ALFECHE v. CASH AMERICA INTERNATIONAL, INC.
2:09-cv-00953
E.D. Pa.Aug 12, 2011Background
- Plaintiffs allege illegal, unfair, and deceptive payday lending practices under Pennsylvania law (LIPL, CDCA, UTPCPL) against Cash America entities.
- Lenders provided online short-term payday loans to Pennsylvania borrowers, funded by Nevada-based Cash America of Nevada; borrowers signed loan agreements via website.
- Arbitration provisions require individual arbitration and prohibit class actions, with a jury trial waiver and a small-claims exception; FAA governs arbitration.
- Plaintiffs filed amended class action seeking damages and a declaration that arbitration provisions are unconscionable under Pennsylvania law; CAFA jurisdiction exists (diversity and >$5 million).
- Defendants moved to compel individual arbitration and stay litigation; court must determine arbitrability and validity of arbitration clause under FAA and relevant law.
- Court grants motion to compel arbitration, ruling the arbitration clause is valid and within the scope of the agreement despite Concepcion-related unconscionability arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitrability and scope of agreement | Alfeche/Saunders contend the clause is unconscionable and unenforceable under PA law. | Cash America asserts the FAA preempts PA unconscionability and that claims fall within the arbitration clause. | Arbitration clause valid and scope includes all claims. |
| Effect of Concepcion on class waiver | Concepcion does not permit class-wide arbitration; waiver unenforceable. | Concepcion preempts PA unconscionability; class waiver enforceable. | FAA preempts PA law; class waiver valid and enforceable. |
| Unconscionability defense under FAA | PA unconscionability law undermines FAA; class waiver should be invalid. | Concepcion treats unconscionability as preempted; enforce arbitration. | Unconscionability defenses barred by FAA as applied to class waiver. |
| Impact of alleged illegality of loan agreements on arbitration | If loans illegal, arbitrator should determine overall illegality and void arbitration clause. | Arbitrator decides legality if the issue arises; court should compel arbitration. | Proceed to arbitration; potential illegality may be addressed by arbitrator. |
| Choice of law and CAFA jurisdiction impact | Requests court to rule on unconscionability and class action waiver as unenforceable. | FAA standards govern; CAFA supports class action context but arbitration remains appropriate. | FAA governs; clause enforceable; arbitration compelled. |
Key Cases Cited
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (U.S. 2003) (arbitrability decisions by courts; FAA enforcement)
- Harris v. Green Tree Financial Corp., 183 F.3d 173 (3d Cir. 1999) (scope and interpretation of arbitration clauses)
- Kaneff v. Del. Title Loans, 587 F.3d 616 (3d Cir. 2009) (summary-like standard for motions to compel arbitration)
- Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529 (3d Cir. 2005) (arbitration clause applicability; scope)
- Concepcion, 131 S. Ct. 1740 (Supreme Court 2011) (FAA preempts state unconscionability rules; class waivers enforceable)
- Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005) (class-action waiver unconscionability rules preempted by FAA as applied to arbitration)
- Thibodeau v. Comcast Corp., 912 A.2d 874 (Pa. Super. Ct. 2006) (PA unconscionability analysis; class action waivers favored classwide arbitration)
- Pacific Health Care Sys. v. Book, 538 U.S. 401 (U.S. 2003) (mere speculation on arbitrator interpretation not to block arbitration)
- Cash Am. Net of Nev., LLC v. Commonwealth of Pa., 8 A.3d 282 (Pa. 2010) (lending practices legality under PA law; context for arbitration outcome)