129 F.4th 418
7th Cir.2025Background
- Eido Hussam Al-Nahhas, an Illinois resident, received four high-interest loans (up to nearly 700% annual rate) from Rosebud Lending LZO (ZocaLoans), allegedly controlled by the Rosebud Sioux Tribe.
- Al-Nahhas alleged ZocaLoans was a front for non-tribal, private equity firms (777 Partners, LLC and Tactical Marketing Partners, LLC) seeking to evade state usury laws using tribal sovereign immunity.
- Al-Nahhas sued ZocaLoans and the firms under Illinois usury statutes and the federal RICO Act for predatory lending practices.
- Defendants participated in litigation for over a year before attempting, for the first time, to compel arbitration based on an arbitration clause in the loan agreements.
- The district court denied the arbitration motion, finding waiver through litigation conduct; ZocaLoans settled with the plaintiff, but 777 Partners and Tactical Marketing Partners appealed, arguing the case was now moot and that arbitration was required.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides waiver of right to arbitrate | Court must decide if waiver occurred | Arbitrator should decide as waiver is 'procedural' | Court decides waiver |
| Whether right to compel arbitration was waived | Defendants participated in litigation = waiver | No waiver; delay was due to counsel/incompetence, arbitration still available | Defendants waived arbitration |
| Enforceability of mootness after settlement | Case not moot: punitive damages & other relief remain | Settlement with ZocaLoans moots the claims, precludes further relief | Case not moot; punitive damages claim remains |
| Whether third parties can compel arbitration | 777 Defendants not parties/beneficiaries, cannot compel | Arbitration clause applies to related entities/beneficiaries | Not reached (waiver sufficient to decide) |
Key Cases Cited
- St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., 969 F.2d 585 (7th Cir. 1992) (waiver of arbitration right can be found by participation in litigation)
- Morgan v. Sundance, Inc., 596 U.S. 411 (2022) (courts not arbitrators decide waiver by litigation conduct)
- Brickstructures, Inc. v. Coaster Dynamix, Inc., 952 F.3d 887 (7th Cir. 2020) (waiver includes both explicit and implied abandonment)
- Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995) (deferential standard in reviewing waiver due to litigation involvement)
- Knox v. Serv. Emps. Int’l Union, Local 1000, 567 U.S. 298 (2012) (standard for mootness — whether any effectual relief can be granted)