Adam Wood V Ascend Loans Llc

Key Facts

Transaction Type

Issues

• The second issue is whether the plaintiff's challenge to the delegation provision was 'specific' to that provision, as required under the FAA. The plaintiff argued that the choice-of-law clause in the loan agreements—which requires application of tribal and federal law—rendered the delegation provision unenforceable by preventing the arbitrator from applying state law to assess arbitrability. The court analyzes whether this challenge rests on distinct factual or legal grounds separate from the plaintiff's broader challenge to the arbitration agreement's validity.
• The third issue is whether the loan agreements' choice-of-law clause—requiring application of tribal and federal law while waiving state law—renders the delegation provision unenforceable under the prospective waiver doctrine. The plaintiff contends that this waiver deprives the arbitrator of the ability to apply state law in determining arbitrability, creating an 'impossible position' for the arbitrator. The court considers recent decisions, including Wood v. W6LS, Inc., which held that such objections should be addressed by the arbitrator at the enforcement stage, not the initial arbitrability determination.
• The first issue is whether there is 'clear and unmistakable evidence' that the parties agreed to arbitrate gateway questions of arbitrability, including the validity, scope, or enforceability of the arbitration agreement itself. The court examines the language in the loan agreements stating that disputes regarding the arbitration agreement's validity, scope, or enforceability must be arbitrated, as well as the agreements' incorporation of AAA and JAMS procedural rules, which the Sixth Circuit has recognized as sufficient to establish such a delegation.

Holdings

• The Court STAYS the matter pending arbitration pursuant to 9 U.S.C. § 3, requiring the parties to submit joint status reports every 90 days and report on the arbitration outcome within 20 days of its conclusion.
• The Court GRANTS Ascend's motion to compel arbitration, concluding that the parties clearly and unmistakably agreed to arbitrate all disputes, including gateway questions of arbitrability, through the arbitration provisions in the loan agreements and the incorporation of AAA/JAMS rules. The Court determines that the delegation provision is valid and enforceable, and thus the question of whether Wood's claims are arbitrable must be decided by an arbitrator, not the Court.
• The Court rejects Wood's argument that the arbitration agreement's choice-of-law provision (tribal and federal law) renders the delegation clause unenforceable under the FAA, noting that the arbitrator can apply the FAA to evaluate the enforceability of the delegation provision and that concerns about state law applicability are premature and should be addressed at the award-enforcement stage.

Remedies

• The court orders the parties to submit a joint status report every ninety (90) days and to provide a report on the arbitration's outcome within twenty (20) days of its conclusion, ensuring regular updates on the case's progress during the arbitration period.
• The court grants Ascend Loans, LLC's motion to compel arbitration, directing the parties to resolve their disputes through individual arbitration as per the loan agreements.
• The court orders a stay of the lawsuit proceedings pending the outcome of the arbitration, as required by the Federal Arbitration Act (9 U.S.C. § 3).

Legal Principles

• The court applied the Federal Arbitration Act (FAA) to determine the enforceability of the arbitration agreement and delegation provisions, emphasizing clear and unmistakable evidence.
• The court addressed whether Ascend's claim of being a tribal entity invokes sovereign immunity to circumvent state usury laws, concluding that the issue is for the arbitrator to decide under the FAA.
• The court considered the unconscionability of the arbitration agreement, particularly the prospective waiver of state law, but found the challenge premature as it should be addressed by the arbitrator.

Precedent Name

• Henry Schein, Inc. v. Archer & White Sales, Inc.
• Blanton v. Domino's Pizza Franchising LLC
• Mallory v. Consumer Safety Tech., LLC
• Swiger v. Rosette
• Rent-A-Center, West, Inc. v. Jackson
• Dillon v. BMO Harris Bank, N.A.
• Danley v. Encore Capital Grp., Inc.
• Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer
• Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.
• Viking River Cruises, Inc. v. Morana
• Becker v. Delek US Energy, Inc.
• In re StockX Customer Data Sec. Breach Litiga.

Key Disputed Contract Clauses

• The arbitration agreements specify that disputes are governed by the 'laws of the Tribe and applicable U.S. federal law,' which the plaintiff argued prospectively waived state statutory rights. The court rejected this argument, noting that the FAA governs arbitrability and allows the arbitrator to apply federal law to assess the enforceability of the agreement. The court also referenced Wood v. W6LS, Inc., which held that choice-of-law objections should be evaluated by the arbitrator at the enforcement stage, not the initial arbitrability determination.
• The loan agreements explicitly state that the parties agree to arbitrate all disputes, including those challenging the validity, scope, or enforceability of the arbitration agreement. This provision is central to the court's determination that there is 'clear and unmistakable' evidence of delegation, as the language directly assigns authority to the arbitrator to resolve threshold arbitrability issues. The court cited Swiger v. Rosette and Danley v. Encore Capital Grp., Inc. as precedents affirming similar language as sufficient for delegation.
• The agreements explicitly delegate the determination of arbitrability to the arbitrator, including disputes over the agreement's validity. The court found this language sufficient to meet the FAA's 'clear and unmistakable' standard, emphasizing that the parties agreed to have the arbitrator resolve whether claims are arbitrable. This conclusion was reinforced by the agreements' incorporation of AAA/JAMS rules, which the Sixth Circuit has recognized as clear evidence of delegation.
• The loan agreements direct parties to use either the American Arbitration Association (AAA) or JAMS to administer arbitration, incorporating their procedural rules. The court held this incorporation constitutes 'clear and unmistakable' evidence of delegation under the FAA, as these rules empower arbitrators to decide arbitrability. Citing Blanton v. Domino's Pizza Franchising LLC and Ciccio v. SmileDirectClub, LLC, the court affirmed that such references meet the Sixth Circuit's standard for valid delegation.
• The arbitration provision includes a Class Action Waiver, which bars parties from pursuing class or representative actions. The plaintiff challenged this as invalid, but the court deferred the issue to the arbitrator, emphasizing that the waiver's enforceability is part of the broader arbitration agreement. The court noted that the plaintiff's challenge to the waiver was tied to his argument that the entire arbitration agreement is unenforceable, which the court found insufficiently specific to warrant judicial review.

Cited Statute

Judge Name

Passage Text

• The Court adheres to the reasoning of the aforementioned decision and likewise notes that Wood may raise his choice-of-law objections with the arbitrator. ... The Court therefore finds that, given the clear and unmistakable delegation of arbitrability, the question of arbitrability of Wood's claims must be decided by an arbitrator, not the Court.
• Wood contends that the delegation provisions should be found unenforceable because the loan agreements contain a choice-of-law provision requiring the application of tribal and federal law and 'prospectively waiving a plaintiff's state statutory rights.' [DE 20 at 422]
• the Court finds that there is clear and unmistakable evidence that the parties agreed to arbitrate issues of arbitrability. Each agreement states that the parties 'agree to arbitrate all disputes and claims through confidential binding individual arbitration, including all claims regarding the validity, scope, or enforceability of this Arbitration Agreement.' [DE 1-1-1-20]