What consumer-protection law can do when the FAA doesn’t get in the way: Eleventh Circuit strikes down contractual forum-selection and class-action-waiver clauses as contrary to public policy

Yesterday, in Davis v. Oasis Legal Finance Operating Company, the Eleventh Circuit struck down contractual forum-selection and class-action-waiver clauses as contrary to public policy. In Davis, a class of borrowers sued lenders, claiming that their loan agreements violated Georgia usury laws. The lenders sought to tank the case on the basis of contractual forum-selection and class-action-waiver clauses. The court of appeals began its opinion this way:

American courts have long refused to enforce contractual provisions that contravene public policy. See, e.g., Marshall v. Baltimore and Ohio R.R., 57 U.S. 314, 334 (1853) (“It is an undoubted principle of the common law that it will not lend its aid to enforce a contract to do an act that is illegal, or which is inconsistent with sound morals or public policy. . . .”). In Georgia, “[n]o principle of jurisprudence is better settled than this.” Glass v. Childs, 71 S.E. 920, 921 (Ga. Ct. App. 1911).

The court then went on to hold that the forum-selection clause and class-action waiver violated public policy, specifically "Georgia’s Payday Lending Act and Industrial Loan Act, [which] articulate a clear public policy against enforcing forum selection clauses in payday loan agreements and in favor of preserving class actions as a remedy for those aggrieved by predatory lenders."


If you wondering about why arbitration didn't come into play, well . . .

The Supreme Court, in multiple cases, has ruled that § 2 of the FAA overrides a state statute or common-law doctrine that attempts to undercut the enforceability of an arbitration agreement. See Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1425, 1426 (2017); DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468, 471 (2015). The class action waiver here is not contained in an arbitration agreement, so § 2 of the FAA does not stand in the way of enforcing Georgia’s public policy. 

Davis gives you a sense of what state-law consumer protection might look like if not for the Supreme Court's Federal Arbitration Act decisions. 

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