Loan providers had been banned from enforcing out-of-state forum selection clauses and class action waivers in loan agreements because such conditions violate Georgia’s public policy, the Eleventh Circuit held in Davis v. Oasis Legal Finance working Co., 2019 WL 4051592 (11th Cir. Aug. 28, 2019). A course of borrowers whom joined into identical loan agreements sued their loan providers, alleging that the agreements violated Georgia’s Payday Lending Act, O.C.G.A. § 16-17-1 et seq., Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., and laws that are usury O.C.G.A. § 7-4-18. Lenders relocated to dismiss the issue and hit the borrowers’ class allegations, arguing that the mortgage agreements’ forum selection clauses needed the borrowers to sue them in Illinois and therefore the course action waivers banned a course action. Siding utilizing the borrowers, the region court denied description the lenders’ motions, keeping that both clauses violated Georgia’s policy that is public had been unenforceable.

The Eleventh Circuit affirmed on interlocutory appeal and in an opinion by Judge Adalberto Jordan. When it comes to forum selection clause, the court reasoned that based on Georgia Supreme Court precedent, the Payday Lending Act establishes a clear public policy that prohibits loan providers from making use of out-of-state forum selection clauses: the Act expressly bars loan providers from designating a court for the quality of disputes “other compared to a court of competent jurisdiction in and also for the county when the debtor resides or even the loan office is located.” Further, the statute describes that loan providers had used forum selection clauses to prevent Georgia courts and that “the General Assembly has determined that such methods are unconscionable and really should be forbidden.”

Lenders argued that the Payday Lending Act could possibly be interpreted to allow non-Georgia forum selection clauses considering that the Act failed to require disputes to specifically be introduced a Georgia county, it just so long as disputes should be settled in a “county when the debtor resides or even the loan workplace is based.” (emphasis included). The court disposed of the argument, reasoning that Georgia place provisions usually utilize the basic term “county” whenever discussing Georgia counties. And also the lenders’ argument made little sense based from the Act’s clear prohibition on out-of-state forum selection clauses.

For all reasons, the court additionally rejected the lenders’ argument that the Payday Lending Act will not connect with loans by out-of-state loan providers. First, the Georgia Supreme Court has recently refused this argument. 2nd, the statute broadly is applicable to“any continuing business” that “consists in entire or perhaps in element of making . . . loans of $3,000.00 or less.” 3rd, if this argument held water, it could make the Act’s prohibition on out-of-state forum selection clauses meaningless.

Then, the court addressed the class action waiver. It consented because of the region court’s summary that the Georgia Legislature designed to protect course actions as a fix against payday lenders—both statutes expressly permit course actions. Enforcing the course action waiver would undermine the point and nature of Georgia’s scheme that is statutory. This, alone, had been enough to make the course action waiver unenforceable under Georgia legislation.

So as to persuade the court otherwise, lenders pointed to prior Eleventh Circuit cases—Jenkins v. First American Cash Advance of Georgia, LLC, 400 F.3d 868 (11th Cir. 2005), and Bowen v. First Family Financial Services, Inc., 233 F.3d 1331 (11th Cir. 2000)—which held that class action waivers in arbitration clauses are not void as against general public policy. The court had not been convinced, emphasizing that Jenkins and Bowen class that is involved waivers in arbitration agreements. Consequently, the Federal Arbitration Act used and created a very good federal policy in benefit of arbitration. Furthermore, Supreme Court precedent establishes that area 2 of the Federal Arbitration Act overrides a continuing state statute or common-law doctrine that efforts to undercut the enforceability of an arbitration contract. Because an arbitration contract wasn’t at problem right here, the court explained, Jenkins and Bowen are distinguishable therefore the Federal Arbitration Act will not use.