Plaintiffs brought a class action against various payday lenders for violations of North Carolina law forbidding high interest rate loans either through by telephone or internet. The loan agreements all included forum selection clauses granting almost exclusive jurisdiction to the Cheyenne River Sioux Tribe (“CRST”), upon which the Defendants sought dismissal of the action, arguing that the district either lack of jurisdiction to hear the matter or, alternatively, that the CRST should make the initial determination regarding the enforcement of the forum selection clause.
Beginning from Atl. Marine Const. Co. v. U.S. Dist. Court for the W. Dist. of Texas, 571 U.S. ____, ____, 134 S. Ct. 568, 583 (2013), the district court held that forum selection clauses should generally be enforced unless found to be either contractually invalid or unreasonable based on the following criteria:
(1) their formation was induced by fraud or overreaching;
(2) the complaining party “will for all practical purposes be deprived of his day in court” because of the grave inconvenience or unfairness of the selected forum;
(3) the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or
(4) their enforcement would contravene a strong public policy of the forum state.
Finding no binding precedent from the 4th Circuit, the district court reviewed other circuit and district opinions on this question, categorizing such in three ways:
(1) The forum selection clause has been found unenforceable. See Jackson v. Payday Fin., LLC, 764 F.3d 765, 768-69 (7th Cir. 2014) and Inetianbor v. CashCall, Inc., 768 F.3d 1346, 1349 (11th Cir. 2014), petition for cert. filed, 83 U.S.L.W. 492 (U.S. Dec. 14, 2014)(No. 14-775), both of which found that as the CRST neither authorizes arbitration nor has any consumer dispute resolution rules selection of such forum was illusory.
(2) The forum selection clause has been enforced. See, e.g., Spuller v. Cashcall, Inc., No. 5:13-CV-806-D (E.D.N.C. Mar. 5, 2014); Milam v. Cashcall, Inc., No. 5:13-CV-768-D (E.D.N.C. Mar. 4, 2014). In Spuller the court found that plaintiff had not “plausibly alleged that either defendant obtained the forum selection clause by fraud or overreaching,” nor was the forum selection clause invalidated by North Carolina public policy.
(3) The CRST has been provided an initial opportunity to determine the enforceability of the forum selection clause using the tribal exhaustion doctrine, which provides that a tribal court should be given precedence to determine the extent of its own jurisdiction when a “colorable claim of tribal court jurisdiction has been asserted.” Ninigret Dev. Corp. v. Narragansett Indian Wetuomuck Hous. Auth., 207 F.3d 21, 31 (1st Cir. 2000), based on four criteria:
(a) an assertion of tribal jurisdiction is motivated by a desire to harass or is conducted in bad faith;
(b) the action is patently violative of express jurisdictional prohibitions;
(c) exhaustion would be futile because of the lack of adequate opportunity to challenge the court’s jurisdiction; or
(d) it is plain that no federal grant provides for tribal governance of nonmembers’ conduct on land covered by two exceptions in Montana v. U.S. See Grand Canyon Skywalk Dev., LLC v. ‘Sa’ Nyu Wa Inc., 715 F.3d 1196, 1200 (9th Cir.), cert. denied, ____ U.S. ____, 134 S. Ct. 825 (2013) (internal citations omitted).
Unlike in Jackson or Inetianbor, the district court weighed heavily the failure by the Plaintiffs in the present action to attempt to actually arbitrator or file any action with the CRST, instead making “ a leap in their logic suggesting that the written documents stating the law of the CRST lead to the conclusion that the CRST arbitration forum is a “sham” without any action trying to actually arbitrate there.” Following Heldt v. Payday Fin., LLC, 12 F. Supp. 3d 1170 (D.S.D. Mar. 31, 2014), the court dismissed this action in order for the action to be filed with the CRST. This dismissal was without prejudice to a subsequent refiling of the action with the district court, in the event the CRST finds that it lacks personal jurisdiction for the action or proves futile.
For a copy of the opinion, please see: