Fourth Circuit Holds Arbitration Clause Unenforceable When It Forbids Arbitrator From Applying The Applicable Law
This case involves a class action filed in a Virginia district court against Delbert Services Corporation, the servicing agent of certain loans, for which the plaintiffs claimed that Delbert’s unfair debt collection practices violated federal law. The lender was Western Sky Financial, LLC, an online lender owned by a member of the Cheyenne River Sioux Tribe and located on the Cheyenne River Indian Reservation in South Dakota. Delbert sought to compel arbitration in response to the plaintiffs’ claims.
The loan agreements at issue required resolution of all disputes through arbitration, but stated that the agreement was “subject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe” and that “[n]either this Agreement nor Lender is subject to the laws of any state of the United States of America”.