303 P.3d 777
Mont.2013Background
- Kelker applied online for a $600 payday loan from Geneva-Roth Ventures with a 780% APR.
- The Loan Agreement contained an arbitration clause and Kelker electronically signed the agreement; she could not view the full eight-page text without scrolling.
- Arbitration clause lacked clear guidance on fee waivers, determining “near” location, or who decides fee-waiver eligibility.
- Kelker sued for violation of the Montana Consumer Loan Act and related claims, asserting the loan was usurious and unconscionable.
- The District Court ruled the arbitration clause unenforceable; Geneva-Roth timely appealed.
- The Montana Supreme Court affirmed the district court, denying enforcement of the arbitration clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration clause should be enforced under Montana law and the FAA. | Kelker argues the clause is unconscionable and procedurally defective. | Geneva-Roth contends generally applicable contract defenses govern, with FAA preemption of state rules. | Arbitration clause is unconscionable and unenforceable under Montana contract law. |
Key Cases Cited
- Kortum-Managhan v. Herbergers NBGL, 349 Mont. 475 (2009 MT) (generally applicable contract law governs arbitration clause validity; unconscionability factors apply)
- Kelly v. Widner, 771 P.2d 142 (1989 MT) (factors for unconscionability include unequal power, lack of meaningful choice, and sophistication)
- Highway Specialties, Inc. v. State, 351 Mont. 527 (2009 MT) (test for unconscionability; contract terms unreasonably favor drafter)
- Summers v. Crestview Apts., 236 Mont. 123 (2010 MT) (unconscionability analysis for contract terms including arbitration)
- Club at Spanish Peaks, L.L.C. v. Club at Spanish Peaks, 343 Mont. 434 (2008 MT) (ambiguity interpreted against drafter; contract unconscionability factors)
- Fitzgerald v. Aetna Ins. Co., 577 P.2d 370 (1978 MT) (contract interpretation to resolve ambiguities; apply unconscionability principles)
- Riehl v. Cambridge Court GF, LLC, 2010 MT 28 (2010 MT) (ambiguity and unconscionability factors in arbitration clauses)
- Woodruff v. Bretz, Inc., 353 Mont. 6 (2009 MT) (adhesion contract and unconscionability factors; no meaningful choice)
- Concepcion v. Attorney General, Both U.S. and S. Ct. series cited (2012 US) (FAA preempts state rule prohibiting class arbitration; generally applicable defenses preserved)
- Nitro-Lift Techs., L.L.C. v. Howard, 133 S. Ct. 505 (2013 US) (FAA national policy favoring arbitration)