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Case 2:12-cv-02221-JAR-DJW Document 26 Filed 09/28/12 Page 1 of 7












IN THE UNITED STATES DISTRICT COURT OF KANSAS

KANSAS CITY

Ann Funderburke,
on behalf of herself and all
others similarly situated,


vs.

MIDLAND FUNDING LLC,

Plaintiff,

Defendant.






Case No. 12–CV–2221 JAR/DJW









PLAINTIFF’S REPLY IN SUPPORT OF MOTION TO STAY BRIEFING ON
DEFENDANT’S MOTION TO COMPEL ARBITRATION AND STAY TRIAL

COURT PROCEEDINGS TO ALLOW DISCOVERY

I. DISCOVERY IS WARRANTED



Unlike many parties that seek to compel arbitration, Midland Funding LLC is not

a party to any arbitration agreement. Instead, it seeks to compel arbitration based upon a

purchase contract that it refuses to produce in discovery1 as well as relies on affidavits

from third parties. Further Midland attached and quotes from a “sample” credit card

agreement it purports to be the agreement between the parties. Once again, as the

threshold showing, Midland alleges that Exhibit A-6 (Doc. 18-1) attached to its Motion is

the contract to arbitrate between Plaintiff and predecessors in interest.


1 Midland has produced a “Bill of Sale,” but said document does not contain any terms of the sale or what
rights if any that were acquired nor does it establish that the CitiBank entity listed in the Bill of Sale had
any authority to transfer any interest as it was not the original creditor.




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As can be seen, Midland was not named in the arbitration agreement. If in fact,

Midland was actually named in the agreement and if Midland did not already avail itself

of the court system when it obtained judgments against Plaintiff and the putative class, its

cost savings arguments that discovery relating to arbitration is too burdensome may be

persuasive. Yet, Midland is not a party to any agreement with Plaintiff and it made the

decision to rely on affidavits in an attempt to prove it can compel arbitration. The fact

that Midland offered the testimony of the affiants establishes that it considers their

testimony crucial to the motion to compel and is basically a concession that discovery is

needed. Just because Midland was able to gather the discovery it sought informally, does

not take away from the fact that Midland relied on discovery from third parties to support

its motion to compel arbitration. Plaintiff should be allowed to do the same.

Further, the testimony Midland attached to its motion is outside the knowledge of

Plaintiff such that Plaintiff should be allowed to depose the affiants to verify that they

have the required knowledge as well as to establish the limits of their knowledge. The

need to depose the affiants is especially urgent as it appears that none of the affiants

actually worked at any of the companies that they are testifying about.2 Instead, one

affiant works at a company related to Midland, who obviously cannot have knowledge of

anything prior to any purported assignment. The other affiant is employed by a company

that is a successor of original creditor that may or may not have been in the chain of title.


2 Midland submitted the affidavit of Kyle Hannan, an employee of Midland’s servicer Midland Credit
Management Inc. (hereafter MCM). Plaintiff should be allowed discovery to determine how Mr. Hannan
would have any knowledge about how Associates National Bank (Delaware) did business 12 years earlier
or whether Exhibit A was sent to Plaintiff. Similarly, Sabrina Stewart, an employee of Citibank N.A. offers
no more evidentiary value on this issue. She is an employee of another alleged successor of the successor
of Associates National Bank (Delaware). She provides no more knowledge or foundation. Once again, Ms.
Stewart adds another layer of complication and lack of knowledge by pointing out that Citibank (South
Dakota) N.A., the alleged successor of interest of Associates National Bank (Delaware), was merged with
Citibank N.A. in July 2011.



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Case 2:12-cv-02221-JAR-DJW Document 26 Filed 09/28/12 Page 3 of 7

How these persons obtained the information in their affidavits is very important to

determine whether Midland can even make a prima face case for arbitration.

As argued in Plaintiff’s motion to stay and for discovery, courts have refused to

allow Midland to enforce arbitration clauses because discovery has revealed holes and

defects in Midland’s chain of title arguments. Presumably in response to those decisions,

Midland is desperately trying to prevent Plaintiff from looking behind the curtain in order

to prevent Plaintiff from refuting Midland’s arguments and illustrating the same holes in

Midland’s chain of title arguments. In response, Midland contends that Plaintiff has all

the information she needs without answering Plaintiff’s concerns as to the sample

documents or the persons who purport to testify about such. Yet, it is not until the curtain

is pulled back that Plaintiff will be able to prove that the discovery relied on by Midland

is insufficient just as in Webb v. Midland Credit Management, Inc., No. 11 C 5111, 2012

WL 2022013 (N.D. Ill. May 31, 2012). As pointed out in Plaintiff’s motion, MCM and

Midland attempted to defeat a Fair Debt Collection Practices Act class action by moving

to compel arbitration pursuant to an original credit card agreement. This fact pattern is

very familiar. Midland alleged that Webb incurred a debt to Citibank N.A. (“Citibank”),

and subsequently the debt was assigned multiple times to various debt collection entities

prior to landing with Midland Funding.

The Webb court denied defendants’ motion because discovery revealed the

affidavits Midland submitted were not based on the personal knowledge of the

assignments necessary to show an unbroken chain of assignment entitling Midland to

enforce the arbitration provision of the original agreement. Plaintiff expects discovery



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would reveal a similar lack of knowledge for the affidavits submitted by Midland in this

case.

Even the cases Midland cites as authority show the need for preliminary discovery

in this case. In Gottesburen v. Midland Funding LLC (Douglas County, Kansas District

Court case 2011-CV-444), Midland filed a motion to enforce an arbitration agreement

that Chase Bank, its predecessor in interest, had previously agreed not to enforce in Ross

v. Bank of America NA, et al., No. 05-CV-7116. MDL No. 1409 (S.D. N.Y.). In spite of

Gottesburen’s argument that the original creditor agreed not to enforce arbitration prior to

the transfer and the original creditor could not transfer anything more than it had,

Midland was allowed by the court to enforce the arbitration agreement. In that case, the

court ruled that “The Court finds that Defendant has failed to present any relevant,

admissible evidence that her Card member Agreement was modified or amended to

remove the Arbitration Clause” by showing the mailing of the specific revocation rider to

Gottesburen by the original creditor (Doc. 18-4, ¶8 at 9).3 As such, Ms. Funderburke

should be given an opportunity to obtain and present evidence to refute Midland’s

assertions. In fact, discovery revealed that Defendant Midland Funding’s submissions in

a similar case were lacking, which resulted in the court denying the motion to compel

arbitration.

At a minimum, Gottesburen v. MCM and Webb v. MCM show the need to allow

Plaintiff to conduct discovery to defend herself. The court in Webb found the following

compelling: “Moreover, when asked at his deposition whether he had any information

about what records Sherman Originator and LVNV maintain and how Sherman


3 It is this same mailing of Defendant’s Exhibit A that appears to be un-provable by affidavits from persons
who with no personal knowledge whether the “sample” credit card agreement containing the arbitration
provision was ever mailed to Ms. Funderburke by Associates National Bank (Delaware) 12 years earlier.



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Case 2:12-cv-02221-JAR-DJW Document 26 Filed 09/28/12 Page 5 of 7

Acquisition keeps its records, Minford responded no or that he did not know. (See

Minford Dep. 21:11–18; 31:1–25.) Thus, by his own admission, Minford is not qualified

to testify as to the process by which Sherman Originator, LVNV, and Sherman

Acquisition created and maintained Exhibits A through D.” The same appears true for

Mr. Hannan.4 As such, Plaintiff should be given the opportunity to test the personal

knowledge of the affiants as well as examine the chain of assignment.

Therefore Plaintiff requires discovery as to (1) the actual records that Midland

claims support its argument that there is a valid arbitration agreement that was sent to

Plaintiff, including the actual purchase agreement relating to any debt of Plaintiff; (2)

whether Mr. Hannan or Ms. Stewart are qualified to testity to those records or the facts

that they claim to have knowledge of; and (3) the relationship between Midland and the

original creditor because the resolution of Midland’s motion to compel arbitration will

almost certainly require the Court to decide whether Midland, who is not a party to the

agreement, has any rights to enforce the agreement and whether it is even the actual

assignee or merely an independent contractor retained to collect the debt.5






4 The lack of ability to conduct discovery was glaring in the court’s ruling in Olnick v. Fuling, another case
attached to Midland’s motion (Doc. 18-4 at 11). In that case, the court adopted Midland’s assertions
because the “plaintiff offers nothing to the contrary.” (Doc. 18-4 at 19.)
5 See e.g. Mims v. Global Credit and Collection Corp., 803 F. Supp. 2d 1349, 1355 (S.D. Fla.
2011)(Denied motion to compel arbitration because the contract with the debt collector expressly stated the
debt collector agreed to perform the debt collection services as an independent contractor and disclaimed
any notion that it was an agent or authorized representative of the debt buyer.); Butto v. Collecto Inc., 802
F. Supp. 2d 443, 449 (E.D.N.Y. 2011) (Denying motion to compel arbitration of debt collector and holding:
“In the Court's view, the disavowal of both agency and control in the collection agreements nullifies
Collecto's assertion that these agreements could form the basis for finding that an agency relationship
existed.”)




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Case 2:12-cv-02221-JAR-DJW Document 26 Filed 09/28/12 Page 6 of 7

II. CONCLUSION

As indicated above, there are many issues and problems with Midland’s attempt

to enforce a Card member agreement’s arbitration and class waiver provisions beyond the

scope of this motion. However, as suspect as Midland’s evidence supporting that Exhibit

A is binding on the Plaintiff, Plaintiff should be able to conduct discovery as to (1) the

actual records that Midland claims support its argument that there is a valid arbitration

agreement that was sent to Plaintiff, including the actual purchase agreement relating to

any debt of Plaintiff; (2) whether Mr. Hannan or Ms. Stewart are qualified to testity to

those records or the facts that they claim to have knowledge of; and (3) the relationship

between Midland and the original creditor Midland should not be able to make

unsupported and completely self-serving statements that are taken without question by

both the Plaintiff and the Court at face value. “The court must consider the non-moving

party’s evidence and construe all reasonable inferences in the light most favorable to the

non-moving party.” Tickanen v. Harris & Harris Ltd., 461 F. Supp. 2d 863, 866.

Therefore, if the Court were to adhere to that standard, it only seems logical that the non-

moving Plaintiff should have an opportunity to discover the veracity of that evidence that

is only within the possession and knowledge – or not – of Midland Funding.







Dated this September 28, 2012.















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Case 2:12-cv-02221-JAR-DJW Document 26 Filed 09/28/12 Page 7 of 7

Respectfully submitted,



By: /s/ A.J. Stecklein
A.J. Stecklein #16330
Charles D. Kugler #7031
Consumer Legal Clinic LLC
748 Ann Avenue
Kansas City, Kansas 66101
Telephone: 913-371-0727
Facsimile: 913-371-0147
[email protected]
[email protected]
Attorneys for Plaintiff


and



By: /s/ Keith J. Keogh
Keith J. Keogh, pro hac vice
Keogh Law Ltd.
101 North Wacker Drive, Suite 605
Chicago, Illinois 60606
Telephone: 312-726-1092
Facsimile: 312-726-1093
[email protected]
Attorney for Plaintiff



CERTIFICATE OF SERVICE



I hereby certify that a copy of the above and foregoing was electronically filed


with the United States District Court and a copy of the Notice of Electronic Filing of the
above document was transmitted via e-mail this September 28, 2012, to:

Thomas M. Martin
Joseph E. Bant
Lewis, Rice & Fingersh LC
1010 Walnut Street, Suite 500
Kansas City, Missouri 64106
Attorneys for Defendant






/s/ A.J. Stecklein
Attorney for Plaintiff






















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