Funderburke v. Midland Funding LLC

Filing 27

MEMORANDUM AND ORDER denying 19 Motion to Stay Briefing on Defendant's Motion to Compel Arbitration and Stay Trial Court Proceedings to Allow Discovery. Plaintiff shall respond to the Motion to Compel Arbitration within fourteen (14) days. Signed by District Judge Julie A. Robinson on 10/15/2012. (pp)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

ANN FUNDERBURKE, on behalf of herself
and all others similarly situated,
Plaintiff,
vs.

MIDLAND FUNDING LLC,
Defendant.

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Case No. 12-2221-JAR-DJW

MEMORANDUM AND ORDER
This is a class action originally filed in the District Court of Wyandotte County, Kansas.
Plaintiff Ann Funderburke alleges that Defendant Midland Funding, LLC (“Midland”)
improperly obtained judgments against her and others similarly situated as the assignee of a
credit card debt. Plaintiff alleges that the judgment was improper because Midland was not
licensed to collect supervised loans under Kansas law, and, therefore, the debt was
unenforceable. Plaintiff further claims that Midland violated the Kansas Consumer Protection
Act by representing to Plaintiff that the debt was enforceable. The case was removed on April
17, 2012, under the Class Action Fairness Act of 2005. On August 3, 2012, Defendant filed a
Motion to Compel Arbitration (Doc. 17), relying on a mandatory arbitration clause in the debt
contract upon which it previously obtained judgment.
Plaintiff has not yet responded to the motion to compel arbitration. Instead, Plaintiff filed
a Motion to Stay Briefing on Defendant’s Motion to Compel Arbitration and Stay Trial Court
Proceedings to Allow Discovery (Doc. 19). This motion is fully briefed and the briefing on the
motion to compel arbitration has been abated pending disposition of this motion for discovery.

In her motion for discovery, Plaintiff seeks: (1) the actual records that Defendant claims support
its argument that there is a valid arbitration agreement that was sent to Plaintiff; (2) whether
declarants Kyle Hannan or Sabrina Stewart are qualified to testify to those records or the facts
for which they claim to have knowledge; and (3) the relationship between Defendant and the
original creditor, because the resolution of the motion to compel arbitration will require the
Court to decide whether Midland, who is not a party to the agreement, is the actual assignee or
merely an independent contractor retained to collect the debt. As described more fully below,
the Court finds that Plaintiff’s discovery requests are overly broad and not necessary to enable
her to oppose the motion to compel arbitration.
Plaintiff’s first request is for the “actual records” upon which Defendant supports its
position that a valid arbitration agreement was sent to Plaintiff. Plaintiff fails to meaningfully
limit this request, but appears to seek documents supporting the authenticity of the card member
agreement attached to Defendant’s motion to compel arbitration. But Defendant has repeatedly
provided this information to Plaintiff.1 Defendant sent Plaintiff the documents attached to its
motion to compel arbitration prior to filing the motion, including the card member agreement
upon which it relies. Plaintiff challenges the authenticity of this document in her motion for
discovery, arguing that Midland cannot show that it is the same card member agreement sent to
Plaintiff by the original creditor. But this is an argument that is appropriate in response to the
motion to compel arbitration, and Plaintiff is presently equipped to advance that argument
without discovery. Moreover, Plaintiff does not explain what further documentation she seeks
from Midland, and the Court is not prepared to allow for discovery that is neither limited nor

1

See Doc. 25 at 4 n.2; Doc. 19 at 2; Doc. 18, attach. 1–4.

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tailored.
Plaintiff’s next discovery request relates to Declarants Kyle Hannan and Sabrina Stewart.
Hannan is an employee of Midland’s servicer. His declaration is submitted to establish that the
card member agreement was sent to Plaintiff by the original creditor. Stewart, an employee of
Citibank, a successor bank to the original creditor, is also offered to lay foundation that the card
member agreement attached to the motion to compel arbitration is valid and binding between
these parties. Plaintiff contends that she must be allowed to discover the basis upon which these
witnesses have personal knowledge of the facts set forth in their declarations, because they did
not work for the original creditor at the time the card member agreement was sent to Plaintiff.
But Plaintiff’s motion concedes that further discovery is not necessary to make this point when
she argues, “Midland provides no competent evidence that the sample card member agreement
from Associates National Bank (Delaware) is applicable to the Account at issue here.” Again,
Plaintiff is equipped to make these evidentiary objections to the declarations in her response to
the motion to compel arbitration.
Finally, Plaintiff seeks discovery about the relationship between Defendant and the
original creditor in order to determine whether Defendant is an actual assignee or an independent
contractor that merely services the loan. Plaintiff relies on Webb v. Midland Credit
Management, Inc.,2 a case in which the Northern District of Illinois considered a motion to
compel arbitration brought by the same defendant. The card member agreement in Webb had
been assigned four times and the plaintiff defeated the motion to compel arbitration by
establishing that the defendants were unable to show an unbroken chain of assignment that

2

No. 11 C 5111, 2012 WL 2022013 (N.D. Ill. May 31, 2012).

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allowed them to stand in the shoes of the original assignor.3 The plaintiff successfully argued
that the defendants failed to lay the necessary foundation that the card member agreement and
supporting documents were business records through the testimony of a qualified witness.4 The
witnesses did not have personal knowledge about the recordkeeping procedures for each of the
assignee business entities that created the exhibits in support of the motion to compel
arbitration.5 Unlike Webb, this case involves only one assignment. As the proponent of the
evidence, Defendant must establish foundation. And to the extent Defendant is unable to lay the
requisite foundation for the exhibits it submitted in support of the motion to compel arbitration,
the Court finds that Plaintiff can advance this argument without additional discovery.
The Court finds that the parties’ arguments on the motion for discovery essentially go to
the merits of the motion to compel arbitration: whether Defendant is able to establish the
requisite foundation for the card member agreement that contains the arbitration clause. The
Court declines to stay briefing on that motion and grant discovery on the scale requested by
Plaintiff. Her arguments on the motion for discovery make clear that she is able to oppose the
motion to compel arbitration without eliminating “the cost and time-saving benefits of
arbitration.”6 Therefore, the motion to stay and for discovery is denied.
IT IS THEREFORE ORDERED BY THE COURT that Plaintiff’s Motion to Stay
Briefing on Defendant’s Motion to Compel Arbitration and Stay Trial Court Proceedings to
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Id. at *5.

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Id. at *4–5.

5

Id. at *5.

6

Spears v. Mid-America Waffles, Inc., No. 11-2273-CM, 2012 WL 1193183, at *2 (D. Kan. Apr. 10, 2012)
(denying motion to stay for discovery on arbitration issue where broad discovery was not necessary to determine the
merits of the underlying motion to compel arbitration).

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Allow Discovery (Doc. 19) is denied. Plaintiff shall respond to the Motion to Compel
Arbitration within fourteen (14) days.
IT IS SO ORDERED.
Dated: October 15, 2012
S/ Julie A. Robinson
JULIE A. ROBINSON
UNITED STATES DISTRICT JUDGE

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