{"id":887241,"date":"2016-02-23T17:18:46","date_gmt":"2016-02-24T00:18:46","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=887241"},"modified":"2016-02-23T17:18:46","modified_gmt":"2016-02-24T00:18:46","slug":"fourth-circuit-holds-arbitration-clause-unenforceable-when-contract-also-disavows-federal-and-state-substantive-law","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/fourth-circuit-holds-arbitration-clause-unenforceable-when-contract-also-disavows-federal-and-state-substantive-law\/","title":{"rendered":"Fourth Circuit Holds Arbitration Clause Unenforceable When Contract Also Disavows Federal and State Substantive Law"},"content":{"rendered":"<p>Mark W. Frilot | The Dispute Resolver | February 8, 2016<\/p>\n<p>While not a <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/how-to-contain-construction-disputes\/\" target=\"_blank\">construction dispute<\/a>, the Fourth Circuit\u2019s decision in <em>Hayes v. Delbert Services Corp.<\/em>, 2016 WL 386016, __ F.3d __ (4th Cir. 2\/2\/16), gives insight to the limits to a court\u2019s willingness to enforce arbitration clauses that also include a waiver of substantive rights.<\/p>\n<p><em>Hayes <\/em>concerned a putative class action against Delbert Services Corporation (\u201cDelbert\u201d), the servicing agent for the loans at issue, in which the plaintiffs claimed that Delbert\u2019s unfair debt collection practices violated federal law.\u00a0 The lender was Western Sky Financial, LLC (\u201cWestern Sky\u201d), an online lender owned by a member of the Cheyenne River Sioux Tribe and located on the Cheyenne River Indian Reservation in South Dakota.\u00a0 Delbert sought to compel arbitration in response to the plaintiffs\u2019 claims.<\/p>\n<p>The loan agreements required resolution of all disputes through <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/to-be-or-not-to-be-in-arbitration-that-is-the-question\/\" target=\"_blank\">arbitration<\/a>, but at the same time disavowed the applicability of any federal or state laws to the dispute, stating that the agreement was \u201csubject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe\u201d and that \u201c[n]either this Agreement nor Lender is subject to the laws of any state of the United States of America\u201d.\u00a0\u00a0 <em>Id. <\/em>at *1-*2.<\/p>\n<p>The district court upheld the arbitration clause, but the Fourth Circuit disagreed:<\/p>\n<p>We both respect and appreciate the support of Congress and the Supreme Court for an <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/third-circuit-rules-that-courts-not-arbitration-panels-have-final-word-on-class-action-arbitrability\/\" target=\"_blank\">arbitration<\/a> procedure that reduces the costs and delays of civil litigation.\u00a0 Our review of the record leads us to conclude, however, that the arbitration agreement in this case is unenforceable.\u00a0 The agreement purportedly fashions a system of alternative dispute resolution while simultaneously rendering that system all but impotent through a categorical rejection of the requirements of state and federal law.\u00a0 The FAA does not protect the sort of arbitration agreement that unambiguously forbids an arbitrator from even applying the applicable law.<\/p>\n<p><em>Id<\/em>. at *1.<\/p>\n<p>The Fourth Circuit further noted&#8230;<\/p>\n<p><a href=\"http:\/\/abaconstructionforumdivision1.blogspot.com\/2016\/02\/fourth-circuit-holds-arbitration-clause.html?utm_source=feedburner&amp;utm_medium=email&amp;utm_campaign=Feed%3A+TheDisputeResolver+%28The+Dispute+Resolver%29\" target=\"_blank\">To finish reading this article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Mark W. Frilot | The Dispute Resolver | February 8, 2016 While not a construction dispute, the Fourth Circuit\u2019s decision in Hayes v. Delbert Services Corp., 2016 WL 386016, __ F.3d __ (4th Cir. 2\/2\/16), gives insight to the limits to a court\u2019s willingness to enforce arbitration clauses that also include a waiver of substantive&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/fourth-circuit-holds-arbitration-clause-unenforceable-when-contract-also-disavows-federal-and-state-substantive-law\/\">Continue reading <span class=\"screen-reader-text\">Fourth Circuit Holds Arbitration Clause Unenforceable When Contract Also Disavows Federal and State Substantive Law<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[41],"tags":[6259],"class_list":["post-887241","post","type-post","status-publish","format-standard","hentry","category-arbitration","tag-arbitration-clause","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Fourth Circuit Holds Arbitration Clause Unenforceable When Contract Also Disavows Federal and State Substantive Law - Advise &amp; 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