Background
Plaintiffs Joshua Harris and Donita Olds borrowed six hundred dollars from defendants W6LS, Inc. and Caliber Financial Services, Inc. at annual interest rates exceeding four hundred ninety percent. The loan agreements contained arbitration provisions delegating arbitrability questions to an arbitrator who was required to apply tribal law and federal law. The relevant tribal contract code was not enacted until after the plaintiffs signed the loans.
The court’s reasoning
The court reasoned that arbitration is a matter of contract requiring mutual assent. The delegation and arbitration provisions failed because they directed the application of a body of tribal law that did not exist at the time of contracting. The court found that parties cannot mutually assent to a dispute resolution process governed by law that is subject to later invention by one party. The court declined to address the prospective waiver doctrine as the motion failed on formation grounds.
What it means going forward
Lenders cannot enforce arbitration clauses that delegate arbitrability to an arbitrator bound by tribal laws that did not exist at the time the loan was originated.
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