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

Lenders 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 who 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 usury guidelines, 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 therefore the class action waivers banned a course action. Siding aided by the borrowers, the region court denied the lenders’ motions, keeping that both clauses violated Georgia’s general public policy and had been unenforceable.

The Eleventh Circuit affirmed on interlocutory appeal and in an opinion by Judge Adalberto Jordan. The court reasoned that relating to Georgia Supreme Court precedent, the Payday Lending Act establishes a clear public policy that prohibits lenders from making use of out-of-state forum selection clauses: the Act expressly bars loan providers from designating a court for the quality of disputes “other super pawn america hours compared to a court of competent jurisdiction in and also for the county when the debtor resides or perhaps the loan workplace is situated. when it comes to forum selection clause” Further, the statute explains that loan providers had utilized forum selection clauses to avoid Georgia courts and that “the General Assembly has determined that such techniques are unconscionable and may be forbidden.”

Lenders argued that the Payday Lending Act might be interpreted to allow non-Georgia forum selection clauses considering that the Act failed to require disputes to specifically be earned a Georgia county, it just provided disputes needs to be settled in a “county when the debtor resides or the loan workplace is based.” (emphasis added). The court disposed of this argument, reasoning that Georgia place conditions frequently utilize the general term “county” whenever discussing Georgia counties. As well as the lenders’ argument made little sense based 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 affect loans by out-of-state loan providers. First, the Georgia Supreme Court has refused this argument. 2nd, the statute broadly is applicable to “any business” that “consists in entire or perhaps 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.

Then, the court addressed the course action waiver. It consented with all the district court’s summary that the Georgia Legislature meant 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 spirit of Georgia’s statutory scheme. This, alone, had been 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 general general general public policy. The court had not been convinced, emphasizing that Jenkins and Bowen class that is involved waivers in arbitration agreements. Consequently, the Federal Arbitration Act used and created a good policy that is federal benefit of arbitration. More over, 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 an arbitration contract. Because an arbitration contract had not been at problem right here, the court explained, Jenkins and Bowen are distinguishable and also the Federal Arbitration Act doesn’t use.