Brice v. Plain Green, LLC, No. 19-15707 (9th Cir. 2021)
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Plaintiffs obtained short-term, high-interest loans from lenders owned by the Tribes. The standard loan contracts contained an agreement to arbitrate any dispute arising under the contract and a delegation provision requiring an arbitrator—not a court—to decide “any issue concerning the validity, enforceability, or scope of [the loan] agreement or [arbitration agreement].” The contracts stated that they were governed by tribal law and that an arbitrator must apply tribal law. Plaintiffs filed class-action RICO complaints against the Tribal Lenders. The district court denied the defendants’ motion to compel arbitration, reasoning that the arbitration agreement as a whole in each contract was unenforceable because it prospectively waived plaintiffs’ right to pursue federal statutory claims by requiring arbitrators to apply tribal law.
The Ninth Circuit reversed. Rather than asking first whether the arbitration agreement was enforceable as a whole, the court must consider first the enforceability of the delegation provision specifically. The delegation provision was enforceable because it did not preclude plaintiffs from arguing to an arbitrator that the arbitration agreement was unenforceable under the prospective-waiver doctrine. The general enforceability issue must, therefore, be decided by an arbitrator. The choice-of-law provisions were not to the contrary because they did not prevent plaintiffs from pursuing their prospective-waiver enforcement challenge in arbitration.
Court Description: Arbitration. The panel reversed the district court’s order denying defendants’ motion to compel arbitration in a RICO action and remanded with instructions to stay the case and compel the parties to proceed with arbitration. Plaintiffs obtained short-term, high-interest loans from either Plain Green, LLC, or Great Plains Lending, LLC, which were owned by the Chippewa Cree Tribe of the Rocky Boy’s Indian Reservation and the Otoe-Missouri Tribe of Indians. These “Tribal Lenders’” standard loan contracts contained an agreement to arbitrate any dispute arising under the contract. The contracts also included a delegation provision requiring an arbitrator—not a court—to decide “any issue concerning the validity, enforceability, or scope of [the loan] agreement or [arbitration agreement].” The contracts stated that they were governed by tribal law and that an arbitrator must apply tribal law. Plaintiffs filed class- * Formerly known as Danielle J. Hunsaker. BRICE V. HAYNES INVESTMENTS 3 action complaints against the Tribal Lenders and other defendants that they alleged were the owners and investors of Think Finance, LLC, which operated a payday loan enterprise via the Tribal Lenders. The district court denied defendants’ motion to compel arbitration on the ground that the arbitration agreement as a whole in each contract was unenforceable because it prospectively waived plaintiffs’ right to pursue federal statutory claims by requiring arbitrators to apply tribal law. The district court concluded that each delegation provision was unenforceable for the same reason. Following Rent-A-Center, West, Inc. v. Jackson, 56 U.S. 63 (2010), and Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015), and disagreeing with other circuits, the panel concluded that, rather than asking first whether the arbitration agreement was enforceable as a whole, it must consider first the enforceability of the delegation provision specifically. The panel concluded that the parties’ delegation provision was enforceable because it did not preclude plaintiffs from arguing to an arbitrator that the arbitration agreement was unenforceable under the prospective-waiver doctrine and, therefore, this general enforceability issue must be decided by an arbitrator. The panel concluded that the contracts’ choice-of-law provisions were not to the contrary because they did not prevent plaintiffs’ from pursuing their prospective-waiver enforcement challenge in arbitration, which was the key to determining whether the delegation provision itself was a prospective waiver. Dissenting, Judge W. Fletcher wrote that the majority misunderstood the effect of the choice-of-law provisions in the agreements. He wrote that, under the choice-of-law 4 BRICE V. HAYNES INVESTMENTS provisions, the arbitrator could apply only tribal law and a small and irrelevant subset of federal law. The prospective waivers of most federal law and all state law prevented the arbitrator from applying the law necessary to determine whether the delegation provisions and the arbitration agreements were valid. Judge W. Fletcher wrote that both the delegation provisions and the arbitration agreements therefore were invalid.
The court issued a subsequent related opinion or order on June 6, 2022.
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