Hayes v. Delbert Services Corp.

Noah Feldman on the Impact of Western Sky-Inspired Litigation on Tribal Sovereignty

Matthew L.M. Fletcher

Noah Feldman has posted “Tribes Don’t Get a Pass on Federal Law” on Bloomberg. HT How Appealing.

Despite the title (oh those editors!), tribal sovereignty isn’t mentioned until the last two paragraphs:

[Judge] Wilkinson tried to duck the deepest question in the case: Would it be all right to take federal law out of the picture altogether if Indian law applied instead? In this case, in practice, the recourse to tribal law would’ve been empty. But what if the Cheyenne River Sioux did have a robust arbitration mechanism in place or rules to guide an arbitration?

Under the decision, that shouldn’t matter: The court held that any agreement that rejects the application of federal law can’t be enforced. At the margin, this decision may actually reduce Indian tribes’ sovereignty. Whether it will help protect consumers from predatory lenders will depend on how other courts cite it.

These are good points. They could be tempered with a couple minor quibbles, mostly that the Cheyenne River Sioux Tribe, as I understand it, had nothing to do with Western Sky’s dispute resolution strategies. Perhaps anything the court said about that’s tribes sovereignty has to be dicta, and my reading of the opinion didn’t see anything like that (unlike the Seventh Circuit’s decision in Jackson).

This will be good fodder for consideration at the ASU e-Commerce meeting later this week….

 

Fourth Circuit Rules against Western Sky et al.

Matthew L.M. Fletcher

Here is the opinion in Hayes v. Delbert Services Corp. (4th Cir.).

An excerpt:

We both respect and appreciate the support of Congress and the Supreme Court for an arbitration procedure that reduces the costs and delays of civil litigation. Our review of the record leads us to conclude, however, that the arbitration agreement in this case is unenforceable. The agreement purportedly fashions a system of alternative dispute resolution while simultaneously rendering that system all but impotent through a categorical rejection of the requirements of state and federal law. The FAA does not protect the sort of arbitration agreement that unambiguously forbids an arbitrator from even applying the applicable law. We therefore reverse the district court’s order compelling arbitration and remand for further proceedings.

Briefs here.

 

Fourth Circuit Briefs in Arbitration Case Arising from the Wreckage of Western Sky

Matthew L.M. Fletcher1 Comment

Here are the briefs in Hayes v. Delbert Services Corp.:

Hayes Brief

Delbert Services Brief

Amicus Brief

Lower court materials here.

Western Sky-Related Debt Collector Successfully Compels Arbitration in Virginia Case

Matthew L.M. Fletcher2 Comments

Here are the materials in Hayes v. Delbert Services Corp. (E.D. Va.):

26 Delbert Motion

30 Opposition

31 Reply

38 DCT Order

An excerpt:

This matter cornes before the Court on the defendant’s motion [2]  to dismiss the amended complaint or, alternatively, to compel arbitration. (Dk. No. 30.) The plaintiffs, borrowers from internet payday lender Western Sky Financial, LLC, brought this action on behalf of themselves and others similarly situated against Delbert Services Corporation, a third-party debt collecter. The plaintiffs allege Delbert violated the Fair Debt Collection Practices Act (“FDCPA”) and the Telephone Consumer Protection Act (“TCPA”) in the course of its collection efforts. Delbert moves to dismiss based on the Loan Agreements’ forum-selection clause or on the basis of the tribal exhaustion doctrine. Alternatively, Delbert moves to compel arbitration. 

The forum-selection clause does not reach third-party debt collectors such as Delbert, and the doctrine of tribal exhaustion does not apply under the facts of this case. The language of the arbitration agreement, however, covers disputes with third-party debt collectors.

Accordingly, the Court GRANTS the motion to compel arbitration under the terms of the Loan Agreement and DISMISSES the claim without prejudice.