Judge Rules in Favor of Tribal Lender BlueChip Financial

Nov 21, 2018News

U.S. District Judge Robert J. Bryan has stayed a proposed class action lawsuit against tribal lender BlueChip Financial (BlueChip) until the Ninth Circuit Court of Appeals issues a final ruling on whether the company can compel arbitration.

According to court documents, the dispute dates back to December 2015 when the plaintiff took out her first loan with BlueChip. The plaintiff ended up taking out three additional loans over the course of 2016 and 2017.

Each loan agreement stipulated that they were subject to tribal law under North Dakota’s Turtle Mountain Band of Chippewa Indians. Furthermore, each loan agreement contained an arbitration clause that informed the borrower that they were waiving their rights to the following:

  • Have juries solve Disputes.
  • Have any court solve Disputes.
  • Serve as a private attorney general or in a representative capacity.
  • Be in a class action.

The loan agreement even went as far as providing the plaintiff a “60-day window to opt out of arbitration by writing to BlueChip, and also allowed her to request a loan agreement without an arbitration clause.” The plaintiff ended up doing neither.

Despite this language, the presiding judge ruled that the loan “agreement goes against public policy and cannot be upheld because it forms a substantive waiver of federal statutory rights.”

BlueChip and its co-defendants immediately appealed the decision while asking the judge to stay all proceedings on the case until the Ninth Circuit Court of Appeals issued a final ruling.

In deciding whether to pause the class action, Judge Bryan considered four questions.

  • Do the defendants have a substantial case for relief on the merits? Judge Bryan decided that the defendants did have a substantial case, and so this factor “weighs in favor of the Defendants.”
  • Would there be irreparable injury to the defendants absent a stay? The judge ruled that the defendants would be “forced to engage in extensive discovery” that could cause irreparable injury absent a stay. The judge weighed this factor “in favor of the Defendants.”
  • Would there be substantial injury to the plaintiff and other parties absent a stay? Judge Bryan ruled that the plaintiff and other parties would be in a “rough spot” if there was a stay, but it was not clear whether a stay would cause substantial injury. The judge said this factor “weighs slightly in favor of the Plaintiff.”
  • Where does the public interest lie? Judge Bryan reasoned that there is both a “strong public policy in favor of arbitration” and a strong policy “against usurious loans.” Thus, this factor does not weigh in favor for either party.

In the end, Judge Bryan found that allowing a proposed class action against BlueChip and its co-defendants would cause irreparable harm against the companies, which would be “significantly unnecessary if their motion to compel arbitration is granted.” Because Judge Brian believes that BlueChip’s appeal has a “substantial case for relief on the merits,” the judge ruled to stay the class action until the Ninth Circuit Court of Appeals issues a final ruling.

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