Lending Agreements’ Out-of-State Forum Selection Clauses and Class Action Waivers Violate Georgia Public Policy 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 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 laws that are usury O.C.G.A. § 7-4-18. The lenders relocated 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 class 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 were 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 based on Georgia Supreme Court precedent, the Payday Lending Act establishes a clear public policy that prohibits loan providers from using out-of-state forum selection clauses: the Act expressly bars loan providers from designating a court when it comes to quality of disputes “other compared to a court of competent jurisdiction in and also for the county where the debtor resides or even 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 methods are unconscionable and really should be forbidden.”

Lenders argued that the Payday Lending Act could possibly be interpreted allowing non-Georgia forum selection clauses considering that the Act failed to require disputes to specifically be introduced a Georgia county, it merely provided disputes needs to be solved in a “county when the debtor resides or even the mortgage workplace is found.” (emphasis included). The court disposed with this argument, reasoning that Georgia place conditions frequently utilize the basic term “county” whenever discussing Georgia counties. While the lenders’ argument made little sense based regarding 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 continuing 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.

Then, the court addressed the course action waiver. It consented using the region 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 point and character of Georgia’s statutory scheme. This, alone, ended up being adequate to make the class 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 public policy. The court wasn’t convinced, emphasizing that Jenkins and Bowen class that is involved waivers in arbitration agreements. Consequently, the Federal Arbitration Act used and created a stronger policy that is federal benefit of arbitration. More over, Supreme Court precedent establishes that area 2 of this Federal prosper personal loans payment plan Arbitration Act overrides state statute or common-law doctrine that efforts to undercut the enforceability of an arbitration contract. Because an arbitration contract wasn’t at problem right here, the court explained, Jenkins and Bowen are distinguishable therefore the Federal Arbitration Act will not use.