Daily-Double Victories in 2nd and 11th Circuit courts of Appeal


On August 29, 2016, appellate decisions were issued by two circuit courts of appeal handing Stueve Siegel a pair of major victories in their fight against illegal payday lending. Both the Second Circuit and Eleventh Circuit issued opinions denying arbitration and permitting borrowers to pursue claims in federal court against banks that facilitated illegal online loans.

The team of Stueve Siegel Hanson lawyers securing the victories included Norman Siegel, Steve Six, Darren Kaplan, and Austin Moore.

2nd Circuit Denies Arbitration in Payday Loan RICO Case

The U.S. Court of Appeals for the Second Circuit affirmed the decision of the Eastern District of New York to deny arbitration after the arbitrator designated in the parties’ payday loan agreement—the National Arbitration Forum—declined to hear the dispute.

The Second Circuit rejected the banks’ argument that Section 5 of the Federal Arbitration Act required the appointment of a substitute arbitrator, holding that “the parties designated an exclusive arbitral forum, the district court compelled the parties to arbitrate before that forum, and the forum declined to accept the case . . . under such circumstances, a court cannot use Section 5 [of the Federal Arbitration Act] to circumvent the clear text of the parties’ agreement and appoint a substitute arbitrator.”

The Court concluded that “the district court correctly declined to compel [plaintiff] to arbitrate her claims before a forum to which she did not agree.”

Austin Moore argued the appeal on behalf of plaintiff Deborah Moss and the class of borrowers.

11th Circuit Refuses to Enforce Tribal Payday Loan Agreement

In a published opinion, the U.S. Court of Appeals for the Eleventh Circuit likewise declined to enforce a tribal payday loan agreement that required arbitration before “an illusory and unavailable arbitral forum” of the Cheyenne River Sioux Tribe (Tribe).

The Eleventh Circuit affirmed the finding of the Northern District of Georgia that the agreement’s “choice of arbitrator” provision indicating that borrowers could select American Arbitration Association (AAA) or JAMS to administer the arbitration did not save the agreement because it still required the arbitration to be conducted by a Tribal representative under non-existent law and procedures of the Tribe.

The Eleventh Circuit also declined to appoint a substitute arbitrator under Section 5 of the Federal Arbitration Act because the “pervasive references to the tribal forum and its rules provide evidence that the forum selection clause was not simply an ancillary concern but an integral aspect of the parties’ agreement to arbitrate.”

A Law360 article discussing the opinion is available here (subscription required).

Stueve Siegel Hanson previously prevailed in an opinion from the Eleventh Circuit allowing borrowers to pursue similar claims. This trio of appellate court decisions will permit borrowers to continue pursuing their underlying claims alleging that the banks violated state law and the Racketeer Influenced and Corrupt Organizations (RICO) Act by knowingly collecting unlawful debts for payday lenders in states that have outlawed payday loans.

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