Gibbs v. Haynes Investments, LLC, No. 19-1434 (4th Cir. 2020)
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After a group of borrowers filed suit against two online lenders, the Haynes Defendants filed a motion to compel arbitration. The Fourth Circuit affirmed the district court's denial of the motion to arbitrate, holding that the borrowers sufficiently challenged the validity of the delegation clauses and the district court was correct to consider the enforceability of the arbitration agreements.
The court also held that the choice-of-law clauses amount to a prospective waiver such that the arbitration agreements, including the delegation clauses, are unenforceable. Therefore, the court explained that the district court had the authority to decide whether the arbitration agreements were valid, correctly decided they were not, and did not err in denying the motion to compel arbitration.
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