Court Opinion

ID: 4234363
Source: CourtListenerOpinion
Date Created: 2018-01-04 20:09:53.015095+00
Date Added: 2024-06-11T13:26:43.023360
License: Public Domain

2018 IL App (5th) 160479
            NOTICE
 Decision filed 01/04/18. The
 text of this decision may be              NO. 5-16-0479
 changed or corrected prior to
 the filing of a Peti ion for
 Rehearing or the disposition of
                                              IN THE
 the same.
                                   APPELLATE COURT OF ILLINOIS

                                FIFTH DISTRICT
______________________________________________________________________________

MIDLAND FUNDING, LLC,                             )   Appeal from the
                                                  )   Circuit Court of
      Plaintiff and Counterdefendant-Appellant,   )   St. Clair County.
                                                  )
v.                                                )   No. 15-L-442
                                                  )
TERESA RANEY and SHIRLEY DARNELL,                 )   Honorable
                                                  )   Christopher T. Kolker,
      Defendants and Counterplaintiffs-Appellees. )   Judge, presiding.
______________________________________________________________________________

       JUSTICE OVERSTREET delivered the judgment of the court, with opinion.
       Presiding Justice Barberis and Justice Goldenhersh concurred in the judgment and
opinion.

                                          OPINION

¶1       In this interlocutory appeal brought pursuant to Illinois Supreme Court Rule 307(a)(1)

(eff. Feb. 26, 2010), the plaintiff-counterdefendant, Midland Funding, LLC (Midland Funding),

appeals the circuit court’s order denying its motion to dismiss and to compel arbitration of

counterclaims filed by the defendants-counterplaintiffs, Teresa Raney and Shirley Darnell. For

the reasons that follow, we affirm.

¶2                                     BACKGROUND

¶3       Darnell and Raney acquired consumer credit card accounts issued by Citibank, N.A.

(Citibank), wherein they were provided with specified lines of credit for consumer purchases in

exchange for paying at least the minimum amounts shown on monthly billing statements. On

                                                1

June 11, 2015, Midland Funding, as Citibank’s assignee, filed complaints against Darnell and

Raney, seeking judgments in the sums of $5848.91, and $16,843.42, respectively, plus court

costs, for the amounts due and owing via the Citibank lines of credit. Midland Funding alleged

that it was the successor in interest to the Citibank accounts, that Midland Funding had

purchased Darnell’s and Raney’s credit card account obligations from Citibank in the regular

course of business, that Darnell and Raney had failed to make the monthly payments on said

accounts and were in default on the accounts, and that Midland Funding was entitled to a

judgment for the unpaid balances plus costs. Midland Funding alleged that it had purchased the

accounts from Citibank on October 14, 2014 (Darnell), and April 23, 2014 (Raney), for good and

valuable consideration, as evidenced by an attached bill of sale and assignment. Midland

Funding also attached account statements showing a $5848.91 Sears MasterCard account balance

for Darnell and a $16,843.47 Sears Premier MasterCard balance for Raney.

¶4     Midland Funding attached to its complaint against Darnell the affidavit of Andrew

Lankey. In the affidavit dated April 16, 2015, Lankey stated that he was employed as a legal

specialist with access to pertinent account records for Midland Credit Management, Inc. (MCM),

servicer of Darnell’s account on behalf of Midland Funding. Based upon his personal knowledge

of the account records, Lankey stated that Midland Funding was the current owner of the

obligation and was assigned all rights, title, and interest to Darnell’s Citibank account. Lankey

stated that MCM’s records showed that Darnell owed a balance of $5848.91, as of April 13,

2015. Lankey stated that Darnell opened the Citibank account on November 1, 1986, the last

payment posted to the account on December 17, 2013, and the account was charged off on July

29, 2014.

                                               2

¶5     Midland Funding attached to its complaint against Raney the affidavit of Rhonda

Schubloom. In the affidavit dated April 16, 2015, Schubloom stated that she was employed as a

legal specialist with access to pertinent account records for MCM, servicer of Raney’s account

on behalf of Midland Funding. Based on her personal knowledge of the account records

maintained on Midland Funding’s behalf, Schubloom stated that Midland Funding was the

current owner of the obligation and was assigned all rights, title, and interest to Raney’s Citibank

account. Schobloom stated that MCM’s records showed that Raney owed a balance of

$16,843.42 as of April 14, 2015. Schubloom stated that Raney opened the Citibank account on

February 1, 1994, the last payment posted to the account on March 1, 2013, and the account was

charged off on October 7, 2013.

¶6     In July 2015, Raney and Darnell filed answers and affirmative defenses. They also filed

class action counterclaims seeking to certify statewide and nationwide classes and seeking

damages based on purported violations of the Collection Agency Act (225 ILCS 425/1 et seq.

(West 2014)), the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1

et seq. (West 2014)), and the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.

(2012)). The counterclaims challenged Midland Funding’s alleged practice of suing to collect

debt purchased from others without sufficient proof of ownership of the debt.

¶7     On November 18, 2015, and December 1, 2015, Midland Funding filed motions to

dismiss the counterclaims pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS

5/2-619 (West 2014)) and to compel arbitration. Midland Funding argued that because the

counterclaims were within the scope of a binding card agreement that included an agreement to

arbitrate and a class action waiver provision (the Card Agreement), the class claims were barred

and should be dismissed. Midland Funding argued that the arbitration provision in the Card

                                                 3

Agreement was subject to the Federal Arbitration Act (9 U.S.C. § 1 et seq. (2012)) and that

Midland Funding was entitled to elect arbitration as the forum within which to address the

putative class claims alleged in the counterclaims. To its motions, Midland Funding attached

account statements and a November 25, 2015, declaration of Michael Burger, senior manager of

operations for MCM. In the declaration, Burger stated, in pertinent part:

               “1. *** I am currently employed as the Sr. Manager, Operations for [MCM].

       MCM is the servicer and authorized agent for Midland Funding and manages the debt

       that Midland Funding purchases.

               2. In my capacity as Sr. Manager, Operations for MCM, I am responsible for,

       among other things, maintaining and overseeing ‘media’, i.e., the loan agreements,

       account purchase and transfer information, debt collection records and other account

       information pertinent to accounts and debts that MCM manages for Midland Funding. I

       make this Declaration from my own personal knowledge of the matters set forth herein,

       or on information and belief based upon my review of the business records that MCM

       maintains for Midland Funding. If called as a witness, I could and would testify

       competently to the matters set forth in this Declaration.

                                               ***

               5. As part of the sale of the Citibank Account to Midland Funding, Citibank

       transferred electronic records and other records for the Account to MCM, which included

       an Excel file identifying the Account. Attached hereto as Exhibit B is an abstract of the

       true and correct data from the Excel file pertaining to the Citibank Account. Citibank also

       provided certain account statements[, attached as Exhibit C].

               ***

                                                4

               7. As reflected in Exhibit A, Citibank assigned all interest in the Citibank Account

       to Midland Funding. Midland Funding currently owns all rights, title[,] and interest in the

       purchased account.

               8. The records produced by Citibank included the Card Agreement applicable to

       the Citibank Account. See Exhibit E.

               9. At the time MCM received the records in Exhibits A-E and maintained them on

       behalf of Midland [Funding], MCM incorporated those records into its business records

       that MCM keeps in the ordinary course of the regularly conducted business activity for

       such accounts, and it is the regular practice of MCM to make and rely upon such records,

       and MCM has routinely relied upon those records in conducting business. See Exhibits

       A-E.”

¶8     Midland Funding attached the Card Agreement referenced in paragraph 8 of the

declaration identified as Exhibit E. The language of the Card Agreement stated, “We are

changing your card agreement and replacing it with a new one. The effective date of these

changes is shown on your statement in the message titled ‘Important Changes to Your Account

Terms’.” Arbitration was identified as a section change to the Card Agreement. In the arbitration

section of the Card Agreement, it stated, in relevant part:

               “ARBITRATION

               PLEASE READ THIS PROVISION OF THE AGREEMENT CAREFULLY. IT

       PROVIDES THAT ANY DISPUTE MAY BE RESOLVED BY BINDING

       ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO TO COURT,

       INCLUDING THE RIGHT TO A JURY AND THE RIGHT TO PARTICIPATE IN A

       CLASS ACTION OR SIMILAR PROCEEDING. IN ARBITRATION, A DISPUTE IS

                                                 5

RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE OR JURY.

ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN

COURT PROCEDURES.

       Agreement to Arbitrate: Either you or we may, without the other’s consent, elect

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

***.

        Claims Covered

       What Claims are subject to arbitration? 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.

This includes Claims based on contract, tort (including intentional tort), fraud, agency,

your or our negligence, statutory or regulatory provisions, or any other sources of law;

Claims made as counterclaims, cross-claims, third-party claims, interpleaders or

otherwise; and Claims made independently or with other claims. A party who initiates a

proceeding in court may elect arbitration with respect to any Claim advanced in that

proceeding by any other party. Claims and remedies sought as part of a class action,

private attorney general or other representative action are 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.

                                       ***

       *** This arbitration provision is governed by the Federal Arbitration Act ***.

                                         6

              What about Claims field in Small Claims Court? Claims filed in a small claims

       court are not subject to arbitration, so long as the matter remains in such court and

       advances only an individual (non-class, non-representative) Claim.

              What about debt collections? We and anyone to whom we assign your debt will

       not initiate an arbitration proceeding to collect a debt from you unless you assert a Claim

       against us or our assignee. We and any assignee may seek arbitration on an individual

       basis of any Claim asserted by you, whether in arbitration or any proceeding, including in

       a proceeding to collect a debt. You may seek arbitration on an individual basis of any

       Claim asserted against you, including in a proceeding to collect a debt.

                                               ***

              Who can be a party? Claims must be brought in the name of an individual person

       or entity and must proceed on an individual (non-class, non-representative) basis. The

       arbitrator will not award relief for or against anyone who is not a party. If you or we

       require arbitration of a Claim, neither you, we, nor any other person may pursue the

       Claim in arbitration as a class action, private attorney general action or other

       representative action, nor may such Claim be pursued on your or our behalf in any

       litigation in any court.” (Emphases in original.)

The Card Agreement referenced variable annual percentage rates as of September 15, 2010, and

listed a copyright date of 2010. The Card Agreement did not reference Darnell or Raney by

name, signature, account number, address, or any other means.

¶9     In response to the motion to dismiss and to compel arbitration, Raney filed a motion to

strike Burger’s declaration, challenging the Card Agreement. Raney claimed that nothing in

Burger’s declaration established that the Card Agreement on which Midland Funding relied for

                                                 7

its motion to dismiss was associated with Raney’s account, was ever received by Raney, or that

Raney agreed to its terms.

¶ 10   Prior to the filing of the motion to dismiss, the parties had not engaged in discovery. On

March 29, 2016, the parties entered a stipulation and agreed order regarding discovery, allowing

for the depositions of Burger and Schubloom. The agreed order provided that Midland Funding’s

“agreement to this order or the stipulation cannot and will not be used against it for purposes of

its Motion to Dismiss and Compel Arbitration, i.e., [to determine] that Midland Funding *** has

waived its right to compel arbitration based on its participation in discovery.”

¶ 11    In a discovery deposition taken on May 4, 2016, Burger testified that, as director of

operations for MCM, he supervised the media operations team, which was responsible for

obtaining documentation for accounts and processing that documentation and uploading it to the

document portal. Burger identified the Card Agreement attached to his declaration as Exhibit E

and stated that “Citibank told us that this is the card agreement associated with that account.”

Burger acknowledged that no account number, name, or signature was included on the Card

Agreement.

¶ 12   When questioned about the Darnell account, Burger testified that he had no personal

knowledge regarding whether or not the Card Agreement was applicable and did not know if

Darnell had ever seen or received the Card Agreement. Burger testified that he did not know if or

when the Card Agreement was ever sent to Darnell and had not seen documentation that

indicated that the Card Agreement had been sent to Darnell. Burger testified that he was not

aware of any evidence that the Card Agreement was ever sent to Darnell or that she saw it.

Likewise, Burger did not testify if or when the Card Agreement was mailed or otherwise

communicated to Raney.

                                                 8

¶ 13   On June 15, 2016, Darnell and Raney executed affidavits stating that they had “never

seen” the Card Agreement, had never agreed to the terms of the Card Agreement, and had never

agreed to the arbitration provision in the Card Agreement. In discovery depositions taken on

August 12, 2016, Raney testified that she could not recall having received the Card Agreement,

and Darnell testified that she had not seen a credit card agreement applicable to her case and did

not know if she had ever received updated terms and conditions. On July 18, 2016, the circuit

court entered an order consolidating the Darnell and Raney cases.

¶ 14   On August 29, 2016, Burger executed a supplemental declaration in support of Midland

Funding’s motion to dismiss and to compel arbitration. Attached to Burger’s supplemental

declaration were Raney’s credit card account statements from January 2010 through October

2013 and Darnell’s statements from December 2009 through July 2014. Although not found in

Darnell’s account statements, a page titled “Important Changes to Your Account Terms” was

included in Raney’s November 2010 credit card account statement, a statement which referenced

her name, account number, and address. This statement provided that certain changes were being

made to Raney’s account terms, which would take effect on December 7, 2010, and which would

include an arbitration provision modification. This statement provided: “For more detailed

information, please refer to the enclosed Notice of Change in Terms and Right to Opt Out.” The

statement itself did not include the language of the arbitration provision, and neither the Card

Agreement nor another document titled “Notice of Change in Terms and Right to Opt Out” was

attached to Raney’s statement in the record.

¶ 15   On October 14, 2016, the circuit court entered its order denying Midland Funding’s

motion to dismiss and to compel arbitration. The circuit court found, inter alia, that Raney and

Darnell were not subject to arbitration because there was no competent evidence that the Card

                                                9

Agreement containing the arbitration provision applied to them. The circuit court noted that the

Card Agreement did not include the signature of any party, did not include information that it

related to Darnell’s or Raney’s account, and did not indicate that Darnell or Raney had received

it or had agreed to its terms. The circuit court noted, however, that Darnell and Raney had

executed sworn statements that they had not seen the Card Agreement nor agreed to its terms.

The circuit court found that although Burger in his declaration had stated that the Card

Agreement was applicable to Darnell and Raney, he testified at his deposition that he had no

personal knowledge regarding whether or not the alleged Card Agreement was applicable. The

circuit court further noted that Raney’s credit card statement, which provided that revised terms

were being distributed, did not identify the Card Agreement as the revised terms so distributed.

¶ 16   On November 14, 2016, Midland Funding filed a notice of interlocutory appeal pursuant

to Illinois Supreme Court Rule 307(a)(1) (eff. Feb. 26, 2010).

¶ 17                                    ANALYSIS

¶ 18   “Generally, the standard of review for a decision on a motion to compel arbitration is

whether there was a showing sufficient to sustain the circuit court’s order.” Keefe v. Allied Home

Mortgage Corp., 393 Ill. App. 3d 226, 229 (2009). However, where the circuit court’s decision is

based on a legal analysis, the decision to deny the motion to compel arbitration is reviewable

de novo. Vassilkovska v. Woodfield Nissan, Inc., 358 Ill. App. 3d 20, 24 (2005). In this case, the

circuit court did not hold an evidentiary hearing where it determined credibility issues but

decided the issue as a matter of law. Thus, our review is de novo. See id.; see also Peach v. CIM

Insurance Corp., 352 Ill. App. 3d 691, 694 (2004) (“review of a trial court’s construction of the

arbitration agreement states a question of law that is subject to a de novo standard”); Travis v.

American Manufacturers Mutual Insurance Co., 335 Ill. App. 3d 1171, 1174 (2002) (“where the

                                               10 

trial court renders its decision without an evidentiary hearing and without findings on any factual

issues, de novo review is appropriate”). We consider anew the pleadings, declarations,

depositions, and exhibits on file to determine whether the circuit court’s decision was correct.

See generally Jackson v. Graham, 323 Ill. App. 3d 766, 779 (2001).

¶ 19   “The Uniform Arbitration Act *** (710 ILCS 5/1 et seq. (West 2000)) empowers courts,

upon application of a party showing an agreement to arbitrate, to compel or stay court action

pending arbitration. 710 ILCS 5/2 (West 2000).” Vassilkovska, 358 Ill. App. 3d at 24-25.

Likewise, the Federal Arbitration Act provides that a court, upon being satisfied that an issue

involved in a proceeding is subject to arbitration pursuant to a written arbitration agreement,

shall on application stay the trial of the action. 9 U.S.C. § 3 (2012). However, “[w]hile

arbitration is a favored method of dispute resolution, courts have consistently cautioned that an

agreement to submit to arbitration is a matter of contract.” United Cable Television Corp. v.

Northwest Illinois Cable Corp., 128 Ill. 2d 301, 306 (1989). Whether under federal rules or state

law, there can be no forced arbitration without a valid contract to arbitrate. Tortoriello v. Gerald

Nissan of North Aurora, Inc., 379 Ill. App. 3d 214, 226 (2008); Vassilkovska, 358 Ill. App. 3d at

25; Ervin v. Nokia, Inc., 349 Ill. App. 3d 508, 538 (2004); Aste v. Metropolitan Life Insurance

Co., 312 Ill. App. 3d 972, 975 (2000).

¶ 20   “An agreement to arbitrate is treated like any other contract.” Vassilkovska, 358 Ill. App.
3d at 24. Accordingly, when deciding whether there is a valid agreement to arbitrate, courts

apply state law principles that govern the formation of contracts. Id. at 25. “Our courts have held

that the issuance of a credit card and cardholder agreement is a standing offer to extend credit

that may be revoked at any time.” Portfolio Acquisitions, L.L.C. v. Feltman, 391 Ill. App. 3d 642,

649 (2009); see also Garber v. Harris Trust & Savings Bank, 104 Ill. App. 3d 675, 679 (1982).

                                                11 

“When the cardholder makes a purchase, the bank advances funds to the merchant and this

arrangement constitutes a loan between the bank and cardholder.” Portfolio Acquisitions, L.L.C.,
391 Ill. App. 3d at 649. “Therefore, each time the credit card is used, a separate contract is

formed between the cardholder and bank.” Id.

¶ 21   “The issuance of a credit card is only an offer to extend credit; acceptance of the credit

offer occurs each time a credit purchase is made by the cardholder.” Asset Acceptance, LLC v.

Tyler, 2012 IL App (1st) 093559, ¶ 47. “Consistent with the treatment of each credit card

purchase as a separate offer and acceptance, modifications to credit card terms are binding

between the parties when, after notice of the modifications, the cardholder uses his credit card.”

Id.

¶ 22   Accordingly “each time a credit card is used, a new contract exists between the parties

according to the terms ‘in effect’ (i.e., having been communicated to the defendant in a

reasonable manner) at the time of the use.” Razor Capital v. Antaal, 2012 IL App (2d) 110904,

¶ 35; see also Garber, 104 Ill. App. 3d at 678. Those terms might include a provision regarding

arbitration. Submission of disputes to arbitration is completely dependent on the private will of

the parties as embodied in whatever contract they may have entered into. Asset Acceptance, LLC,

2012 IL App (1st) 093559, ¶ 41. To compel arbitration as a term or modification of a credit card

agreement, however, the card issuer must allege what the terms were at the time of each use, that

those terms were communicated to the cardholder in a reasonable manner, and that the

cardholder thereafter accepted those terms by using the card. See generally Razor Capital, 2012
IL App (2d) 110904, ¶ 35. “[M]odified terms of an agreement, once communicated to the

cardholder, are deemed accepted when the card is used after the modifications.” Id. ¶ 32.

                                               12 

¶ 23   In Asset Acceptance, LLC, the credit card holder contended that Asset Acceptance, as the

credit card issuer, failed to present a prima facie case for confirmation of an arbitration award

under section 13 of the Federal Arbitration Act (9 U.S.C. § 13 (2006)) because it failed to show

that an arbitration agreement existed between the parties. Asset Acceptance, LLC, 2012 IL App

(1st) 093559, ¶ 40. Asset Acceptance’s motion to dismiss the cardholder’s counterclaims

attached two purported bank card documents, each of which contained an arbitration clause. Id.

¶ 43. However, neither document contained the cardholder’s name or his credit card account

number. Id. The appellate court found it problematic that the documents provided no evidence

that they pertained to the cardholder’s account, that the cardholder had received the papers, or

that the cardholder had agreed to the terms set forth in the papers by making a credit purchase

after he was mailed the attached papers. Id. ¶ 48. The appellate court noted that Illinois courts

had deemed similar documents insufficient to establish a contract. See id.; Velocity Investments,

LLC v. Alston, 397 Ill. App. 3d 296, 299 (2010) (“Cardmember Agreement and Disclosure

Statement” was legally insufficient to collect on a credit card debt because the document offered

no evidence that defendant agreed to be bound by the terms or that the terms applied to this

particular account). The appellate court determined that the documents did not support the

conclusion that the parties had entered into a contract to arbitrate their disputes. Asset

Acceptance, LLC, 2012 IL App (1st) 093559, ¶ 48. Thus, the appellate court concluded that

absent such an arbitration agreement, Asset Acceptance had failed to satisfy its burden to

establish a prima facie case to confirm the arbitration award under section 13 of the Federal

Arbitration Act. Id. ¶¶ 57-60.

¶ 24   In the present case, Midland Funding also did not demonstrate when or how the generic

Card Agreement containing the arbitration provision pertained to Darnell or Raney or that it was

                                               13 

communicated to Darnell or Raney prior to subsequent credit card use. See Razor Capital, 2012
IL App (2d) 110904, ¶ 32 (in absence of allegations or affidavits explaining when and how

generic agreement attached to the complaint was communicated to the defendant, via mail to

defendant’s most recent billing address or in another similar manner by which it would be

reasonable to presume that defendant received it, and showing that the defendant used the card

thereafter, thereby accepting the terms, the plaintiff cannot recover pursuant to those terms). As

noted by the circuit court, the Card Agreement itself did not contain any signature, name, or

account information and included no indication that it was mailed or in any way communicated

to Darnell or Raney. Instead, Darnell and Raney executed sworn statements that they had never

seen the Card Agreement nor agreed to its terms. Moreover, Burger did not attest or testify that

the records he was allegedly responsible for maintaining and overseeing revealed that the Card

Agreement’s arbitration provision had been communicated to Darnell or Raney prior to

subsequent credit card use. Burger, in his declaration, stated that “[t]he records produced by

Citibank included the Card Agreement applicable to the” accounts; however, when deposed,

Burger testified that he had no personal knowledge regarding whether or not the Card Agreement

was applicable, he did not know and was unaware of any document or other evidence to

determine if the arbitration provision had been communicated to Darnell, and he did not testify

otherwise regarding Raney. Accordingly, Midland Funding failed to show that it had

communicated the arbitration provision to Darnell or Raney as a modification of the agreement

or that Darnell or Raney received the arbitration provision modification before charging

additional funds and accepting it as a modification of their agreements. See Asset Acceptance,

LLC, 2012 IL App (1st) 093559, ¶ 48.

                                               14 

¶ 25    Raney’s November 2010 account statement referenced an enclosed “Notice of Change in

Terms and Right to Opt Out” document that purportedly contained arbitration provision

modifications. However, no such document was attached to Raney’s account statement in the

record. Although the Card Agreement, which was attached to Midland Funding’s motion to

dismiss and to compel arbitration, is also titled “Notice of Change in Terms and Right to Opt

Out,” the circuit court correctly concluded that there was no evidence that the generic Card

Agreement attached to the motion had been enclosed with Raney’s November 2010 account

statement or that it was ever mailed or communicated to Darnell or Raney.

¶ 26    Midland Funding argues that the circuit court was not permitted to determine the validity

of the Card Agreement or the arbitration provision therein. Midland Funding cites the arbitration

provision in the Card Agreement that provides: “All Claims *** are subject to arbitration,

including Claims regarding the application, enforceability, or interpretation of this Agreement

and this arbitration provision.” Midland Funding argues that the parties clearly and unmistakably

contracted for a gateway issue, i.e., the issue of arbitrability, and therefore, the circuit court was

bound by the agreement and should have deferred the decision of this threshold matter to an

arbitrator.

¶ 27    We have just held, however, that the parties did not clearly and unmistakably enter into

an agreement regarding arbitration. Darnell and Raney challenged the arbitration clause itself

and whether it was communicated to them as a modification of their credit card agreement.

Having concluded that Midland Funding failed to demonstrate that Darnell or Raney was subject

to the generic Card Agreement in the record, we decline to adopt Midland Funding’s view that

the Card Agreement’s arbitration language controls and requires claims regarding its application

to be subject to arbitration. In failing to demonstrate when or how the Card Agreement’s

                                                 15 

arbitration provisions were communicated to Raney or Darnell, Midland Funding failed to

demonstrate that the agreement between it and Raney and the agreement between it and Darnell

included the arbitration provisions found in the Card Agreement. Thus, we cannot conclude that

the agreements governing the Darnell and Raney accounts contained mandatory arbitration

clauses requiring the enforceability of the arbitration agreements to be decided by the arbitrator.

See In re Arbitration Between Teleserve Systems, Inc. & MCI Telecommunications Corp., 659
N.Y.S.2d 659, 664 (App. Div. 1997) (“under either Federal or New York law, to the extent that

petitioner challenges the arbitration clauses themselves or their inclusion in the agreements,

those challenges are for the court to determine”); see also Donaldson, Lufkin & Jenrette Futures,

Inc. v. Barr, 124 Ill. 2d 435, 445 (1988) (party should not be compelled to go to the expense,

trouble, and hazard to the arbitration process when he has not agreed to do so); Bess v. DirecTV,

Inc., 381 Ill. App. 3d 229, 237 (2008) (“independent claims specifically challenging the

procedural unconscionability of an arbitration provision *** should be decided by the court

rather than an arbitrator” (emphasis omitted)); Tortoriello, 379 Ill. App. 3d at 227 (issue of

whether contract to arbitrate exists must be determined by the court, not an arbitrator).

¶ 28   In sum, we conclude that the circuit court properly determined that Midland Funding

failed to demonstrate that it had communicated the arbitration provision to Darnell or Raney in

order to modify their agreements. In light of our conclusion that Midland Funding failed to show

that Darnell or Raney agreed to the arbitration provision in the Card Agreement, we need not

address Midland Funding’s remaining arguments on appeal.

¶ 29                                   CONCLUSION

¶ 30   For the foregoing reasons, we affirm the judgment of the circuit court of St. Clair County.

                                                16 

¶ 31   Affirmed.

                   17
                                 2018 IL App (5th) 160479 

                                      NO. 5-16-0479

                                          IN THE

                            APPELLATE COURT OF ILLINOIS

                                     FIFTH DISTRICT

MIDLAND FUNDING, LLC,                             )   Appeal from the
                                                  )   Circuit Court of
      Plaintiff and Counterdefendant-Appellant,   )   St. Clair County.
                                                  )
v. 	                                              )   No. 15-L-442
                                                  )
TERESA RANEY and SHIRLEY DARNELL,                 )   Honorable
                                                  )   Christopher T. Kolker,
      Defendants and Counterplaintiffs-Appellees. )   Judge, presiding.
______________________________________________________________________________

Opinion Filed:          January 4, 2018
______________________________________________________________________________

Justices:            Honorable David K. Overstreet, J.

                  Honorable John B. Barberis, P.J., and
                  Honorable Richard P. Goldenhersh, J.,
                  Concur
______________________________________________________________________________

Attorneys         Theodore W. Seitz, Dykema Gossett PLLC, Capitol View, 201 Townsend
for               Street, Suite 900, Lansing, MI 48933; Heather L. Kramer, Rosa M.
Appellant         Tumialán, Jennifer A. Warner, Dykema Gossett PLLC, 10 South Wacker
                  Drive, Suite 2300, Chicago, IL 60606
______________________________________________________________________________

Attorneys         David I. Cates, Chad M. Mooney, Cates Mahoney, LLC, 216 West Pointe
for               Drive, Suite A, Swansea, IL 62226; Brendan M. Nester, Sean K. Cronin,
Appellees         Donovan Rose Nester, P.C., 201 South Illinois Street, Belleville, IL 62220
______________________________________________________________________________