854 S.E.2d 642
Va.2021Background
- NC Financial Solutions of Utah, LLC (NCFS‑Utah), an online lender, made >47,000 loans to Virginia consumers (2012–2018) at nominal interest rates of roughly 34%–155%.
- The Virginia Attorney General sued under the Virginia Consumer Protection Act (VCPA) seeking injunctive relief, civil penalties, fees, and orders to restore money to consumers (restitution).
- Loan agreements contained broad arbitration clauses governed by the FAA; NCFS‑Utah moved to dismiss or to compel arbitration of individual damages, arguing FAA preemption and that restitution would undermine arbitration agreements.
- The Commonwealth invoked EEOC v. Waffle House, stressing it is not a party to the arbitration agreements and is enforcing the VCPA on behalf of the public.
- The Fairfax Circuit Court denied NCFS‑Utah’s motion, holding the Commonwealth is not bound by the arbitration clauses and that the VCPA permits restitution to identifiable victims; NCFS‑Utah appealed.
- The Supreme Court of Virginia affirmed the circuit court judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitration agreements bar the Commonwealth from litigating restitution and other VCPA claims | Commonwealth: it is not a party to the loan contracts and thus is not bound by arbitration; may litigate enforcement in court (Waffle House) | NCFS‑Utah: FAA and arbitration provisions require individual claims be arbitrated; restitution would nullify arbitration and is preempted | Court: Commonwealth not bound by arbitration clauses; FAA does not preclude its judicial enforcement or victim‑specific relief (affirmed) |
| Whether the VCPA authorizes the Attorney General to obtain restitution for individual consumers | Commonwealth: VCPA remedial scheme and Code §§ 59.1‑203, 59.1‑205 authorize injunctions and restoration of money/property to identifiable victims | NCFS‑Utah: VCPA does not permit the Commonwealth to pursue individual restitution in court when arbitration agreements exist | Court: Statutory text and remedial purpose permit restitution; §§ 59.1‑203 and 59.1‑205 authorize restoring money/property to identifiable persons (affirmed) |
Key Cases Cited
- EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) (agency enforcing public rights is not necessarily bound by private arbitration agreements and may seek victim‑specific relief)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (FAA places arbitration agreements on same footing as other contracts)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (FAA does not alter background principles of state contract law about who is bound by agreements)
- Amchem Prods., Inc. v. Newport News Cir. Ct. Asbestos Cases Pls., 264 Va. 89 (2002) (federal substantive law governs whether parties must arbitrate under the FAA)