Lending Agreements’ Out-of-State Forum Selection Clauses and Class Action Waivers Violate Georgia Public Policy Blog 11thCircuitBusinessBlog

Lending Agreements’ Out-of-State Forum Selection Clauses and Class Action Waivers Violate Georgia Public Policy Blog 11thCircuitBusinessBlog

Next, the court addressed the class action waiver

Lenders had been banned from enforcing out-of-state forum selection clauses and class action waivers in loan agreements because such conditions violate Georgia’s general general public policy, the Eleventh Circuit held in Davis v. Oasis Legal Finance Operating Co., 2019 WL 4051592 (11th Cir. Aug. 28, 2019). A course of borrowers whom joined into identical loan agreements sued their loan providers, alleging that the agreements violated Georgia’s Payday Lending Act, O.C.G.A. § 16-17-1 et seq., Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., and laws that are usury O.C.G.A. § 7-4-18. Lenders relocated to dismiss the problem and hit the borrowers’ class allegations, arguing that the mortgage agreements’ forum selection clauses needed the borrowers to sue them in Illinois and that the course action waivers banned a course action. Siding using the borrowers, the region court denied the lenders’ motions, keeping that both clauses violated Georgia’s policy that is public had been unenforceable.

The Eleventh Circuit affirmed on interlocutory appeal and in an opinion by Judge Adalberto Jordan. When it comes to forum selection clause, the court reasoned that based on Georgia Supreme Court precedent, the Payday Lending Act establishes a clear public policy that prohibits loan providers from utilizing out-of-state forum selection clauses: the Act expressly bars loan providers from designating a court for the quality of disputes “other when compared to a court of competent jurisdiction in and also for the county when the debtor resides or the loan office is located.” Further, the statute describes that loan providers had utilized forum selection clauses to prevent Georgia courts and that “the General Assembly has determined that such techniques are unconscionable and really should be forbidden.”

Lenders argued that the Payday Lending Act could possibly be interpreted to allow non-Georgia forum selection clauses considering that the Act failed to require disputes to specifically be introduced a Georgia county, it just so long as disputes needs to be solved in a “county when the debtor resides or even the loan workplace is based.” (emphasis included). The court disposed of the argument, reasoning that Georgia place conditions usually make use of the term that is general” whenever discussing Georgia counties. As well as the lenders’ argument made little sense based from the Act’s clear prohibition on out-of-state forum selection clauses.

The court also rejected the lenders’ argument that the Payday Lending Act does not apply to loans by out-of-state lenders for several reasons. First, the Georgia Supreme Court has recently refused this argument. 2nd, the statute broadly is applicable to “any business” that “consists in entire or in element of making . . . loans of $3,000.00 or less.” 3rd, if this argument held water, it might make the Act’s prohibition on out-of-state forum selection clauses meaningless.

So as to persuade the court otherwise, lenders pointed to prior Eleventh Circuit instances Jenkins

It consented aided by the region court’s summary that the Georgia Legislature designed to protect course actions as a fix against payday lenders—both statutes expressly allow course actions. Enforcing the course action waiver would undermine the point and payday loans Pennsylvania no credit check nature of Georgia’s statutory scheme. This, alone, had been adequate to make the course action waiver unenforceable under Georgia legislation.

First United states advance loan of Georgia, LLC, 400 F.3d 868 (11th Cir. 2005), and Bowen v. First Family Financial Services, Inc., 233 F.3d 1331 (11th Cir. 2000)—which held that class action waivers in arbitration clauses are not void as against general public policy. The court had not been convinced, emphasizing that Jenkins and Bowen involved class action waivers in arbitration agreements. Therefore, the Federal Arbitration Act used and created a stronger federal policy in benefit of arbitration. Furthermore, Supreme Court precedent establishes that area 2 of this Federal Arbitration Act overrides state statute or common-law doctrine that efforts to undercut the enforceability of a arbitration contract. Because an arbitration contract wasn’t at issue right right right here, the court explained, Jenkins and Bowen are distinguishable as well as the Federal Arbitration Act will not use.

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