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

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

Loan providers were banned from enforcing out-of-state forum selection clauses and class action waivers in loan agreements because such conditions violate Georgia’s general public policy, the Eleventh Circuit held in Davis v. Oasis Legal Finance working 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 issue 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 with all 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. Are you aware that forum selection clause, the court reasoned that in accordance with 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 resolution of disputes “other than the usual 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 used forum selection clauses to prevent Georgia courts and that “the General Assembly has determined that such techniques are unconscionable and may be prohibited.”

Lenders argued that the Payday Lending Act could possibly be interpreted to allow non-Georgia forum selection clauses since the Act failed to especially need disputes to be introduced a Georgia county

it just provided disputes should be solved in a “county where the debtor resides or perhaps the loan workplace is situated.” (emphasis included). The court disposed for this argument, reasoning that Georgia location conditions frequently make use of the basic term “county” whenever discussing Georgia counties. Plus the lenders’ argument made sense that is little regarding the Act’s clear prohibition on out-of-state forum selection clauses.

For all reasons, the court additionally rejected the lenders’ argument that the Payday Lending Act will not connect with loans by out-of-state lenders. First, the Georgia Supreme Court has refused this argument. 2nd, the statute broadly is applicable to “any business” that “consists in entire or in element of making bad credit personal loans not payday loans. . . loans of $3,000.00 or less.” 3rd, if this argument held water, it could make the Act’s prohibition on out-of-state forum selection clauses meaningless.

Then, the court addressed the course action waiver. It consented because of the region court’s summary that the Georgia Legislature designed to protect course actions as an answer against payday lenders—both statutes expressly allow course actions. Enforcing the class action waiver would undermine the reason and nature of Georgia’s scheme that is statutory. This, alone, ended up being enough to make the course action waiver unenforceable under Georgia legislation.

So as to persuade the court otherwise, lenders pointed to prior Eleventh Circuit cases—Jenkins v. First American Cash Advance 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 public policy. The court had not been convinced, emphasizing that Jenkins and Bowen involved class action waivers in arbitration agreements. Consequently, the Federal Arbitration Act applied and created a good policy that is federal benefit of arbitration. More over, Supreme Court precedent establishes that section 2 of this Federal Arbitration Act overrides a continuing state statute or common-law doctrine that attempts to undercut the enforceability of a arbitration contract. Because an arbitration contract wasn’t at problem right right right here, the court explained, Jenkins and Bowen are distinguishable in addition to Federal Arbitration Act will not use.