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

Loan providers 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 working Co., 2019 WL 4051592 (11th Cir. Aug. 28, 2019). A class of borrowers who entered into identical loan agreements sued their lenders, 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 short term payday loans to dismiss the problem and hit the borrowers allegations that are’ class arguing that the mortgage agreements’ forum selection clauses needed the borrowers to sue them in Illinois and therefore the course action waivers banned a course action. Siding utilizing 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. 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 lenders from designating a court for the quality of disputes “other than the usual court of competent jurisdiction in and also for the county where the borrower resides or even the loan workplace is based. when it comes to forum selection clause” 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 should be forbidden.”

Lenders argued that the Payday Lending Act could possibly be interpreted to permit non-Georgia forum selection clauses since the Act didn’t require disputes to specifically be introduced a Georgia county

it just provided disputes needs to be settled in a “county when the borrower resides or perhaps the mortgage workplace is found.” (emphasis included). The court disposed with this argument, reasoning that Georgia location provisions usually utilize the basic term “county” whenever discussing Georgia counties. While the lenders’ argument made sense that is little regarding the Act’s clear prohibition on out-of-state forum selection clauses.

For many reasons, the court additionally rejected the lenders’ argument that the Payday Lending Act will not connect with loans by out-of-state loan providers. First, the Georgia Supreme Court has recently rejected this argument. 2nd, the statute broadly applies to“any continuing business” that “consists in whole or perhaps in element of making . . . 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.

Upcoming, the court addressed the course action waiver. It consented utilizing the region court’s conclusion that the Georgia Legislature designed to protect course actions as an answer against payday lenders—both statutes expressly allow course actions. Enforcing the course action waiver would undermine the reason and nature of Georgia’s scheme that is statutory. This, alone, had been adequate 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 weren’t void as against general general 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 used and created a powerful policy that is federal benefit of arbitration. More over, Supreme Court precedent establishes that area 2 of this Federal Arbitration Act overrides a continuing state statute or common-law doctrine that efforts to undercut the enforceability of a arbitration contract. Because an arbitration contract had not been at problem right here, the court explained, Jenkins and Bowen are distinguishable while the Federal Arbitration Act will not use.

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