Gibbs v. Sequoia Capital Operations, LLC, No. 19-2108 (4th Cir. 2020)Annotate this Case
After a group of borrowers filed suit against two online lenders, the Sequoia 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.
Furthermore, because the effect of the choice-of-law provisions is to stymie the vindication of the federal statutory claims that the borrowers seek to enforce, they amount to a prospective waiver and render the delegation provisions unenforceable. The court therefore held that the entire arbitration agreement is unenforceable. 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.