Parnell v. CashCall, Inc.
181 F. Supp. 3d 1025
N.D. Ga.2016Background
- Plaintiff (Georgia resident) obtained a $1,000 online loan from Western Sky; CashCall later serviced and funded the loan and received payments from Plaintiff.
- The loan agreement (Parnell Loan Agreement) named Western Sky as lender, asserted exclusive governing law/jurisdiction of the Cheyenne River Sioux Tribe, and contained an arbitration clause requiring arbitration “by the Cheyenne River Sioux Tribal Nation by an authorized representative” and a delegation clause covering arbitrability.
- Plaintiff sued CashCall in Georgia state court asserting state-law claims (including violation of Georgia payday-lending law); Western Sky and Webb were later dismissed; CashCall moved to compel arbitration and stay or dismiss.
- The Eleventh Circuit previously reversed denial of an earlier motion to compel and remanded; Plaintiff amended and specifically challenged the delegation clause and enforceability of the arbitration agreement.
- The district court found the tribal forum/infrastructure (consumer dispute rules, authorized tribal arbitral representatives, applicable tribal law) effectively unavailable and determined the forum-selection/choice-of-law language was procured by fraud/overreaching and attempted to waive application of state and federal law.
- Because the arbitration clause was integral to the contract, the court concluded the delegation and arbitration provisions were unenforceable (unconscionable / chosen forum unavailable) and denied CashCall’s motion to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAA arbitration applies and covers the dispute | Parnell's loan dispute falls within arbitration but arbitration clause and delegation provision are invalid because the tribal forum and rules do not exist and the clause waives statutory remedies | FAA applies; clause valid and delegates arbitrability to arbitrator/tribal forum; parties may select AAA/JAMS as administrator and proceed | FAA governs, but court denied enforcement because chosen tribal forum is unavailable and provision is unconscionable |
| Validity of delegation provision (who decides arbitrability) | Delegation provision is void/unenforceable because it requires arbitrability to be decided by a non-existent tribal forum/representative and waives federal/state rights | Delegation clause is clear and must be enforced; court should send arbitrability to arbitrator per Rent-A-Center | Court considered and rejected delegation: Plaintiff raised a specific challenge and court found the provision unenforceable |
| Whether choice-of-law/jurisdiction constitutes waiver of federal/state law | Clause attempts to renounce federal/state law and denies access to statutory remedies; thus unconscionable and against public policy | Choice-of-law is permissible; parties can select tribal law and an administering organization to handle arbitration | Court held clause operated as a prohibited “choice of no law,” contravened public policy, and was unenforceable |
| Severability / availability of alternative arbitration (AAA/JAMS) | Even if AAA/JAMS administer, the agreement limits their rules to the extent they don't conflict with tribal law; because tribal law/rules are absent, arbitration cannot proceed | The clause permits selection of established arbitral administrators and arbitrators, so arbitration remains available | Court found the administrator-selection language insufficient (administrator ≠ tribal arbitrator) and concluded arbitration unavailable/severance inappropriate |
Key Cases Cited
- Klay v. All Defendants, 389 F.3d 1191 (11th Cir. 2004) (two-step FAA arbitrability inquiry and liberal federal policy favoring arbitration)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (distinction between challenges to arbitration clause vs. contract generally)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (parties may delegate arbitrability to arbitrator; specific challenges to delegation must be litigated)
- Jenkins v. First American Cash Advance of Georgia, LLC, 400 F.3d 868 (11th Cir. 2005) (payday-loan transactions can involve interstate commerce under FAA)
- Inetianbor v. CashCall, Inc., 768 F.3d 1346 (11th Cir. 2014) (tribal forum in similar Western Sky agreement was unavailable; arbitration provision unenforceable)
- Parnell v. CashCall, Inc., 804 F.3d 1142 (11th Cir. 2015) (recognizing express delegation language in Western Sky agreements)
- Jackson v. Payday Financial, LLC, 764 F.3d 765 (7th Cir. 2014) (tribal courts have limited jurisdiction; findings that similar arbitration clauses were sham)
- Hayes v. Delbert Services Corp., 811 F.3d 666 (4th Cir. 2016) (arbitration agreement invalid where it renounces application of federal law and seeks to evade statutory protections)