Christina Williams v. Medley Opportunity Fund II, LP

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________

Nos. 19-2058, 19-2082
______________

CHRISTINA WILLIAMS; MICHAEL STERMEL,
On Behalf of Themselves and All Others Similarly Situated

v.

MEDLEY OPPORTUNITY FUND II, LP;
MARK CURRY; BRIAN MCGOWAN; VINCENT NEY;
OTHER JOHN DOE PERSONS OR ENTITIES;
RED STONE INC, As Successor In Interest to MacFarlane
Group, Inc.

Red Stone, Inc.
Appellant in
No. 19-2058
______________

CHRISTINA WILLIAMS; MICHAEL STERMEL, On
Behalf of
Themselves and All Others Similarly Situated

v.

MEDLEY OPPORTUNITY FUND II, LP; MARK CURRY;
 BRIAN MCGOWAN; VINCENT NEY; OTHER JOHN
DOE
PERSONS OR ENTITIES; RED STONE, INC., As
Successor
In Interest to MacFarlane Group, Inc.

Mark Curry, Brian McGowan, Vincent Ney,
Appellants in
No. 19-2082
________________

Appeals from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-18-cv-02747)
District Judge: Honorable Mitchell S. Goldberg
______________

Argued February 5, 2020
______________

Before: SHWARTZ, SCIRICA, and COWEN, Circuit Judges.

(Filed: July 14, 2020)
______________

Arpit K. Garg
Tamara S. Grimm
Molly M. Jennings
Jonathan E. Paikin
Thomas L. Strickland
Daniel Volchok [ARGUED]
Seth P. Waxman
WilmerHale

2
1875 Pennsylvania Avenue, N.W.
Washington, DC 20006

Charles K. Seyfarth
O’Hagan Meyer
411 East Franklin Street
Suite 500
Richmond, VA 23219

Counsel for Appellant Red Stone, Inc.

Robert M. Cary
Sarah M. Harris [ARGUED]
Michael J. Mestitz
Christopher Yeager
Williams & Connolly
725 12th Street, N.W.
Washington, DC 20005

Counsel for Appellant Mark Curry

David F. Herman
Richard L. Scheff
Armstrong Teasdale
One Commerce Square, 2005 Market Street
29th Floor
Philadelphia, PA 19103

Counsel for Appellants Brian McGowan and Vincent
Ney

Michael J. Quirk
Motley Rice

3
40 West Evergreen Avenue
Suite 104
Philadelphia, PA 19118

Matthew W.H. Wessler [ARGUED]
Gupta Wessler
1900 L Street, N.W.
Suite 312
Washington, DC 20036

Counsel for Appellees Christina Williams and Michael
Stermel, On Behalf of Themselves and All Others
Similarly Situated

Stephen F. Raiola
Covington & Burling
850 10th Street, N.W.
One City Center
Washington, DC 20001

Counsel for Amicus Curiae Online Lenders Alliance in
Support of Appellants

Patrick O. Daugherty
Van Ness Feldman
1050 Thomas Jefferson Street, N.W.
Seventh Floor
Washington, DC 20007

Counsel for Amicus Curiae Native American Financial
Services Association in Support of Appellants

Anthony M. Sabino

4
2nd Floor
92 Willis Avenue
Mineola, NY 11501

Counsel for Amicus Curiae Anthony Michael Sabino in
Support of Appellant Red Stone, Inc.

Mark C. Stephenson
Ward Law
1617 John F. Kennedy Boulevard
Suite 500
Philadelphia, PA 19103

Counsel for Amici Curiae American Legislative
Exchange Council, The Center for Individual
Freedom, and the American Consumer Institute in
Support of Appellant Red Stone, Inc.

Jeffrey R. White
American Association for Justice
777 6th Street, N.W.
Suite 200
Washington, DC 20001

Counsel for Amicus Curiae American Association for
Justice in Support of Appellees

______________

OPINION
______________

5
SHWARTZ, Circuit Judge.

Christina Williams and Michael Stermel (“Plaintiffs”)
obtained loans from AWL, Inc., an online entity owned by the
Otoe-Missouria Tribe of Indians (“Tribe”). Plaintiffs assert
that AWL charged unlawfully high interest rates and sued
AWL’s holding company, Red Stone, Inc., and three members
of AWL’s board of directors, Mark Curry, Vincent Ney, and
Brian McGowan (collectively, “Defendants”) for violations of
federal and Pennsylvania law. Defendants moved to compel
arbitration. The District Court denied their motion, holding
that the loan agreements—which provided that only tribal law
would apply in arbitration—stripped Plaintiffs of their right to
assert statutory claims and were therefore unenforceable.
Because AWL permits borrowers to raise disputes in
arbitration only under tribal law, and such a limitation
constitutes a prospective waiver of statutory rights, its
arbitration agreement violates public policy and is therefore
unenforceable. As a result, the District Court correctly denied
Defendants’ motion to compel arbitration.

I1

A

Plaintiffs entered into payday loan agreements with

1
Because Defendants moved to compel arbitration
based on the face of the complaint and the documents relied
upon, and because the District Court did not order discovery
and instead relied only on the pleadings, we draw the facts from
Plaintiffs’ complaint. See Guidotti v. Legal Helpers Debt
Resolution, L.L.C., 716 F.3d 764, 772, 776 (3d Cir. 2013).

6
AWL. “Payday loans are ostensibly short-term cash advances
for people who face unexpected obligations or emergencies,”
“typically for small sums” and “to be repaid quickly.” Gingras
v. Think Fin., Inc., 922 F.3d 112, 117 (2d Cir. 2019), cert.
denied, 140 S. Ct. 856 (2020).

To obtain loans from AWL, Plaintiffs had to sign a loan
agreement that set forth the interest rates, payment terms, and
other provisions. 2 The loan agreement states that it “is between
you, as borrower/debtor, and AWL, Inc., an arm of [the Tribe],
as lender,” J.A. 280, and includes the following
“IMPORTANT DISCLOSURE” to the borrower:

YOU AGREE THAT THIS LOAN IS MADE
WITHIN THE TRIBE’S JURISDICTION AND
IS SUBJECT TO AND GOVERNED BY
TRIBAL LAW[3] AND NOT THE LAW OF
YOUR RESIDENT STATE. IN MAKING
THIS LOAN, YOU CONSENT TO TRIBAL
JURISDICTION FOR THIS LOAN. YOUR
RESIDENT STATE LAW MAY HAVE
INTEREST RATE LIMITS AND OTHER
CONSUMER PROTECTION PROVISIONS
THAT ARE MORE FAVORABLE. IF YOU

2
The three loan agreements at issue in this case (two by
Williams and one by Stermel) are identical, save the principal,
which ranged from $1000-$1600, and annual percentage
interest rates, which ranged from 496.55% to 714.88%, J.A.
35-37, so we will refer to the three agreements as one.
3
The loan agreement defines “Tribal Law” as “any law
or regulation duly enacted by the [Otoe-Missouria] Tribe.”
J.A. 280.

7
 WISH TO HAVE YOUR RESIDENT STATE
LAW APPLY TO ANY LOAN THAT YOU
TAKE OUT, YOU SHOULD CONSIDER
TAKING A LOAN FROM A LICENSED
LENDER IN YOUR STATE.

J.A. 280 (capitalization in original). 4 The loan agreement also
makes disclosures pursuant to the Truth in Lending Act, but
states that “we do not concede that the Truth in Lending Act
applies to this transaction.” J.A. 283. The loan agreement
further informs the borrower that “[o]ur inclusion of any
disclosures does not mean that Lender consents to the
application of federal law to any Loan or to this [Loan]
Agreement.” J.A. 281.

Following these disclosures, the loan agreement
contains twenty-five numbered sections. One section is titled
“WAIVER OF JURY TRIAL AND AGREEMENT TO
ARBITRATE.” J.A. 289 (capitalization in original). This
section of the loan agreement is defined in the contract as “the
Agreement to Arbitrate.” Compare J.A. 289 (defining the
“Waiver of Jury Trial and Agreement to Arbitrate” as the
“Agreement to Arbitrate”), with J.A. 280 (defining “this loan
agreement” as the “Agreement” (capitalization omitted)). We
refer to this section as the “arbitration agreement.”

4
The disclosure also provides that the lender is immune
from suit in any court, the lender is regulated only by the
Tribe’s Consumer Finance Services Regulatory Commission,
and a borrower’s right to submit complaints is limited to the
dispute resolution process set forth in the loan agreement or to
the Commission.

8
 The arbitration agreement: (1) provides that “any
dispute you have related to this agreement will be resolved by
binding arbitration,” J.A. 289 (capitalization omitted);
(2) defines “[d]ispute” as “any claim or controversy of any
kind between you and us or otherwise involving this [Loan]
Agreement or the Loan . . . includ[ing], without limitation, all
federal, state or Tribal Law claims or demands” and “any issue
concerning the validity, enforceability, or scope of this [Loan]
Agreement” or arbitration agreement, J.A. 289-90; and
(3) allows the party requesting arbitration to select either the
American Arbitration Association (“AAA”) or JAMS “for
initiating and pursuing arbitration,” J.A. 290.

In a subsection called “APPLICABLE LAW AND
JUDICIAL REVIEW OF ARBITRATOR’S AWARD,” the
arbitration agreement states: “THIS [LOAN] AGREEMENT
SHALL BE GOVERNED BY TRIBAL LAW.” J.A. 291
(capitalization in original). The subsection then specifies that
“[t]he arbitrator shall apply Tribal Law and the terms of this
[Loan] Agreement, including [the arbitration agreement].”
J.A. 291. The subsection further provides that

[t]he arbitrator shall make written findings and
the arbitrator’s award may be filed with a Tribal
court. The arbitration award shall be supported
by substantial evidence and must be consistent
with this [Loan] Agreement and Tribal Law, and
if it is not, it may be set aside by a Tribal court
upon judicial review.

J.A. 291. The tribal court may confirm an arbitration award
“only if” the court “determines that the award is supported by
substantial evidence and is not based on legal error under

9
Tribal Law.” J.A. 291.

The arbitration agreement makes numerous other
references to tribal law:

• “The policies and procedures of the selected arbitration
firm applicable to consumer transactions will apply
provided such policies and procedures do not contradict
this [arbitration agreement] or Tribal Law.” J.A. 290.

• “Unless prohibited by Tribal Law, the arbitrator may
award fees, costs, and reasonable attorneys’ fees to you
if you substantially prevail in the arbitration.” J.A. 290.

• “Any arbitration under this [Loan] Agreement may be
conducted either on Tribal land or within thirty (30)
miles of your then current residence, at your choice,
provided that this accommodation for you shall not be
construed in any way . . . to allow for the application of
any law other than Tribal Law . . . .” J.A. 291.

• “The arbitrator has the ability to award all remedies
available under Tribal Law . . . .” J.A. 291.

• “As an integral component of accepting this [Loan]
Agreement, you irrevocably consent to the exclusive
jurisdiction of the Tribal courts for purposes of this
[Loan] Agreement.” J.A. 291.

• “In the event you opt out of the [arbitration agreement],
any disputes shall nonetheless be governed under tribal
law and must be brought within the court system of [the
Tribe].” J.A. 289 (capitalization omitted).

10
 Separate from the arbitration agreement is another
section of the loan agreement, titled
“ACKNOWLEDGEMENT AND CERTIFICATION.” J.A.
292 (capitalization in original). That section also discusses
both arbitration and tribal law and notifies the borrower that
“[b]y signing below, you also consent to the dispute resolution
provision including the provision consenting and limiting
disputes to tribal law and to tribal courts, to arbitration and to
the provision not to bring, join or participate in any class
action.” J.A. 292.

Another section of the loan agreement, titled
“GOVERNING LAW,” mentions federal law and its
application to the loan agreement and the Tribe. J.A. 292
(capitalization in original). It provides, in relevant part:

You understand and agree that this [Loan]
Agreement is governed only by Tribal Law and
such federal law as is applicable under the Indian
Commerce Clause of the United States
Constitution . . . . [N]either we nor this [Loan]
Agreement are subject to any other federal or
state law or regulation, nor to the jurisdiction of
any court, unless so stated in this [Loan]
Agreement . . . . The Lender may choose to
voluntarily use certain federal laws as guidelines
for the provision of services. Such voluntary use
does not represent acquiescence of the Tribe to
any federal law unless found expressly
applicable to the operations of the Tribe.

J.A. 292.

11
 The loan agreement also includes a severability clause
that provides: “If any provision of this [Loan] Agreement is
held unenforceable, including any provision of the [arbitration
agreement], the remainder of this [Loan] Agreement shall
remain in full force and effect.” J.A. 292.
B

Plaintiffs, on behalf of themselves and a putative class,
sued Defendants in federal court, alleging that AWL’s lending
practices violated the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, and
various Pennsylvania consumer protection laws. Defendants
moved to compel arbitration.

The District Court denied the motion to compel,
reasoning that: (1) the arbitration agreement was unenforceable
because the arbitrator is permitted only to consider tribal law
and, therefore, the arbitrator could not consider any of
Plaintiffs’ claims as they are based on federal and state law;
and (2) “a ‘choice of arbitrator’ provision permitting the parties
to select the AAA or JAMS does not provide an available
arbitral forum” because it only permitted the arbitrator to apply
policies and procedures that do not “contradict the agreement
or ‘Tribal law,’” J.A. 5 (quoting MacDonald v. CashCall, Inc.,
883 F.3d 220, 229-30 (3d Cir. 2018)).

Defendants appeal.

12
 II 5

“The Federal Arbitration Act requires courts to enforce
covered arbitration agreements according to their terms.”
Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1412 (2019)
(citing 9 U.S.C. § 2).6 Defendants assert that the District Court
erred in refusing to compel arbitration because (A) the
arbitration agreement specifies that the arbitrator will decide
issues of enforceability and (B) the arbitration agreement’s
applicable law subsection is not an impermissible prospective
waiver of statutory rights.

A

We first address who decides whether the arbitration
agreement is enforceable: the court or the arbitrator. The

5
The District Court had jurisdiction under 28 U.S.C.
§§ 1331 and 1367(a). We have jurisdiction over appeals from
orders denying a motion to compel arbitration. 9 U.S.C.
§ 16(a)(1)(B); In re Remicade (Direct Purchaser) Antitrust
Litig., 938 F.3d 515, 519 n.3 (3d Cir. 2019). Our review of
such orders is plenary, and “we may affirm on any grounds
supported by the record.” MacDonald, 883 F.3d at 225
(quoting Hassen v. Gov’t of V.I., 861 F.3d 108, 114 (3d Cir.
2017)).
6
9 U.S.C. § 2 provides: “A written provision in . . . a
contract evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of such
contract or transaction, or the refusal to perform the whole or
any part thereof . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract.”

13
arbitration agreement provides that “any dispute . . . related to
this agreement will be resolved by binding arbitration,” J.A.
289 (capitalization omitted), “includ[ing] any issue concerning
the . . . enforceability . . . of this [Loan] Agreement” or the
arbitration agreement, J.A. 290. Defendants argue that a court
cannot decide whether the arbitration agreement is
unenforceable because the agreement delegates such
enforceability determinations to the arbitrator.
“[P]arties may agree to have an arbitrator decide not
only the merits of a particular dispute but also . . . ‘whether the
parties have agreed to arbitrate,’” in what is called a
“delegation clause.” Henry Schein, Inc. v. Archer & White
Sales, Inc., 139 S. Ct. 524, 529 (2019) (quoting Rent-A-Center,
W., Inc. v. Jackson, 561 U.S. 63, 68-69 (2010)). The Supreme
Court explained that “before referring a dispute to an arbitrator,
the court determines whether a valid arbitration agreement
exists. But if a valid agreement exists, and if the agreement
delegates the arbitrability issue to an arbitrator, a court may not
decide the arbitrability issue.” Id. at 530 (citation omitted). In
accordance with this principle, our Court has held that when an
agreement contains a clause that delegates to an arbitrator the
decision whether an arbitration agreement is enforceable, “[a]
court cannot reach the question of the arbitration agreement’s
enforceability unless a party challenged the delegation clause
and the court concludes that the delegation clause is not
enforceable.” MacDonald, 883 F.3d at 226. While a party
“must ‘challenge the delegation provision specifically,’” id.
(quoting Rent-A-Center, 561 U.S. at 70, 72) (alteration
omitted), “a party may rely on the same arguments that it

14
employs to contest the enforceability of other
arbitration agreement provisions,” id. at 226-27. 7
Plaintiffs contested the delegation clause in their
opposition to the motion to compel, and they challenged the
clause based upon arguments they made concerning the
enforceability of the entire arbitration agreement. Pls.’ Opp’n
to Mot. to Compel at 15, ECF No. 100 (“A contract that
contains an FAA-prohibited prospective waiver is
unenforceable in its entirety, delegation clause included . . . .
As a result, any delegation clause here is unenforceable for the
same reason the rest of the arbitration contract is
unenforceable.”). Because “[t]hese explicit references to the
delegation clause are sufficient to contest it,” MacDonald, 883
F.3d at 227, we will proceed to examine Plaintiffs’
enforceability arguments.

7
Defendants contend that Henry Schein establishes a
categorical rule that, when an agreement includes a delegation
clause, “a court possesses no power to decide the arbitrability
issue.” Curry Br. at 24 (quoting Henry Schein, 139 S. Ct. at
529). Several appellate courts have rejected similar arguments,
Gingras, 922 F.3d at 126 n.3; Lloyd’s Syndicate 457 v.
FloaTEC, L.L.C., 921 F.3d 508, 515 n.4 (5th Cir. 2019), and
we agree with them. The question presented in Henry Schein
was limited to whether courts, even in the face of a delegation
clause, may “decide the arbitrability question themselves if the
argument that the arbitration agreement applies to the
particular dispute is ‘wholly groundless.’” 139 S. Ct. at 527-
28. Henry Schein “did not change . . . the rule that courts must
first decide whether an arbitration agreement exists at all.”
Lloyd’s, 921 F.3d at 515 n.4; see also Gingras, 922 F.3d at 126
n.3 (stating that Henry Schein did not address “a challenge to
the validity of an arbitration clause itself”).

15
 B

Plaintiffs contend that the arbitration agreement,
including the delegation clause, is unenforceable under the
prospective waiver doctrine. The prospective waiver doctrine
in the arbitration context refers to a situation in which the
parties agree that, if disputes arise between them, then they
waive the right to rely on federal law. The Supreme Court has
observed that such waivers violate public policy. E.g., Am.
Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 236 (2013).
Thus, while federal policy favors arbitration, “the Supreme
Court has . . . made clear that arbitration is only appropriate so
long as the prospective litigant effectively may vindicate his or
her statutory cause of action in the arbitral forum.” Blair v.
Scott Specialty Gases, 283 F.3d 595, 605 (3d Cir. 2002)
(internal quotation marks, alterations, and citations omitted).
Put differently, while arbitration may be a forum to resolve
disputes, 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 266
(2009), an agreement to resolve disputes in that forum will be
enforced only when a litigant can pursue his statutory rights
there, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 628 (1985). Accordingly, arbitration
agreements that limit a party’s substantive claims to those
under tribal law, and hence forbid federal claims from being
brought, are unenforceable. Gingras, 922 F.3d at 117-18;
Dillon v. BMO Harris Bank, N.A., 856 F.3d 330, 332 (4th Cir.
2017); Hayes v. Delbert Servs. Corp., 811 F.3d 666, 668 (4th
Cir. 2016); Smith v. W. Sky Fin., LLC, 168 F. Supp. 3d 778,
785 (E.D. Pa. 2016).8

8
Our Court addressed a similar contract in MacDonald
that provided that “[t]he arbitrator will apply the laws of the

16
 1

To determine whether the prospective waiver doctrine
applies, we must identify the law that would apply in
arbitration under the agreement here, and thus what claims
Plaintiffs could pursue in arbitration. To do so, we interpret
the contract. We apply the forum’s contract interpretation law,
DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468 (2015), unless
the contract has a choice-of-law provision, see Gay v.
CreditInform, 511 F.3d 369, 389-90 (3d Cir. 2007). Here, the
applicable law subsection of the arbitration agreement states
that tribal law applies, and the governing law section of the
loan agreement states that “this [Loan] Agreement is governed
only by Tribal Law and such federal law as is applicable under
the Indian Commerce Clause of the United States
Constitution.” J.A. 292. However, because “the parties have
not provided the Court with any such [tribal] law” nor have
they identified any “such federal law as is applicable under the
Indian Commerce Clause” regarding contract interpretation,
we will “apply the forum’s contract interpretation principles.”
MacDonald, 883 F.3d at 228.

a

Cheyenne River Sioux Tribal Nation.” 883 F.3d at 225. While
we held that contract was unenforceable because the arbitral
forum there was illusory, id. at 232, and it was therefore
unnecessary to reach the prospective waiver issue, one panel
member noted that he “would also affirm on the alternative
ground that the Loan Agreement impermissibly waives a
borrower’s federal and state statutory rights, thereby rendering
the arbitration clause unenforceable,” id. at 233 n.15 (citing
Hayes, 811 F.3d at 673-74).

17
 Under the law of the forum, Pennsylvania, we
determine the meaning of a contract based on the language
used. 9 E.g., Binswanger of Pa., Inc. v. TSG Real Estate LLC,
217 A.3d 256, 262 (Pa. 2019). The applicable law subsection
of the arbitration agreement provides that “[t]he arbitrator shall
apply Tribal Law and the terms of this [Loan] Agreement,
including [the arbitration agreement].” J.A. 291. That
subsection further provides that a tribal court may confirm an
arbitration award “only if” the court “determines that the
award . . . is not based on legal error under Tribal Law.” J.A.
291. This subsection thus makes clear that tribal law applies
in arbitration and that the arbitrator’s decision will only be
sustained if it is supported by tribal law.

Other language in the arbitration agreement also
demonstrates that the rule of decision in arbitration is tribal
law. The arbitration agreement provides that (1) “[t]he
arbitrator has the ability to award all remedies available under
Tribal Law,” J.A. 291; (2) “the arbitrator may award fees,
costs, and reasonable attorneys’ fees” “[u]nless prohibited by
Tribal Law,” J.A. 290; (3) if the parties conduct the arbitration
off tribal land, the lender’s “accommodation” of that request
“shall not be construed . . . to allow for the application of any
law other than Tribal Law,” J.A. 291; and (4) the arbitration
firm can only apply “policies and procedures” that “do not
contradict . . . Tribal Law,” J.A. 290.

9
Because there is no suggestion that Pennsylvania law
places arbitration agreements on different “footing” than other
contracts, use of Pennsylvania law is consistent with the FAA.
DIRECTV, 136 S. Ct. at 468.

18
 Finally, and significantly, the acknowledgment and
certification section of the loan agreement confirms that the
only claims available in arbitration are tribal-law claims,
explicitly stating that the borrower “consent[s] to the dispute
resolution provision including the provision consenting and
limiting disputes to tribal law and to tribal courts, [and] to
arbitration.” J.A. 292. Thus, the plain language of the
arbitration agreement and the loan agreement shows that only
tribal-law claims may be brought in arbitration.

b

Defendants, nonetheless, contend that borrowers may
bring claims in arbitration that arise under “such federal law as
is applicable under the Indian Commerce Clause.” To make
this argument, Defendants interpret the arbitration agreement’s
applicable law subsection to incorporate the term “such federal
law as is applicable under the Indian Commerce Clause” from
the governing law section because the applicable law
subsection states that “[t]he arbitrator shall apply Tribal Law
and the terms of this [Loan] Agreement,” and the governing
law section is a term of the loan agreement. We disagree with
Defendants’ interpretation for two reasons.

First, “the specific controls the general when
interpreting a contract.” Dominic’s Inc. v. Tony’s Famous
Tomato Pie Bar & Rest., Inc., 214 A.3d 259, 269 (Pa. Super.
Ct. 2019) (citation omitted). Because the arbitration agreement
specifically directs that tribal law applies in arbitration, with
no mention of any other body of law, and because the Indian
Commerce Clause language comes from a separate section in
the general loan agreement, the arbitration agreement’s
applicable law subsection is “more likely to reflect the intent

19
of the parties.” Trinity Indus., Inc. v. Greenlease Holding Co.,
903 F.3d 333, 350 (3d Cir. 2018) (quoting Musko v. Musko,
697 A.2d 255, 256 (Pa. 1997)). This intent to limit a borrower
with a dispute to tribal-law claims is apparent in the
acknowledgement and certification section, which specifically
states that “[b]y signing [the loan agreement], [the borrower]
consent[s] to . . . limiting disputes to tribal law.” J.A. 292.
This specific reference to the type of disputes that a borrower
can bring in arbitration controls over the more general
reference in the governing law section of the loan agreement.
Second, if we read the phrase “such federal law as is
applicable under the Indian Commerce Clause” in the context
in which it appears, it becomes clear that that phrase does not
provide a separate rule of decision for arbitration. Khawaja v.
RE/MAX Cent., 151 A.3d 626, 632 (Pa. Super. Ct. 2016)
(instructing that we consider the context in which a contractual
phrase appears). The phrase appears in a section separate from
the arbitration agreement, titled “GOVERNING LAW.” J.A.
292 (capitalization in original). That section further states that
“neither we nor this [Loan] Agreement are subject to any other
federal or state law or regulation,” meaning that the lender and
loan agreement are subject only to tribal law and some limited
group of unidentified “federal law as is applicable under the
Indian Commerce Clause.” J.A. 292. Read in its entirety, the
governing law section, therefore, identifies only the laws to
which the Tribe and loan agreement are subject. The laws to
which the Tribe and loan agreement are subject, however, are
not the same as what laws can serve as the basis for claims in
arbitration. 10

10
Reading the agreement in any other way would
introduce an irreconcilable and nullifying conflict within the
contract, which we must avoid. Dominic’s, 214 A.3d at 269

20
 The agreement itself reflects this difference. The
acknowledgement and certification section of the loan
agreement, which follows the governing law section,
specifically states that “[b]y signing below, you also consent to
the dispute resolution provision including the provision
consenting and limiting disputes to tribal law and to tribal
courts, [and] to arbitration[.]” J.A. 292. Thus, regardless of

(stating that “clauses in a contract should not be read as
independent agreements thrown together without
consideration of their combined effects” so “[t]erms in one
section of the contract . . . should never be interpreted in a
manner which nullifies other terms” (citation omitted)); see
Binswanger, 217 A.3d at 262 (instructing that contracts are not
to be interpreted “in such a way as to lead to an absurdity or
make the . . . contract ineffective to accomplish its purpose”
(citation omitted)). The arbitration agreement provides that
“THIS [LOAN] AGREEMENT SHALL BE GOVERNED BY
TRIBAL LAW,” only tribal-law remedies are available, and
the arbitrator’s conclusions of law must be consistent with
tribal law. J.A. 291 (capitalization in original). If the
arbitration agreement’s applicable law subsection implicitly
incorporates the language from the separate governing law
section stating that “such federal law as is applicable under the
Indian Commerce Clause,” then that could nullify the repeated
and explicit directive that only tribal law applies in arbitration
and the requirement that a borrower consents to “limiting
disputes to tribal law.” J.A. 292. Thus, we will not interpret
the arbitration agreement’s directive to consider the loan
agreement as surreptitiously adopting a separate body of law,
in contravention to the plain language of the arbitration
agreement.

21
the law captured by the governing law section, a borrower is
limited to pursuing disputes under tribal law.

2

Because the arbitration agreement mandates that only
tribal law applies in arbitration, federal law does not. As a
result, the arbitration agreement effects as an impermissible
prospective waiver of statutory rights. The Supreme Court has
said that “a provision in an arbitration agreement forbidding
the assertion of certain statutory rights” renders an arbitration
agreement unenforceable. Italian Colors, 570 U.S. at 236; see
also Mitsubishi, 473 U.S. at 637 n.19 (“[I]n the event the
choice-of-forum and choice-of-law clauses operated in tandem
as a prospective waiver of a party’s right to pursue statutory
remedies for antitrust violations, we would have little
hesitation in condemning the agreement as against public
policy.”). While parties may choose what law governs their
contract or how their arbitration is conducted, DIRECTV, 136
S. Ct. at 468, “a party may not underhandedly convert a choice
of law clause into a choice of no law clause,” Hayes, 811 F.3d
at 675. 11 By limiting the claims available to borrowers to

11
Defendants latch onto generalized language in
Supreme Court cases to argue that parties can categorically
choose which law applies and what claims can be brought.
DIRECTV, 136 S. Ct. at 468 (“[The FAA] allows parties to an
arbitration contract considerable latitude to choose what law
governs some or all of its provisions, including the law
governing enforceability of a class-arbitration waiver. In
principle, they might choose to have portions of their contract
governed by the law of Tibet, the law of pre-revolutionary
Russia . . . .” (citation omitted)). As the Court of Appeals for

22
tribal-law claims, the arbitration agreement here requires a
borrower to prospectively waive claims based on any other
law. Like our sister circuits, we conclude that this requirement
violates public policy and renders the arbitration agreement
unenforceable. Gingras, 922 F.3d at 117-18; Dillon, 856 F.3d
at 332; Hayes, 811 F.3d at 668.

Defendants’ arguments to the contrary are
unpersuasive. First, Defendants argue that for an agreement to
be invalid under the prospective waiver doctrine, it must
affirmatively disclaim federal law. As support for this
affirmative-disclaimer requirement, Defendants rely on
language from Supreme Court opinions where the Court
declined to credit arguments that the arbitrator would not
entertain federal claims because it was not clear from the
contracts that the contract waived federal rights. That is not
the case here because the arbitration agreement is clear that
only tribal-law claims are available, and that pronouncement is
enough to show that federal-law claims are unavailable.
Gingras, 922 F.3d at 127 (“By applying tribal law only,
arbitration . . . appears wholly to foreclose [borrowers] from
vindicating rights granted by federal and state law.”); Dillon,
856 F.3d at 335-36 (concluding that because the arbitration
agreement provides “that the arbitrator shall not allow for the
application of any law other than tribal law,” the
court “interpret[s] these terms in the arbitration agreement as

the Fourth Circuit explained, parties may choose what law will
govern an arbitration through a choice-of-law clause (i.e. what
procedures will be used and what contract interpretation
principles apply), but a choice-of-law clause cannot forbid
federal substantive claims from being brought. Hayes, 811
F.3d at 675.

23
an unambiguous attempt to apply tribal law to the exclusion of
federal and state law” (emphasis omitted)).

Second, the individual Defendants assert that the
arbitration agreement is not an impermissible prospective
waiver because borrowers can still “vindicate the substance”
of their RICO claim under tribal law. Curry Br. at 36
(emphasis omitted). 12 That is, the individual Defendants argue
that Plaintiffs could bring a RICO-like claim under tribal law
and receive similar relief. The Supreme Court, however, has
framed the prospective waiver question as whether the contract
effects an “elimination of the right to pursue [a] remedy.”
Italian Colors, 570 U.S. at 236 (emphasis omitted); see also
Mitsubishi, 473 U.S. at 637 n.19 (“right to pursue statutory
remedies”); Penn Plaza, 556 U.S. at 265-66 (“The decision to
resolve ADEA claims by way of arbitration instead of litigation
does not waive the statutory right . . . ; it waives only the right
to seek relief from a court in the first instance.”). Thus, the
question is whether a party can bring and effectively pursue the
federal claim—not whether some other law is a sufficient
substitute. 13 Accordingly, by “flatly and categorically

12
Red Stone does not embrace this argument.
13
The individual Defendants’ argument that an
arbitration agreement is not an impermissible prospective
waiver when parties can vindicate the substance of their federal
claims under another jurisdiction’s law misconstrues the
Supreme Court’s precedent. The Court has explained that an
arbitration agreement is enforceable “so long as the
prospective litigant effectively may vindicate its statutory
cause of action in the arbitral forum.” Italian Colors, 570 U.S.
at 235 (quoting Mitsubishi, 473 U.S. at 637). Defendants take
this “effective vindication” language to mean that a contract

24
renounc[ing] the authority of the federal statutes to which
[Defendants are] and must remain subject,” the agreement
takes the “step” “plainly forbidden” by Supreme Court
precedent. Hayes, 811 F.3d at 675. Thus, the arbitration
agreement contains a forbidden prospective waiver of statutory
rights.

Finally, even if we interpreted the arbitration agreement
to allow borrowers to assert claims in arbitration arising under
“such federal law as is applicable under the Indian Commerce
Clause,” the agreement still effects a prospective waiver.
RICO, the federal claim Plaintiffs brought here, is a law passed
under Congress’ Interstate and Foreign Commerce Clause
powers. E.g., Seville Indus. Mach. Corp. v. Southmost Mach.
Corp., 742 F.2d 786, 788 n.4 (3d Cir. 1984), abrogated in part

can waive federal rights so long as the applicable law (here,
tribal law) allows the party to effectively vindicate the
substance of the federal right. The Court has never gone so far.
Rather, the Court has held that a party may waive certain
procedural guarantees associated with a statutory right (such as
the ability to proceed as a class action) so long as the party
retains the right to assert the federal claim. Id. at 236-37; see
also Hayes, 811 F.3d at 675 (explaining that Italian Colors
upheld a class arbitration waiver “because the waiver only
reduced the economic incentive to bring a federal antitrust
claim” but, critically, “did not prevent a party from pursuing
an antitrust claim altogether”). The Court has not indicated
that a party can waive the federal right itself. “In fact, the Court
stated that the rule against substantive waivers ‘would certainly
cover a provision in an arbitration agreement forbidding the
assertion of certain statutory rights.’” Hayes, 811 F.3d at 675
(quoting Italian Colors, 570 U.S. at 236).

25
on other grounds by Bell Atl. Corp. v. Twombly, 550 U.S. 544,
557 (2007); United States v. Juvenile Male, 118 F.3d 1344,
1348 (9th Cir. 1997). RICO still applies to the Tribe because
congressional acts of general applicability apply to Indian
tribes. Lazore v. C.I.R., 11 F.3d 1180, 1183 (3d Cir. 1993).
However, as a law passed pursuant to Congress’ foreign and
interstate commerce powers—not Indian commerce power—it
is not a “federal law” made “applicable under the Indian
Commerce Clause.” As a result, under the loan agreement,
Plaintiffs could not bring their RICO claim in arbitration even
under Defendants’ reading, so the loan agreement effects a
prospective waiver.

Furthermore, the text of the loan agreement makes clear
that the phrase “such federal law as is applicable under the
Indian Commerce Clause” does not capture all federal law or
even laws of general applicability. By using the language
“such federal law as is applicable under the Indian Commerce
Clause,” the contract conveys a reference to some subset of
federal laws, which notably Defendants never identified to this
Court. Even if that subset had been identified, it would
demonstrate that at least some federal claims would be excised
and hence could not be relied upon (for example, RICO). Our
interpretation of the clause “such federal law as is applicable
under the Indian Commerce Clause” as referring to a subset of
federal law is bolstered by (1) other language in the same
section that states that the Tribe and the loan agreement are not
“subject to any other federal or state law or regulation,” J.A.
292, and (2) several statements in the loan agreement that the
lender’s voluntary use of federal laws as guidelines “does not
represent acquiescence of the Tribe to any federal law unless
found expressly applicable to the operations of the Tribe,” J.A.
292; see also J.A. 281 (stating that the lender’s use of

26
disclosures “does not mean that Lender consents to the
application of federal law to any Loan or to this [Loan]
Agreement”); J.A. 282-83 (stating that disclosures of the type
contemplated under the Truth in Lending Act do not mean the
Tribe “concede[s] that the Truth in Lending Act applies to this
transaction”); J.A. 291 (stating that arbitration conducted off
tribal land does not “allow for the application of any law other
than Tribal Law”). For these reasons, even if the arbitration
agreement allowed borrowers to bring claims arising under
“such federal law as is applicable under the Indian Commerce
Clause,” the agreement would still create an impermissible
waiver of federal statutory rights.

C

The prospective waiver of statutory rights renders the
entire arbitration agreement (delegation clause included)
unenforceable because the prohibited waiver here is not
severable. 14 “Pennsylvania courts have held that if

14
Even if we analyzed the delegation clause entirely
separately, we would conclude it is unenforceable. As one
district court in this Circuit explained, while the arbitration
agreement delegates arbitrability determinations to the
arbitrator, it also provides that the arbitrator can only apply
tribal law, so

[t]he arbitrator would be expressly forbidden
from relying on any federal or state law, which
means that the arbitrator could not ask whether
the arbitration clause—and its complete
exclusion of federal law—would violate the
federal public policy against arbitration clauses

27
an essential term of a contract is deemed illegal, it renders the
entire contract unenforceable” and cannot be severed. Spinetti
v. Serv. Corp. Int’l, 324 F.3d 212, 214 (3d Cir. 2003) (emphasis
omitted); see also Stewart v. GGNSC-Canonsburg, L.P., 9
A.3d 215, 219 (Pa. Super. Ct. 2010) (holding an arbitration
agreement unenforceable when the invalid term was essential).
In short, the arbitration agreement’s clear reference to the
exclusive application of tribal law is intertwined with the
arbitration process and is central to it.15 As the Court of
Appeals for the Fourth Circuit twice held, statements in a loan

that operate as a prospective waiver . . . . Quite
possibly, the arbitrator would uphold the
arbitration clause, because there would be no
principle of federal law standing in the way.
Enforcing the delegation clause would
effectively allow [the lender] to subvert federal
public policy and deny [the borrower] the
effective vindication of her federal statutory
rights before the arbitration of her claims even
began.

Ryan v. Delbert Servs. Corp., No. 5:15-cv-05044, 2016 WL
4702352, at *5 (E.D. Pa. Sept. 8, 2016) (internal quotation
marks, alterations, and citations omitted).
15
Relatedly, the arbitration agreement explicitly states
that “[a]s an integral component of accepting this [Loan]
Agreement, you irrevocably consent to the exclusive
jurisdiction of the Tribal courts for purposes of this [Loan]
Agreement.” J.A. 291. The arbitration agreement provides
that the tribal courts will apply tribal law when reviewing
arbitration awards. J.A. 291. Thus, the law the tribal courts
will apply is also integral to the arbitration agreement.

28
agreement that only tribal law applied in arbitration, and that
federal law did not apply to the tribe, showed that “one of the
animating purposes of the arbitration agreement was to ensure
that [the tribe] and its allies could engage in lending and
collection practices free from the strictures of any federal law.”
Hayes, 811 F.3d at 676; see also Dillon, 856 F.3d at 336.

The arbitration agreement here repeatedly states that
only tribal law claims can be brought in arbitration. Were we
to remove the invocations of tribal law in the arbitration
agreement, we would “impermissibl[y] rewrit[e]” the contract.
MacDonald, 883 F.3d at 231; accord Dillon, 856 F.3d at 336
(“[A borrower’s] consent to application of federal law would
defeat the purpose of the arbitration agreement in its
entirety.”). Because tribal law provisions are “integral to the
entire arbitration agreement,” they “cannot be severed.”16
MacDonald, 883 F.3d at 232. 17 As a result, “the entire
arbitration agreement, including the delegation clause, is
unenforceable.” Id.; see also Gingras, 922 F.3d at 128
(same). 18

16
Of equal import is the Hayes court’s observation that
“severance should not be used when an agreement represents
an integrated scheme to contravene public policy.” 811 F.3d
at 676 (internal quotation marks and citation omitted).
17
The loan agreement’s severability clause does not
change our conclusion because a severability clause cannot
save an arbitration agreement if the invalid provision is integral
to the agreement. Stewart, 9 A.3d at 220-21; accord
MacDonald, 883 F.3d at 231 (collecting cases).
18
Because we conclude that the prospective waiver of
statutory rights renders the arbitration agreement
unenforceable, we need not address whether the inability to

29
 III

For the foregoing reasons, we will affirm the District
Court’s order denying Defendants’ motions to compel
arbitration.

seek Article III court review of an arbitration award provides a
separate ground to hold the arbitration agreement
unenforceable, see Vimar Seguros y Reaseguros, S.A. v. M/V
Sky Reefer, 515 U.S. 528, 540 (1995) (noting that a lack of
“subsequent opportunity for review” at the award-enforcement
stage could run afoul of public policy); Gingras, 922 F.3d at
127-28 (holding that an arbitration agreement’s “mechanism of
tribal court review” was unconscionable), or whether Plaintiffs
forfeited the argument.

30