unless you cancel your account within 30 days after receiving your card and

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you have not used your account for any purpose. (Exhibit O to Burger Declaration). 

McIntyre used his Chase Account and stopped making payments by January 13, 2010. 

The Account was charged off on August 31, 2010. 

The Chase Credit Card Agreement contains an arbitration provision providing

that either party may elect mandatory, binding arbitration, without the other’s consent, of

any claim, dispute or controversy arising from or relating to the Cardmember

Agreement. The Chase Credit Card Agreement also contains a class action waiver,

states it is governed by the Federal Arbitration Act, provides that Chase may assign the

agreement, states that the arbitration provision survives, and has an anti-waiver clause. 

A true and correct copy of the Bill of Sale and Assignment is attached as Exhibit

K to the Burger Declaration. The Final Data File referenced in the Bill of Sale identifies

McIntyre’s Chase Account as one of the accounts sold to Midland Funding. (Exhibit L to

Burger Declaration). The Account Purchase Agreement is attached as Exhibit M and

shows that Midland Funding purchased “all right, title and interest in and to” McIntyre’s

Chase Account. (Burger Declaration ¶ 13, Exhibit M). 

On August 24, 2015, plaintiffs filed their Second Amended class action complaint

against the defendants alleging violations of the Fair Debt Collection Practices Act, 15,

U.S.C. § 1692 et seq. (FDCPA), and the Michigan Collection Practices Act, MCL §

445.251, et seq. (MCPA), in which plaintiffs allege the defendants sought to collect post

charge-off interest that had been waived by their original creditors. The defendants

notified plaintiffs of their election to arbitrate this matter but plaintiffs refuse to do so. On

September 4, 2015 defendants filed their motion to compel arbitration and to dismiss

the action without prejudice. On December 1, 2015 the court entered an order denying

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the motion without prejudice. The court permitted defendants to file a renewed motion

to compel arbitration which is presently before the court. 

ANALYSIS

The FAA represents a “liberal federal policy favoring arbitration” and the

“fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v.

Concepcion, 131 S. Ct. 1740, 1745 (2011). When a contract contains an arbitration

clause, there is a presumption in favor of arbitrability. Huffman v. Hilltop Cos., LLC, 747

F.3d 391, 394 (6th Cir. 2014). When faced with a motion to compel arbitration, “the

court must engage in a limited review to determine whether the dispute is arbitrable;

meaning that a valid agreement to arbitrate exists between the parties and that the

specific dispute falls within the substantive scope of that agreement.” Javitch v. First

Union Securities, Inc., 315 F.3d 619, 624 (6th Cir. 2003). 

Plaintiffs assert that defendants violated federal and state law by allegedly

seeking to collect post charge-off interest that had been waived by plaintiffs’ original

creditors. In order to resolve the issue of arbitrability of the plaintiffs’ claims, the court

must address plaintiffs’ challenges to the validity of the agreement to arbitrate contained

in the credit card agreements. The Supreme Court in Rent-A-Center, West, Inc. v.

Jackson, 561 U.S. 63 (2010) held that this is the only “type of challenge relevant to a

court’s determination whether the arbitration agreement at issue is enforceable.” Id. at

70. A court is not to consider challenges that question “the contract as a whole, either

on a ground that directly affects the entire agreement (e.g., the agreement was

fraudulently induced), or on the ground that the illegality of one of the contract’s

provisions render the whole contract invalid.” Id. 

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I. Evidentiary Burden Regarding Original Contract Documents

Plaintiffs first question whether the exemplar credit card agreements provided by

defendants are enforceable because defendants have not produced the original

agreements signed by the plaintiffs. The last time the court considered the issue it was

not convinced that the sample or embedded credit card agreements provided by

defendants were the same agreements accepted by plaintiffs. Defendants have now

produced declarations from the custodian of the accounts of the original creditor, in the

case of Citibank, who in turn attached the relevant exemplar contract documents, as

well as copies of actual statement transaction details from plaintiffs’ credit card

accounts. In the case of the Chase account, defendants provide the Affidavit of Sale of

Account by Original Creditor, which attests to the validity of the records that make up

the accounts, including an exemplar cardmember agreement and actual statement

transaction details. (Burger Decl. Ex. O). Plaintiffs have not come forward with any

evidence to rebut that the agreements that have been produced are the same as those

entered between plaintiffs and the original creditors. See, e.g., Coppock v. Citigroup,

Inc., 2013 U.S. Dist. LEXIS 40632, *12-13 (W.D. Wash. March 22, 2013) (accepting an

“exemplar” agreement where the plaintiff “produced no evidence that the 2001

agreement (an exemplar of which Citi submitted with its motion) is not the agreement

that governed her account.”) 

Defendants argue that the agreements submitted by defendants are not required

to be authenticated, as argued by plaintiffs. A Rule 56 standard of proof does not apply

to defendants’ motion to compel arbitration, and furthermore the current Rule 56 does

not require authentication. See, e.g., Townsend v. Rhodes, 2015 U.S. Dist. LEXIS

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129943, *10 n. 8 (E.D. Mich. Sep. 28, 2015) (“in light of the 2010 changes to Rule 56,

authentication is no longer required.”). Even so, Ms. Reinecke has authenticated

Danley’s and McIntyre’s Citibank Card Agreements, and Mr. Burger has provided

authentication of McIntyre’s Chase Card Agreement, with their declarations for

purposes of satisfying the business record exception to the rule against hearsay. 

The arbitration clauses in the credit card agreements, which the court accepts at

this stage as being those governing the parties’ relationship, contain delegation clauses. 

The delegation clauses provide that claims relating to the debtors’ account, a prior

related account, or the parties’ relationship are subject to arbitration, including claims

regarding application, enforceability and interpretation of the agreement as a whole. 

Plaintiffs do not mention, let alone challenge the delegation provision. The Supreme

Court held that such a failure requires the Court to “treat it [the delegation provision] as

valid under § 2, and must enforce it under §§ 3 and 4, leaving any challenge to the

validity of the Agreement as a whole to the arbitrator.” Rent-A-Center, 561 U.S. at 72-

73. 

II. Purchase of Credit Card Receivables

Plaintiffs next argue that defendants cannot invoke the arbitration agreements in

the credit card agreements because “[t]he only thing these defendants ever bought

were the rights to debts.” The parties go on to argue the applicability of the UCC to the

sale of credit card receivables and whether or not the terms of the credit card

agreements follow the sale of the receivables. This is an example of an issue

challenging the application, enforceability or interpretation of the credit card agreement

and the arbitration provision, and as such it is distinctly an issue for the arbitrator to

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decide. A challenge to the applicability of the arbitration provision has been delegated

to the arbitrator, as discussed in the previous section of this opinion.

III. Chase Purchase Agreement Section 4

Plaintiffs point to language in the Chase Purchase Agreement between Chase

and Midland Funding, which states “Purchaser agrees that it will not attempt to enforce

any rights it may otherwise have under any arbitration clauses that may appear in

Seller’s Cardholder Agreements.” (Burger Declaration, Exhibit M, Section 4, p. 9). This

language appears in the section regarding “Representations and Warranties of

Purchaser”. Defendants point out that plaintiffs omit the previous page of the

agreement, which provides “All representations and warranties made in respect of this

Section 4 shall survive the execution and delivery of this Agreement until the second

anniversary of the applicable Closing Date for which such representations and

warranties were made by Purchaser.” (Exhibit M, Section 4(h), p. 8). The closing date

for the sale of McIntyre’s Chase Account to Midland Funding was March 28, 2012. 

(Exhibit K). Therefore, according to defendants, Midland Funding agreed not to enforce

McIntyre’s arbitration agreement for a two-year period following the closing date, which

ended on March 28, 2014. 

The issue whether defendants acquired Chase and Citibank’s rights to invoke the

arbitration clause when they purchased the plaintiffs’ debts is one that has been

delegated to the arbitrator to decide. 

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CONCLUSION

For the reasons stated above, defendants’ motion to compel arbitration and

dismiss action without prejudice is GRANTED.

Dated: May 16, 2016

s/George Caram Steeh 

GEORGE CARAM STEEH

UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE

Copies of this Order were served upon attorneys of record on

May 16, 2016, by electronic and/or ordinary mail.

s/Marcia Beauchemin

Deputy Clerk

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