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Yulon Clerk, On Behalf of Herself and All Others Similarly Situated v. Cash Central of Utah

August 24, 2011

YULON CLERK, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
CASH CENTRAL OF UTAH, LLC, D/B/A CASH CENTRAL OF PENNSYLVANIA, LLC, DEFENDANT.



The opinion of the court was delivered by: Norma L. Shapiro, J.

MEMORANDUM

Plaintiff Yulon Clerk filed a state class action complaint alleging that the financial lending practices of fourteen defendants were illegal under Pennsylvania law. Defendants removed the action to federal court. We severed plaintiff's claim against defendant Cash America Net of Nevada, LLC ("Cash America of Nevada") from the claims against the other thirteen defendants, and severed the claims against the other thirteen defendants from each other. We retained plaintiff's action against defendant Cash America of Nevada on our docket; the other thirteen actions were reassigned. This action, against defendant Cash Central of Utah, LLC ("Cash Central of Utah"), was reassigned to our docket. Before the court is defendant's motion to dismiss plaintiff's complaint in favor of, or to compel, arbitration. For the reasons discussed below, the motion will be granted.

I. Factual Background

Plaintiff, a Pennsylvania citizen, brings a putative class action on behalf of herself and all others similarly situated against defendant Cash Central of Utah, a Utah citizen. Plaintiff's amended complaint alleges that defendant engaged in illegal, unfair, and deceptive lending practices, in violation of Pennsylvania's Loan Interest Protection Law ("LIPL"), 41 P.S. §§ 101, 502 et seq., Consumer Discount Company Act ("CDCA"), 7 P.S. § 6201 et seq., and Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-1 et seq. Plaintiff also brings claims for unjust enrichment and contractual unconscionability under Pennsylvania law. Plaintiff requests: actual and statutory damages; treble damages under the LIPL; restitution of excess interest and charges collected by defendant; a declaration that the loan agreements signed by plaintiff are void and unenforceable; injunctive relief as the court deems proper; and attorney's fees and costs.

Defendant Cash Central of Utah operated a website to provide short-term loan contracts, also called "payday" loans,*fn1 to individuals. Plaintiff alleges defendant negotiated or made short-term loans of less than $25,000 with interest rates greatly exceeding the ceilings allowed under the Pennsylvania usury and small-loan laws. Pennsylvania has a general usury ceiling of six percent (6%), but licensed small-loan lenders can make consumer loans for amounts less than $25,000 at interest rates as high as twenty-four percent (24%) APR. See 41 Pa. Cons. Stat. Ann. § 201; 7 Pa. Con. Stat. Ann. § 6203. Plaintiffs allege that defendant, who was not licensed as a small-loan lender, charged Pennsylvania customers illegal interest rates exceeding Pennsylvania's six percent (6%) usury ceiling.

Between June and August, 2007, plaintiff entered into seven loan agreements over the internet with defendant Cash Central of Utah. Each loan agreement, signed by plaintiff by clicking a link on defendant's website, contains an identical arbitration clause and class action waiver. See Def.'s Mot. to Dismiss or Compel Arbitration, Ex. A. The arbitration clause and class action waiver state in pertinent part:

AGREEMENT TO ARBITRATE ALL DISPUTES.

You and We agree that any and all claims, disputes, or controversies between You and Us . . . shall be resolved by binding individual (and not class, consolidated or representative) arbitration by and under the Code of Procedure of the National Arbitration Forum ("NAF") in effect at the time the claim is filed. This agreement to arbitrate all disputes shall apply no matter by whom or against whom the claim is filed. Rules and forms of the NAF may be obtained and all claims may be filed at any NAF office, on the World Wide Web at www.arb-forum.com, by telephone at 800-474-2371, or at 'National Arbitration forum' [sic], P.O. Box 50191, Minneapolis, Minnesota 55405.' Your arbitration fees may be waived by the NAF or paid by Us in the event you cannot afford to pay them. The cost of any participatory, documentary or telephone hearing, if one is held at Your or Our request, will be paid for solely by Us as provided in the NAF rules and, if a participatory hearing is requested, it will take place at a location near Your residence. This Agreement shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16. . . . Notice: YOU AND WE WOULD HAVE HAD AN OPPORTUNITY TO LITIGATE DISPUTES THROUGH A COURT AND HAVE A JUDGE OR JURY DECIDE THE DISPUTES BUT HAVE AGREED INSTEAD TO RESOLVE DISPUTES THROUGH BINDING ARBITRATION. YOU ACKNOWLEDGE AND AGREE THAT BY ENTERING INTO THIS AGREEMENT TO ARBITRATE ALL DISPUTES YOU ARE GIVING UP YOUR RIGHT TO HAVE A TRIAL BY JURY TO RESOLVE OR TO HAVE A COURT RESOLVE ANY AND ALL CLAIMS, DISPUTES OR CONTROVERSIES ALLEGED AGAINST US OR RELATED THIRD PARTIES.

AGREEMENT NOT TO BRING, JOIN OR PARTICIPATE IN CLASS ACTIONS: To the extent permitted by law, by signing below You agree that You will not bring, join, or participate in any class action claim, dispute or controversy You may have against Us or Our agents, directors, officers, and employees. You agree to the entry to injunctive relief to stop such a lawsuit. You agree to pay costs We incur, including Our costs and attorneys fees in seeking such relief. This agreement is not a waiver of any of Your rights and remedies to pursue and claim individually and as a class action in binding arbitration as provided above.

Id.

We have subject matter jurisdiction under the Class Action Fairness Act because there is diversity of citizenship between the parties and the aggregate amount in controversy from all putative class members exceeds $5 million. See 28 U.S.C. § 1332(d)(2).

II. Discussion

Defendant moves, based on the plain language of the identical arbitration clauses contained in each loan agreement, to dismiss plaintiff's complaint in favor of, or to compel, arbitration. Plaintiff responds, first, that the arbitration clause, in particular its class action waiver, is procedurally and substantively unconscionable, so it is unenforceable under Pennsylvania law.Second, plaintiff argues that the arbitration clause is unenforceable because the National Arbitration Forum ("NAF") is designated as the exclusive arbitral forum, but the NAF ceased administering arbitrations between consumers and businesses in July, 2009, so it is no longer available as an arbitral forum.

A court, not an arbitrator, decides issues of arbitrability, i.e., whether the parties have submitted a particular dispute to arbitration by a valid arbitration clause. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003); Harris v. Green Tree Fin. Corp., 183 F.3d 173, 179 (3d Cir. 1999). A motion to compel arbitration is granted if there are no genuine disputes of material fact that: (1) a valid agreement to arbitrate was entered by the parties; and (2) the parties' claims are within the scope of the arbitration ...


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