MacDonald v. Cashcall — civil / arbitration — affirmance — Shwartz

The introduction of today’s Third Circuit opinion rejecting lenders’ effort to compel arbitration of a borrower’s challenge to a 116% interest loan:

John MacDonald, on behalf of himself and a putative
class, sued CashCall, Inc., WS Funding, LLC, Delbert Services
Corp., and J. Paul Reddam (collectively “Defendants”) over a
loan agreement that he contends is usurious and
unconscionable. The agreement includes (1) a provision
requiring that all disputes be resolved through arbitration
conducted by a representative of the Cheyenne River Sioux
Tribe (“CRST”) and (2) a clause that delegates questions about
the arbitration provision’s enforceability to the arbitrator.
Defendants moved to compel arbitration, which the District
Court denied. Because the parties’ agreement directs
arbitration to an illusory forum, and the forum selection clause
is not severable, the entire agreement to arbitrate, including the
delegation clause, is unenforceable, and we will therefore
affirm.

Joining Shwartz were Hardiman and Vanaskie. (The opinion included a footnote that Judge Vanaskie would have affirmed on additional grounds.) Arguing counsel were Joseph Barloon of Skadden Arps for the lenders and Matthew Wessler of Gupta Wessler (a former Nygaard clerk) for the borrower.