Background
Accelerated Inventory Management, LLC (AIM), a debt buyer, sued Jose Hernandez in Cook County to collect on an alleged $15,000 personal loan originated by WebBank through LendingClub. The loan documents contained a broad arbitration provision allowing either party or a subsequent holder to require arbitration, subject to an opt-out provision.
Hernandez asserted affirmative defenses concerning AIM’s collection activity and later filed putative class counterclaims alleging debt-collection, consumer-fraud, and lending-law violations. He also alleged AIM’s collection action was untimely and challenged the loan documents’ enforceability. AIM then moved to compel individual arbitration of the counterclaims. The circuit court denied the motion on waiver grounds.
The Court’s Holding
The Illinois Appellate Court affirmed. AIM waived arbitration by choosing to bring its own collection claim in court even though that claim was covered by the same arbitration clause it later invoked against Hernandez’s counterclaims.
The counterclaims and affirmative defenses were closely related to AIM’s suit: they arose from the same loan, agreements, collection efforts, and questions about enforceability and timeliness. They were, in the court’s words, mirror images of the issues AIM itself placed before the circuit court. AIM therefore acted inconsistently with a claimed right to arbitrate those related issues.
Key Takeaways
- A party may waive arbitration by litigating an arbitrable claim in court.
- The waiver can extend to related counterclaims arising from the same contract and facts.
- A broad clause covering counterclaims does not preserve arbitration after the holder elects court litigation over the same dispute.
Why It Matters
Debt buyers and other assignees cannot file a collection case in court and then selectively demand arbitration when the borrower responds with closely connected statutory or class counterclaims. The result turns on the relationship between the original claim and later claims, rather than solely on the arbitration clause’s broad wording.
This Rule 23 order is nonprecedential except in the limited circumstances permitted by Illinois Supreme Court Rule 23(e)(1).