Lending AgreementsвЂ™ 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 GeorgiaвЂ™s general 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 GeorgiaвЂ™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 laws and regulations, O.C.G.A. 7-4-18. Lenders relocated to dismiss online title TN the problem and hit the borrowers allegations that areвЂ™ class arguing that the mortgage agreementsвЂ™ forum selection clauses needed the borrowers to sue them in Illinois and therefore the course action waivers banned a course action. Siding because of the borrowers, the region court denied the lendersвЂ™ motions, keeping that both clauses violated GeorgiaвЂ™s public policy and had been unenforceable.
On interlocutory appeal as well as in an impression by Judge Adalberto Jordan, the Eleventh Circuit affirmed. 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 вЂњother than the usual court of competent jurisdiction in and also for the county when the debtor resides or the loan workplace is based. when it comes to forum selection clauseвЂќ Further, the statute describes that loan providers had utilized forum selection clauses to prevent Georgia courts and that вЂњthe General Assembly has determined that such techniques are unconscionable and really should be forbidden.вЂќ
Lenders argued that the Payday Lending Act could possibly be interpreted allowing non-Georgia forum selection clauses as the Act did not require disputes to specifically be introduced a Georgia county
it just so long as disputes should be solved in a вЂњcounty where the debtor resides or the loan workplace is found.вЂќ (emphasis included). The court disposed for this argument, reasoning that Georgia place provisions usually make use of the general term вЂњcountyвЂќ whenever referring to Georgia counties. Therefore the lendersвЂ™ argument made sense that is little from the ActвЂ™s clear prohibition on out-of-state forum selection clauses.
For a number of reasons, the court additionally rejected the lendersвЂ™ argument that the Payday Lending Act doesn’t connect with loans by out-of-state loan providers. First, the Georgia Supreme Court has recently refused this argument. 2nd, the statute broadly applies to вЂњany businessвЂќ that вЂњconsists in entire or perhaps in element of making . . . loans of $3,000.00 or less.вЂќ 3rd, if this argument held water, it can make the ActвЂ™s prohibition on out-of-state forum selection clauses meaningless.
Upcoming, the court addressed the course action waiver. It consented using the region courtвЂ™s conclusion that the Georgia Legislature meant to preserve course actions as an answer against payday lendersвЂ”both statutes expressly allow course actions. Enforcing the course action waiver would undermine the point and character of GeorgiaвЂ™s scheme that is statutory. This, alone, ended up being adequate to make the course action waiver unenforceable under Georgia legislation.
So as to persuade the court otherwise, lenders pointed to prior Eleventh Circuit casesвЂ”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)вЂ”which held that class action waivers in arbitration clauses weren’t void as against general public policy. The court wasn’t convinced, emphasizing that Jenkins and Bowen involved class action waivers in arbitration agreements. Consequently, the Federal Arbitration Act used and created a solid 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 an arbitration contract. Because an arbitration agreement had not been at problem right right here, the court explained, Jenkins and Bowen are distinguishable in addition to Federal Arbitration Act will not use.