Jessica Parm v. National Bank of California, N.A.
2016 U.S. App. LEXIS 15919
| 11th Cir. | 2016Background
- In 2013 Jessica Parm (borrower) electronically signed a $1,000 payday loan agreement with Western Sky Financial; Northern Bank of California (NBCal) authorized electronic transfers for repayment. The loan disclosed a very high effective interest rate and repayment obligation.
- The loan contained an arbitration clause stating disputes "shall be conducted by the Cheyenne River Sioux Tribal Nation (CRST) by an authorized representative" under CRST consumer rules, but also a "Choice of Arbitrator" clause allowing the borrower to select AAA, JAMS, or another organization to administer the arbitration.
- Parm sued NBCal in 2014 alleging illegal electronic transfers and challenged enforceability of the arbitration clause, asserting the tribal arbitral forum and rules did not exist.
- The district court denied NBCal’s motion to compel arbitration, holding the arbitration clause unenforceable because the designated tribal forum was unavailable and the clause was unconscionable; NBCal appealed.
- The Eleventh Circuit reviewed de novo, considered the delegation clause in the contract (which assigns gateway arbitrability questions to an arbitrator), and analyzed whether the delegation clause itself is enforceable given the alleged lack of an available forum.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the delegation clause is enforceable when the agreement names the CRST as the arbitral forum but that forum is unavailable | Parm: delegation clause is unenforceable because the arbitration requires an unavailable tribal forum | NBCal: Choice of Arbitrator (AAA/JAMS) provides a neutral, available forum and thus delegation is enforceable | Held: Delegation clause unenforceable because the agreement mandates the unavailable CRST forum and that forum is integral to the bargain |
| How to interpret the "Choice of Arbitrator" clause vis-à-vis the CRST requirement | Parm: clause cannot be read to displace the mandatory CRST representative requirement; forum remains tribal and unavailable | NBCal: AAA/JAMS can appoint arbitrators irrespective of tribal affiliation, supplying an available forum | Held: Choice of Arbitrator must be read to allow AAA/JAMS only to administer an arbitration so long as the arbitrator is a CRST representative; NBCal’s reading is rejected |
| Whether §5 FAA substitution of an arbitral forum can cure the unavailable CRST forum | Parm: substitution is improper because the tribal forum was integral to the agreement | NBCal: FAA §5 permits appointing a substitute forum or arbitrator | Held: §5 substitution not available because the chosen tribal forum was integral, so failure of that forum precludes enforcement |
| Whether Inetianbor controls and mandates denial of compulsion to arbitrate | Parm: Inetianbor requires finding unenforceability when CRST forum is integral and unavailable | NBCal: Parm’s agreement differs due to Choice of Arbitrator, so Inetianbor is distinguishable | Held: Inetianbor controls; agreements are materially indistinguishable and unenforceable for lack of an available, integral forum |
Key Cases Cited
- Inetianbor v. CashCall, Inc., 768 F.3d 1346 (11th Cir. 2014) (holding similar Western Sky tribal-forum arbitration clause unenforceable where tribal forum was unavailable and integral to the agreement)
- Parnell v. CashCall, Inc., 804 F.3d 1142 (11th Cir. 2015) (FAA governs interstate electronic loan agreements; challenges to delegation clauses must be made directly)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (delegation clauses are severable and a party may be required to arbitrate gateway arbitrability issues if the delegation clause itself is valid)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (arbitration agreements are treated like other contracts and are enforceable absent generally applicable contract defenses)
- Jackson v. Payday Fin., LLC, 764 F.3d 765 (7th Cir. 2014) (tribal-forum arbitration clauses can be unenforceable where the designated tribal forum is unavailable and integral to the agreement)