CashCall’s Use of Tribal Arbitration under Attack

Posted by NCBRC - October 17, 2014

An arbitration clause is not enforceable when the specified forum is unavailable. So said the Eleventh Circuit Court of Appeals in Inetianbor v. CashCall, Inc., __ F.3d __, 2014 WL 4922225 (11th Cir. Oct. 2, 2014).

The plaintiff, Mr. Inetianbor, paid $3,252.65 to CashCall as servicer of his $2,500 loan and, believing the debt repaid, refused to pay the next monthly bill. When CashCall reported the debt to credit agencies as being in default, the plaintiff filed a complaint in district court alleging violation of the Fair Credit Reporting Act as well as defamation and usury violations. CashCall sought to enforce an arbitration clause in the lending agreement in which the plaintiff: “agree[s] that any Dispute . . . will be resolved by Arbitration, which shall be conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of this Agreement.” After a couple attempts to comply with the arbitration clause, Mr. Inetianbor, informed the court that the Tribe “does not authorize Arbitration.”

The district court found that because the forum specified in the loan agreement was unavailable, the clause was unenforceable and denied CashCall’s motion to compel. CashCall appealed.

The Eleventh Circuit began with the Federal Arbitration Act (FAA) which provides that a written agreement in any contract to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Arbitration clauses are to be liberally construed and a district court is empowered to compel compliance. Noting that there is disagreement among the circuits, the court reiterated its holding in Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217, 1222 (11th Cir. 2000), that where the choice of forum is an integral part of an arbitration clause, the clause will not be enforceable upon unavailability of that forum. (Citing Green v. U.S. Cash Advance Ill., LLC, 724 F.3d 787, 790–92 (7th Cir. 2013) as criticizing and rejecting the integral provision rule).

To determine whether particular clause of an arbitration agreement is integral to that agreement the court looked to the intent of the parties as evidenced by the contract language. In this case, the agreement made several references to the Cheyenne River Sioux Tribal Nation including mandatory language in the arbitration provision. The importance of Tribal involvement was clear from the first provision of the contract specifying that the agreement “is subject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe, Cheyenne River Indian Reservation.” The court distinguished Brown, which had ultimately determined that the specific forum was not integral to the contract, on the basis that the arbitration provision at issue in Brown referred to procedural rules rather than a specific forum. In this case, the overall contract referenced the Tribe in five out of nine paragraphs, in language that made clear that the forum itself was essential to the agreement to arbitrate and, therefore, the absence of the word “exclusive” did not open the door to other fora. The court rejected CashCall’s contrary precedents on the bases that they referenced rules of a particular forum or were not otherwise expressed in mandatory terms.

The court also rejected CashCall’s argument that the severability provision of the contract permitted it to arbitrate in a forum other than the Tribe. The same considerations that rendered the forum integral to the arbitration clause, rendered it essential to the contract in general and, therefore, not severable.

After confirming that the Tribe was, in fact, unavailable as an arbitration forum, the circuit court affirmed the district court’s holding.

Inetianbor 11th Circuit Opinion

NCBRC recently filed a motion for leave to file an amicus brief on behalf of the NACBA membership in the Fourth Circuit case of Moses v. CashCall, No. 14-1195. Like Inetianbor, that case involves a Tribal Arbitration clause in a lending agreement. NACBA’s brief calls out CashCall on its use of sham Tribal Arbitration systems to evade oversight by district courts in furtherance of its usurious lending practices. The brief discusses the bankruptcy court’s power to deny arbitration when it finds an “inherent conflict” between arbitration and the purposes of the Bankruptcy Code. Such conflict may be found where the litigation requires in-depth interpretation of the Code to make essential bankruptcy determinations.

Moses is scheduled for argument on October 30, 2014.

Moses NACBA amicus


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