The defendants appeal from the denial of their motion to submit the claims of two of the plaintiffs to arbitration. 9 U.S.C. § 16(a)(1)(B). The defendants are Instant Cash, Inc., a small-loan company active in Indiana, and its lawyer, Steinkamp (also Steinkamp’s firm, but it can be ignored). Instant Cash made “payday” loans to the four plaintiffs. A payday loan is a loan of *776 short duration, typically two weeks, at an astronomical annual interest rate, here more than 500 percent. As the name implies, it is a loan to poor or improvident borrowers who have no savings or credit and run out оf money for their living expenses before they receive their weekly or biweekly paycheck. The borrowers must be desperate, since the annual percentage rate оf the loans is disclosed to them in clear and conspicuous type on the loan instrument.
The plaintiffs defaulted and Steinkamp represented Instant Cash in suits against them in small-claims court. (The stаtus of the small-claims litigation is unclear.) They riposted with this federal suit, in which they charge the defendants with RICO violations (Steinkamp they further charge with violating the federal Fair Debt Collection Praсtices Act) and also with violating Indiana usury law. Indiana’s supreme court has held that payday loans at the interest rates typically and here charged by the lenders are usurious and therefоre unenforceable.
Livingston v. Fast Cash USA, Inc.,
The defendants moved for an order to arbitrate their federal and state law disputеs with the plaintiffs, invoking an arbitration agreement that the plaintiffs had signed. It might seem that the defendants would have little to gain from arbitration, given Livingston. But they may think that an arbitrator is more likely to ignore or mistаke the law than a judge would be; anyway there are other claims in the case besides the usury claim and the defendants may fear being dragged into class action suits if borrowers can prоceed against them in state or federal court. The defendants’ desire to arbitrate is therefore understandable on multiple grounds.
All the plaintiffs had signed the arbitration agreement but two of them had not signed it at the time they took out the loans on which they base this suit. Sheila Smith had borrowed $150 from Instant Cash on July 12, 2000, to be repaid on the 26th. On the same day that she signed the loan agreement shе signed a separate agreement, entitled “Additional Terms and Conditions of This [Loan] Agreement. Waiver of Jury Trial and Arbitration Agreement” (we’ll call this the “waiver agreement”), which provided that all disputes would be resolved by arbitration with the exception of disputes within the jurisdiction of a small-claims court. “Disputes” are defined in the waiver agreement to
include, without limitation (a) any fеderal or state law claims, disputes or controversies, arising from or relating directly or indirectly to the [loan-application form], this Agreement [i.e., the loan agreement] (including this arbitrаtion provision and the fees charged), or any prior agreement or agreements between you and us; (b) all counterclaims, cross-claims and third-party claims; (c) all common law сlaims, based upon contract, tort, fraud, and other intentional torts; (d) any claims based upon a violation of any state or federal constitution, statute or regulation; (e) all claims аsserted by us against you, including claims for money damages to collect any sum we claim you owe us; (f) all claims asserted by you individually, as a private attorney general, as a represеntative and or member of a class of persons, or in any other Representative capacity, against us and/or any of our employees, agents, [etc.].
The agreement thus (in clause (f)) also authorizes agents of Instant Cash, such as *777 Steinkamp, to demand arbitration of their disputes with the borrowers.
On August 15, Smith signed another loan agreement, this one for $125, with repayment again due in two weeks. But this time she didn’t sign a waiver agreement. Although the back of the loan agreement contains a list of additional terms and conditions (the same list had appeared on the back of her July loan agreement) including a waiver clause, this clause, unlike what we are calling the waiver agreement, does not refer to arbitration or litigation.
The facts pertaining to plaintiff Hicks are the same. But the other two plaintiffs signed the waiver agreement every time they borrowed from Instant Cash, and the district judge held that they were bound by the agreement and so had to arbitrate their RICO and other claims. These other two plaintiffs do not appeal from this ruling, and could not if they wanted to because the grant of a motion to compel arbitration is not appealable unless the judge dismisses the case. 9 U.S.C. § 16(b);
McCaskill v. SCI Management Corp.,
The defendants pin their contention that Smith and Hicks must arbitrate on clause (d) of the waiver agreement (“any claims based upon a violation of аny state or federal constitution, statute or regulation”). But it is apparent that clauses (b) through (f), including therefore (d), relate back to (a), which limits the duty to arbitrate to disputes arising under “this Agreement,” that is, the loan agreement, and to disputes arising under “prior ... agreements.” The function of clauses (b) through (f) is to make clear that neither the legal theory nor the procedural vehicle for a claim arising out of an agreement as defined in clause (a) is relevant to arbitra-bility; all that matters is that the claim arise from either the current loan agreement or a prior loan agreement.
Thus the waiver agreement that Smith signed on July 12 related to the loan agreement that she signed the same day plus any prior agreements between her and Instant Cash. But the dispute on which she bases her claim in this lawsuit (likewise Hicks, mutatis mutandis) arose out of the loan agreement that she signed on August 15. If (b) through (f) are read as standing free from any loan agreement, absurd results еnsue, for example that if Instant Cash murdered Smith in order to discourage defaults and her survivors brought a wrongful death suit against Instant Cash (a “common law” suit, thus encompassed by (c)), Instant Cash could insist that the wrоngful death claim be submitted to arbitration. For that matter, if an employee of Instant Cash picked Smith’s pocket when she came in to pay back the loan, and Smith sued the employeе for conversion, he would be entitled to arbitration of her claim. It would make no difference that the conversion had occurred in Smith’s home 20 years after her last transaction with Instant Cаsh.
The defendants’ lawyer blanched when confronted with such hypothetical cases at oral argument but was unable to suggest a limiting principle. Or to explain why, if the agreement appliеs to subsequent as well as prior loan agreements, clause (a) refers explicitly to prior agreements but contains no reference to subsequent ones. We do not put too muсh weight on this point, however, lest it seem that if the word “prior” had not appeared in the waiver agreement the defendants would prevail. Considering who the borrowers are,
*778
an agreement requiring them to arbitrate disputes arising out of future agreements (unless perhaps they were merely rollovers, that is, renewals or extensions of previous loan agreements) might be thought unconscionable. See, e.g.,
Weaver v. American Oil Co.,
All that is certаin is that the waiver agreement, read sensibly and as a whole, with careful attention to the relation among the clauses, does not apply to future disputes, including disputes over future loan agreements. But that is enough to defeat the appeals.
A cynic might argue that, given the desperation of people who take out payday loans, these plaintiffs would have signed anything, so that relieving them from the duty to arbitrate gives them a windfall based on an oversight by Instant Cash. The defendants do not make this argument, however, perhaps fearing that it would invite a conclusion that payday loans are unconscionable and therefore unenforceable even in states that do not deem them usurious.
AFFIRMED.