With four arbitration-centric cases already slated for review this Term, and one Certiorari Petition awaiting imminent disposition, is SCOTUS about to take up yet another arbitration-related case? Stay tuned.
As described in our recent feature article, After a Lull in 2021, a Busy Year Ahead Arbitration-wise for SCOTUS, 2021:48 Sec. Arb. Alert 1 (Dec. 23, 2021), the Supreme Court is already set to review four cases involving arbitration, and other Certiorari Petitions are pending. We reported in SAA 2021-45 (Dec. 2) that a Petition for Certiorari was filed last September in Certiorari in Branch Banking and Trust Company v. Sevier County Schools Federal Credit Union, No. 21-365, presenting this question: “Whether the Federal Arbitration Act displaces a state common-law rule forbidding companies from adding an arbitration requirement to their standard form contract with customers unless the contract already includes a dispute-resolution clause.” We covered the case below in SAA 2021-16 (Apr. 29), where a divided Sixth Circuit held in Sevier County Schools Federal Credit Union v. Branch Banking & Trust Co., 990 F.3d 470 (6th Cir. Mar. 5, 2021), that, although the deposit agreement permitted the bank to make unilateral changes, adding an arbitration clause was not permissible. The majority found that: “the purported imposition of the arbitration provision would violate the common law’s implied covenant of good faith and fair dealing.” Judge Griffin dissented: “Because plaintiffs assented to this arbitration agreement, and because it is neither adhesive nor unconscionable ….” The Petition was set for consideration at the Court’s January 7 conference, but alas the January 10 Order List is devoid of any reference to the case.
Surprise! Here Comes Another One
As has been the Court’s practice lately, arbitration-related cases seem to feature their own Miscellaneous Orders, and Treppa v. Hengle, No. 21A237 was no exception. What happened here? We covered in the “Quick Takes” section of SAA 2021-45 (Dec. 2) Hengle v. Treppa, No. 20-1062, 2021 WL 5312780 (4th Cir. Nov. 16, 2021). The Court’s words tell the story; first, the facts:
“The named plaintiffs in this case, all Virginia consumers, received short-term loans from online lenders affiliated with a federally recognized Native American tribe. Eventually the borrowers defaulted and brought a putative class action against tribal officials and two non-members affiliated with the tribal lenders to avoid repaying their debts, which they alleged violated Virginia and federal law. The defendants moved to compel arbitration under the terms of the loan agreements and to dismiss the complaint on various grounds.”
Next, the holdings:
“The district court denied the motions to compel arbitration and, with one significant exception relevant here, denied the motions to dismiss. Four of those rulings are now before us in this interlocutory appeal. First, the district court found the arbitration provision unenforceable as a prospective waiver of the borrowers’ federal rights. Second, the district court denied the tribal officials’ motion to dismiss the claims against them on the ground of tribal sovereign immunity. Third, the district court held the loan agreements’ choice of tribal law unenforceable as a violation of Virginia’s strong public policy against unregulated lending of usurious loans. Fourth, the district court dismissed the federal claim against the tribal officials, ruling that the Racketeer Influenced and Corrupt Organizations Act (RICO) does not authorize private plaintiffs to sue for injunctive relief. For the reasons explained below, we affirm all four rulings on appeal.”
So, the underlying lawsuit was back before the District Court, in Hengle v. Asner, No. 3:19-cv-00250-DJN (E.D. Va.).
No Stay Right Now
On December 10 Treppa and the other lenders filed an Application for a Stay Pending the Filing and Distribution of a Petition for a Writ of Certiorari. The Petitioners promise that a Certiorari Petition will soon be filed and assume that the Court will grant it:
“As it has done in similar cases, the Court should grant a stay because it is likely to grant certiorari to resolve this circuit conflict and reverse the Fourth Circuit’s opinion. See Henry Schein, Inc. v. Archer & White Sales, Inc., No. 19A766; Henry Schein, Inc. v. Archer & White Sales, Inc., No. 17A859…. The Court is also likely to reverse the Fourth Circuit. Henry Schein and Rent-A-Center establish that delegation clauses must be enforced, unless the opponent of arbitration can show that the delegation clause specifically is defective. Although the Fourth Circuit nominally applied this principle, it sapped it of any real force by permitting a disputed interpretation of a general choice-of-law provision to override the delegation clause….”
The Petitioners’ irreparable injury argument asserted that: “Applicants would be forced to engage in costly litigation procedures — including class action discovery — that arbitration streamlines to the benefit of all parties. This Court has granted stays for this precise reason before and it should do the same here.” In a January 10 Miscellaneous Order, the Court states: “The application for stay presented to The Chief Justice and by him referred to the Court is denied.”
(ed: *We’re not sure how to read the Court’s action here. As usual, there’s no explanation. Time will tell. **We’ll keep tracking Branch Bank. ***We notice that the Court will be issuing decisions on January 13. Wonder if one of them will be Badgerow v. Walters, No. 20-1143,which was argued November 2021. Recall that the Court reviewed Badgerow v. Walters, 975 F.3d 469 (5th Cir. 2020), a case we analyzed in SAA 2020-36 (Sep. 23). In the underlying case, the Fifth Circuit held that the District Court was correct when it applied the “look through” standard to determine that it could remove a state court action to vacate an Award. The issue identified for review in the granted Petition for Certiorari: “Whether federal courts have subject-matter jurisdiction to confirm or vacate an arbitration award under Sections 9 and 10 of the FAA where the only basis for jurisdiction is that the underlying dispute involved a federal question.”)
This post first appeared on the Securities Arbitration Alert blog. The blog’s editor-in-chief is George H. Friedman, Chairman of the Board of Directors for Arbitartion Resolution Services, Inc.