FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
KIMETRA BRICE; EARL BROWNE; JILL No. 19-15707
NOVOROT,
Plaintiffs-Appellees, D.C. No.
3:18-cv-01200-
v. WHO
PLAIN GREEN, LLC,
Defendant, OPINION
and
HAYNES INVESTMENTS, LLC; L.
STEPHEN HAYNES,
Defendants-Appellants.
Appeal from the United States District Court
for the Northern District of California
William Horsley Orrick, District Judge, Presiding
Argued and Submitted September 16, 2020
San Francisco, California
Filed September 16, 2021
2 BRICE V. HAYNES INVESTMENTS
Before: William A. Fletcher, Danielle J. Forrest ∗, and
Lawrence VanDyke, Circuit Judges.
Opinion by Judge Forrest;
Dissent by Judge W. Fletcher
SUMMARY **
Arbitration
The panel reversed the district court’s order denying
defendants’ motion to compel arbitration in a RICO action
and remanded with instructions to stay the case and compel
the parties to proceed with arbitration.
Plaintiffs obtained short-term, high-interest loans from
either Plain Green, LLC, or Great Plains Lending, LLC,
which were owned by the Chippewa Cree Tribe of the Rocky
Boy’s Indian Reservation and the Otoe-Missouri Tribe of
Indians. These “Tribal Lenders’” standard loan contracts
contained an agreement to arbitrate any dispute arising under
the contract. The contracts also included a delegation
provision requiring an arbitrator—not a court—to decide
“any issue concerning the validity, enforceability, or scope
of [the loan] agreement or [arbitration agreement].” The
contracts stated that they were governed by tribal law and
that an arbitrator must apply tribal law. Plaintiffs filed class-
*
Formerly known as Danielle J. Hunsaker.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
BRICE V. HAYNES INVESTMENTS 3
action complaints against the Tribal Lenders and other
defendants that they alleged were the owners and investors
of Think Finance, LLC, which operated a payday loan
enterprise via the Tribal Lenders.
The district court denied defendants’ motion to compel
arbitration on the ground that the arbitration agreement as a
whole in each contract was unenforceable because it
prospectively waived plaintiffs’ right to pursue federal
statutory claims by requiring arbitrators to apply tribal law.
The district court concluded that each delegation provision
was unenforceable for the same reason.
Following Rent-A-Center, West, Inc. v. Jackson, 56 U.S.
63 (2010), and Brennan v. Opus Bank, 796 F.3d 1125 (9th
Cir. 2015), and disagreeing with other circuits, the panel
concluded that, rather than asking first whether the
arbitration agreement was enforceable as a whole, it must
consider first the enforceability of the delegation provision
specifically. The panel concluded that the parties’
delegation provision was enforceable because it did not
preclude plaintiffs from arguing to an arbitrator that the
arbitration agreement was unenforceable under the
prospective-waiver doctrine and, therefore, this general
enforceability issue must be decided by an arbitrator. The
panel concluded that the contracts’ choice-of-law provisions
were not to the contrary because they did not prevent
plaintiffs’ from pursuing their prospective-waiver
enforcement challenge in arbitration, which was the key to
determining whether the delegation provision itself was a
prospective waiver.
Dissenting, Judge W. Fletcher wrote that the majority
misunderstood the effect of the choice-of-law provisions in
the agreements. He wrote that, under the choice-of-law
4 BRICE V. HAYNES INVESTMENTS
provisions, the arbitrator could apply only tribal law and a
small and irrelevant subset of federal law. The prospective
waivers of most federal law and all state law prevented the
arbitrator from applying the law necessary to determine
whether the delegation provisions and the arbitration
agreements were valid. Judge W. Fletcher wrote that both
the delegation provisions and the arbitration agreements
therefore were invalid.
COUNSEL
Richard L. Scheff (argued) and David F. Herman,
Armstrong Teasdale LLP, Philadelphia, Pennsylvania; Anna
S. McLean and Jacqueline Simonovich, Sheppard Mullin
Richter & Hampton LLP, San Francisco, California; for
Defedants-Appellants.
Matthew W.H. Wessler (argued), Gupta Wessler PLLC,
Washington, D.C.; Kristi C. Kelly and Andrew J. Guzzo,
Kelly Guzzo PLC, Fairfax, Virginia; Leonard A. Bennett,
Craig C. Marchiando, and Elizabeth W. Hanes, Consumer
Litigation Associates P.C., Newport News, Virginia; Anna
C. Haac, Tycko & Zavareei LLP, Washington, D.C.; for
Plaintiffs-Appellees.
Patrick O. Daughtery, Van Ness Feldman LLP, Washington,
D.C., for Amicus Curiae Native American Financial
Services Association.
BRICE V. HAYNES INVESTMENTS 5
OPINION
FORREST, Circuit Judge:
We must decide whether a provision allowing an
arbitrator, instead of a court, to decide whether an arbitration
agreement that is governed by something other than federal
law is unenforceable because it requires the parties to
prospectively waive their federal rights. Already confused?
You’re not alone. Grappling with the Supreme Court’s
decision in Rent-A-Center, West, Inc. v. Jackson, 561 U.S.
63 (2010), we work our way through this brain twister and
conclude that an agreement delegating to an arbitrator the
gateway question of whether the underlying arbitration
agreement is enforceable must be upheld unless that specific
delegation provision is itself unenforceable. Because we
conclude that the delegation provision in the contract at issue
is not itself an invalid prospective waiver (while not
resolving whether the arbitration agreement as a whole is a
prospective waiver), we reverse the district court and remand
with instructions to compel the parties to proceed with
arbitration. In reaching our decision, we diverge from the
decisions reached by several of our sister circuits.
I. BACKGROUND
Plaintiffs-appellees Kimetra Brice, Earl Browne, and Jill
Novorot (Borrowers) obtained short-term, high-interest
loans from either Plain Green, LLC (Plain Green) or Great
Plains Lending, LLC (Great Plains Lending). The Chippewa
Cree Tribe of the Rocky Boy’s Indian Reservation in
Montana owns Plain Green; the Otoe-Missouria Tribe of
Indians owns Great Plains Lending. Both lenders
represented themselves as “tribal lending entities,” and we
refer to them collectively herein as “Tribal Lenders.”
6 BRICE V. HAYNES INVESTMENTS
The Tribal Lenders’ standard loan contracts contain an
agreement to arbitrate any dispute arising under the
contract. 1 And each arbitration agreement includes a
delegation provision requiring an arbitrator—not a court—
to decide “any issue concerning the validity, enforceability,
or scope of [the loan] agreement or [arbitration agreement].”
The loan contracts also make several references to “Tribal
Law.” For example, they state that the contracts “shall be
governed by the laws of the tribe,” or “Tribal Law,” and that
an arbitrator must “apply Tribal Law and the terms of this
Agreement.”
Borrowers took out payday loans from the Tribal
Lenders that they now contend were illegal, and they filed
class-action complaints against numerous entities, including
the Tribal Lenders and Haynes Investments, LLC; Sequoia
Capital Operations, LLC; and 7HBF No. 2, LTD
(collectively, Investors). 2 Borrowers assert claims under the
Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U.S.C. § 1962(a)–(d), and California law. They
allege that Investors are the owners and investors of Think
Finance, LLC, which operated a payday loan enterprise via
1
The arbitration provisions in the various contracts are not identical,
but the parties agree that the relevant provisions are materially similar—
as did the district court.
2
This opinion references not only the defendants named in this case,
Brice v. Plain Green, LLC, No. 19-15707, but also the defendants named
in the companion case, Brice v. 7HBF No. 2, Ltd., No. 19-17477, which
we resolve today via memorandum disposition for the reasons stated in
this opinion. The parties argued Plain Green and 7HBF together at oral
argument, and the cases involve the same borrowers and materially
similar loan agreements. (The companion case 7HBF was itself
consolidated with another similar appeal, Brice v. Sequoia Capital
Operations LLC, No. 19-17414, but the Sequoia Defendants settled after
oral argument and that appeal was dismissed).
BRICE V. HAYNES INVESTMENTS 7
the Tribal Lenders that was “designed to evade state usury
laws and make illegal high interest loans.” According to
Borrowers, Investors financed and actively participated in
the enterprise, rendering them liable for any underlying
illegal conduct.
Investors moved to compel arbitration, citing the
arbitration agreements and delegation provisions in
Borrowers’ various loan contracts. 3 The district court denied
the motions, concluding the arbitration agreement as a whole
in each contract is unenforceable because it prospectively
waives Borrowers’ right to pursue federal statutory claims
by requiring arbitrators to apply tribal law. The district court
held that each delegation provision was unenforceable for
the same reason. That is, the district court concluded that
because tribal law governs the loan contracts and Borrowers
cannot present in arbitration merits claims based on federal
law, both the arbitration agreements as a whole and the
“accompanying delegation clauses” are unenforceable
prospective waivers. The district court did not analyze
enforceability of the delegation provisions separate from the
larger agreements to arbitrate. Several Investors appealed.
II. DISCUSSION
We review de novo the denial of a motion to compel
arbitration and the validity of an arbitration clause.
O’Connor v. Uber Techs., Inc., 904 F.3d 1087, 1093 (9th
Cir. 2018); Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d
914, 917 (9th Cir. 2011).
3
Investors made several motions; only the motion to compel
arbitration is at issue here.
8 BRICE V. HAYNES INVESTMENTS
A. Order of Analysis
1. The Parties’ Arguments 4
The parties disagree on the proper order of analysis.
Investors argue the court first must decide delegation—
whether there is a clear and enforceable delegation provision
that requires an arbitrator to decide whether the parties’
arbitration agreement is enforceable. If the delegation
provision is enforceable, Investors argue the court must stop
there and not proceed to consider whether the arbitration
agreement is also enforceable. That task, Investors assert, is
for the arbitrator. Alternatively, Investors argue that the
district court erroneously held the arbitration agreements
were unenforceable by misapplying the prospective-waiver
doctrine.
Borrowers disagree. Like the district court, Borrowers
believe the first question is enforceability of the arbitration
agreement as a whole. If the entire arbitration agreement—
delegation provision included—is unenforceable, Borrowers
argue that the court need not apply the delegation provision.
Accordingly, Borrowers assert that the district court properly
considered and held that the parties’ arbitration agreement is
unenforceable because it required them to prospectively
waive their statutory rights.
We agree with Investors that our focus first must be on
the enforceability of the delegation provision specifically.
And we conclude that, under recent decisions both from the
4
The Native American Financial Services Association (NAFSA)
filed an amicus brief in support of Investors in both appeals. Because
NAFSA declined to address the dispositive delegation provision issue—
besides a single statement supporting Investors’ delegation arguments—
we decline to address NAFSA’s additional points.
BRICE V. HAYNES INVESTMENTS 9
Supreme Court and our court, the parties’ antecedent
delegation provision is enforceable because it does not
preclude Borrowers from arguing to an arbitrator that the
arbitration agreement is unenforceable under the
prospective-waiver doctrine and, therefore, this general
enforceability issue must be decided by an arbitrator.
2. Governing Law
Under the Federal Arbitration Act (FAA), arbitration
agreements are “valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. The FAA
“establishes an equal-treatment principle.” Kindred Nursing
Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1426 (2017). “A
court may invalidate an arbitration agreement based on
generally applicable contract defenses like fraud or
unconscionability, but not on legal rules that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue.” Id. (internal quotations
and citation omitted).
In considering a motion to compel arbitration, we
generally decide two gateway issues: (1) whether the parties
agreed to arbitrate and (2) “whether the agreement covers the
dispute” at issue. Brennan v. Opus Bank, 796 F.3d 1125,
1130 (9th Cir. 2015). But the Supreme Court’s decision in
Rent-A-Center established that parties can agree to arbitrate
even these preliminary gateway questions—provided any
such agreement is “clear and unmistakable.” 561 U.S. at 69
n.1. This is known as a delegation provision, which “is
simply an additional, antecedent agreement the party seeking
arbitration asks the federal court to enforce, and the FAA
operates on this additional arbitration agreement just as it
does on any other.” Henry Schein, Inc. v. Archer & White
Sales, Inc., 139 S. Ct. 524, 529 (2019) (quoting Rent-A-
10 BRICE V. HAYNES INVESTMENTS
Center, 561 U.S. at 70) (abrogating a judge-made exception
to enforcing delegation clauses under the FAA).
Where a delegation provision exists, courts first must
focus on the enforceability of that specific provision, not the
enforceability of the arbitration agreement as a whole. Rent-
A-Center, 561 U.S. at 71; Brennan, 796 F.3d at 1132. To do
otherwise would render the delegation provision a nullity.
Consider our decision in Brennan. There, as here, “three
agreements—each nested inside the other—[wer]e relevant
to our analysis”: (1) the Loan Agreement, (2) the Arbitration
Agreement, and (3) the Delegation Provision. Brennan,
796 F.3d at 1133. Thus, there were “multiple severable
arbitration agreements.” Id.; Rent-A-Center, 561 U.S. at 71–
72 (noting “[a]s a matter of substantive federal arbitration
law, an arbitration provision is severable from the remainder
of the contract” (internal quotations and citation omitted)).
And one of those severable agreements delegated deciding
“gateway” issues—like enforceability—to an arbitrator.
Thus, in Brennan, “[t]he arbitration clause at issue, as in
Rent-A-Center, [wa]s the Delegation Provision because that
[wa]s the arbitration agreement [Defendants] s[ought] to
enforce.” 796 F.3d at 1133.
Following Rent-A-Center and Brennan, Borrowers must
show that the delegation provision is itself unenforceable.
Rent-A-Center, 561 U.S. at 72–74. Rent-A-Center
contemplates that a delegation provision may be
unenforceable for the same reason as the broader arbitration
agreement. See id. at 72–74. (“[H]ad [plaintiff] challenged
the delegation provision by arguing that these common
procedures as applied to the delegation provision rendered
that provision unconscionable . . . . [plaintiff] would have
had to argue that the limitation upon the number of
depositions causes the arbitration of his claim that the
BRICE V. HAYNES INVESTMENTS 11
Agreement is unenforceable to be unconscionable.”). But
still we must consider the enforceability argument as applied
to the specific agreement at issue—here, the delegation
provision. See id. We cannot merely mention that Borrowers
challenge the delegation provision and proceed to analyze
the enforceability of the entire arbitration agreement. 5
B. Prospective-Waiver Doctrine
With the order of analysis established, we consider the
law governing Borrowers’ enforceability argument.
Borrowers offer one reason why both the arbitration
agreement and the delegation provision are unenforceable:
prospective waiver. Under the prospective-waiver
doctrine—a.k.a. “effective vindication”—an arbitration
agreement that waives a party’s “right to pursue [federal]
statutory remedies” is unenforceable. Am. Express Co. v.
Italian Colors Rest., 570 U.S. 228, 235 (2013) (emphasis
omitted); see also id. at 252 (Kagan, J., dissenting) (stating
that “effective[ ]vindication . . . comes into play only when
the FAA is alleged to conflict with another federal law”). 6
5
Although Investors assert Borrowers failed to adequately challenge
the delegation clause before the district court, as required by Rent-A-
Center, that argument fails under Smith v. Jem Grp, Inc., 737 F.3d 636,
640 (9th Cir. 2013), which explains that challenging the delegation
provision in response to a motion to compel arbitration is enough. And
that is exactly what Borrowers did.
6
The dissent contends that the federal prospective-waiver doctrine
is not limited to federal remedies, but also applies to state-law remedies.
Dissent at 44. The dissent also suggests that the prospective-waiver
doctrine extends to constitutional and common-law rights, not just
statutory rights. Id. at 45. Both propositions extend the prospective-
waiver doctrine beyond the Supreme Court’s application. See, e.g.,
Italian Colors, 570 U.S. at 236; id. at 252 (Kagan, J., dissenting) (“When
a state rule allegedly conflicts with the FAA, we apply standard
12 BRICE V. HAYNES INVESTMENTS
In Italian Colors, the Supreme Court disparaged this
doctrine as “originat[ing] as dictum” and noted that the
Court has never used it to invalidate an arbitration
agreement. Id. at 235 (majority opinion); see also id. at 246–
47 (Kagan, J., dissenting). The Court also drew a distinction
between agreements that make it more difficult to prove a
statutory remedy and those that eliminate the right to pursue
that remedy. Id. at 236 (majority opinion). Although the
Court left open the possibility that agreements that make
proving a statutory claim more difficult may be invalid based
on prospective waiver, it implied that the doctrine’s primary
focus is on those agreements that completely eliminate the
right to pursue a statutory remedy. See id. Indeed, in a strong
dissent, Justice Kagan challenged the majority’s narrow
view of prospective waiver, asserting that this doctrine
applies anytime “an arbitration agreement prevents the
effective vindication of federal rights,” id. at 248 (Kagan, J.,
dissenting), even if the agreement does not “explicitly bar[]
a claim” but merely “operate[s] to do so,” id. at 242.
1. Enforceability of the Delegation Provision
In analyzing the enforceability of the delegation
provision, we begin with the text of the parties’ agreements.
The loan contracts, including the arbitration agreements,
have evolved over several years (and lawsuits). Although the
precise terms of each agreement vary, the parties and the
district court agreed that they are materially the same.
preemption principles . . . . Our effective-vindication rule comes into
play only when the FAA is alleged to conflict with another federal
law. . . . In that all-federal context, one law does not automatically bow
to the other, and the effective-vindication rule serves as a way to
reconcile any tension between them.”).
BRICE V. HAYNES INVESTMENTS 13
Each arbitration agreement—a separate section within
the loan contracts—begins with an invitation to opt out. It
then provides that “any Dispute” between lender and
borrower “will be resolved by Arbitration.” The arbitration
agreement instructs: “Dispute is to be given its broadest
possible meaning, and includes … all federal, state, or
Tribal Law claims or demands . . . based on any legal or
equitable theory….” The delegation provision at the heart of
this case is part of the broad definition of “Dispute,” and
states: “A Dispute includes any issue concerning the
validity, enforceability, or scope of this Agreement or this
Agreement to Arbitrate.” 7 The key provisions we ultimately
find determinative state in full:
The loan contracts also contain multiple choice-of-law
provisions directing that the parties’ relationship “shall be
governed by the laws of the tribe,” or “Tribal Law.” The
contracts specify that “neither this agreement nor [the
lender] is subject to the laws of any state of the United
States.” However, certain federal laws are expressly
referenced as governing the contract and “[the lender] may
choose to voluntarily use certain federal laws as guidelines
for the provision of services” even though “such voluntary
7
Borrowers do not dispute that the delegation provision indicates a
“clear and unmistakable” intent to arbitrate gateway issues. See Rent-A-
Center, 561 U.S. at 68–69 (noting that similar terms demonstrated a clear
and unmistakable intent to delegate arbitrability issues).
14 BRICE V. HAYNES INVESTMENTS
use does not represent acquiescence of [the tribe] to any
federal law unless found expressly applicable.” On the plain
language of these terms, federal law is not foreclosed in the
same way state law is foreclosed. The arbitration agreement
also specifies that tribal law is not the only source of
authority by directing the arbitrator to “apply Tribal Law and
the terms of this Agreement, including this Agreement to
Arbitrate.”
The arbitrator is limited to “award[ing] all remedies
available under Tribal Law, whether at law or in equity,” and
an “arbitration award . . . must be consistent with this
Agreement and Tribal Law.” The loan contract clarifies that
the selection of tribal law applies even if the arbitration is
held on non-tribal land:
[A]rbitration . . . under this Agreement may
be conducted either on Tribal land or within
thirty . . . miles of [borrower’s] current
residence, at [borrower’s] choice, provided
that this accommodation . . . shall not be
construed in any way . . . to allow for the
application of any law other than Tribal Law.
In determining whether the delegation provision is
unenforceable, we must decide whether this particular
provision precludes Borrowers from presenting and having
the arbitrator decide whether the arbitration agreement is
unenforceable as a prospective waiver under the federal law.
That is, does the delegation provision prohibit the arbitrator
from considering disputes “concerning the . . .
enforceability” of the arbitration agreement that are based on
federal law? Under governing precedent, we conclude that
the delegation provision is enforceable because it does not
eliminate Borrowers’ right to pursue in arbitration their
BRICE V. HAYNES INVESTMENTS 15
prospective-waiver challenge to the arbitration agreement as
a whole, even though that challenge arises under federal law.
See Italian Colors, 570 U.S. at 235. The plain language of
the delegation provision does not foreclose the arbitrator
from considering enforceability disputes based on federal
law. The description of what an arbitrator can decide
expressly includes enforceability disputes arising under
“federal, state, or Tribal Law . . . based on any legal or
equitable theory.” This necessarily means that Borrowers’
rights to pursue their federal prospective-waiver argument
remains intact at this stage of the proceedings and the
delegation provision is not facially a prospective waiver.
The choice-of-law provisions do not undermine this
conclusion. As Borrowers themselves point out, the
arbitration agreement—not the delegation provision—limits
the arbitrator to “awarding remedies available under Tribal
Law.” Unlike the definition of “Dispute,” the additional,
antecedent delegation provision does not expressly
incorporate this remedial limitation. Additionally, the plain
meaning of the remedial limitation does not necessarily
conflict with the delegation provision. Deciding whether an
arbitration agreement is enforceable does not result in an
“award”—unlike, for example, resolving a claim brought
under RICO for which plaintiffs are seeking damages or
some other remedy. That the scope of remedies awardable
on a merits claim is limited to those remedies available under
tribal law does not undermine the conclusion that Borrowers
can present a contract enforceability argument based on
federal law to the arbitrator where such is expressly provided
for in the delegation provision.
Nor do the choice-of-law provisions limit the arbitrator
to considering only tribal law in resolving enforceability
disputes. To begin, the instruction in the arbitration
16 BRICE V. HAYNES INVESTMENTS
agreement that “[t]he arbitrator shall apply Tribal Law and
the terms of this Agreement” does not limit the arbitrator to
considering only tribal law. If that sentence ended before
“and,” perhaps it would foreclose the arbitrator from
considering prospective waiver or other non-tribal-law
grounds for unenforceability (assuming tribal law does not
recognize prospective waiver and the Investors do not agree
to application of this doctrine). But because the arbitrator
also is instructed to apply “the terms of this Agreement” in
deciding enforceability issues, and the parties’ arbitration
agreement contemplates disputes arising under “federal,
state, or Tribal Law . . . based on any legal or equitable
theory,” the arbitrator is not clearly foreclosed from
considering Borrowers’ prospective-waiver argument. Cf.
Dillon v. BMO Harris, N.A., 856 F.3d 330, 333 (4th Cir.
2017) (contract expressly provided “no other state or federal
law or regulation shall apply to this Agreement, its
enforcement or interpretation”). That is, again, the term of
the arbitration agreement relevant here—the delegation
provision—does not itself prevent Borrowers from raising
an enforceability challenge based on federal law.
While the choice-of-law provisions dictating that tribal
law governs the parties’ relationship could be viewed as
conflicting with the delegation provision’s plain meaning,
they do not defeat its plainly stated mandate that the
arbitrator decide enforceability issues from whatever source
they arise. We do not dispute that the loan contract’s
selection of tribal law as the governing authority may mean
the arbitrator will ultimately decide she cannot consider an
enforceability challenge to the arbitration agreement as a
whole based on prospective waiver if tribal law does not
recognize this doctrine. But that possibility does not prevent
Borrowers from pursuing their prospective-waiver
enforcement challenge in arbitration, which is the key in
BRICE V. HAYNES INVESTMENTS 17
determining whether the delegation provision is itself a
prospective waiver. Especially where the definition of
“Dispute,” the operative term in the delegation provision—
which, again, is an additional, antecedent agreement—
includes “federal . . . claims based on any legal or equitable
theory” and “includes any issue concerning the validity,
enforceability, or scope of [the arbitration agreement].” At
this preliminary stage in the proceedings, the risk that the
arbitrator will decide the prospective-waiver doctrine has no
application to the parties’ contract because it arises under
federal law only “diminishes,” but does not “foreclose[],”
Borrowers’ “opportunity to gain relief for a statutory
violation.” Italian Colors, 570 U.S. at 244 (Kagan, J.,
dissenting). This is not enough. 8
8
Indeed, where there “is uncertainty whether the foreign choice of
law would preclude otherwise applicable federal substantive statutory
remedies, the arbitrator should determine in the first instance whether the
choice of law provision would deprive a party of those remedies.” Dillon,
856 F.3d at 334 (citing Vimar Seguros y Reaseguros, S.A. v. M/V Sky
Reefer, 515 U.S. 528, 540–41 (1995)); see also 14 Penn Plaza LLC v.
Pyett, 556 U.S. 247, 274 (2009) (noting the Court hesitates “to invalidate
arbitration agreements on the basis of speculation”); cf. Comedy Club,
Inc. v. Improv W. Assocs., 553 F.3d 1277, 1284 (9th Cir. 2009) (“[A]ny
doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration.” (internal quotations and citation omitted)). In other
words, “the prospective waiver issue would not become ripe for final
determination until the federal court was asked to enforce the arbitrator’s
decision.” Gibbs v. Haynes Invs., LLC, 967 F.3d 332, 340 (4th Cir.
2020). Thus, even those circuits that the dissent contends we should line
up behind might hesitate at this stage of the proceedings to decide that a
delegation clause—properly considered as a separate and independent
agreement—was invalid under the prospective-waiver doctrine where
there is uncertainty as to whether the plaintiffs could pursue their federal
remedies in arbitration. See also Aggarao v. MOL Ship Mgmt. Co.,
675 F.3d 355, 371–73 (4th Cir. 2012).
18 BRICE V. HAYNES INVESTMENTS
The dissent disagrees, asserting that the choice-of-law
provisions “categorically foreclose[]” Borrowers from
obtaining relief on their federal claims.” Dissent at 47. But
the dissent cites to no language in the arbitration agreement
or delegation provision disavowing application of federal
law generally, much less any language that would prevent
the arbitrator from considering a “legal or equitable theory”
regarding contract enforceability that arises under “federal
law.” To be clear, the choice-of-law provisions do not state
that only tribal law applies, or that the arbitrator cannot apply
any law other than tribal law. While the contracts do clearly
foreclose reliance on state law, the same is not true of federal
law. We do not dispute (nor could we) that the contracts give
tribal law preeminence, but contrary to the dissent’s
assertion, there is nothing in the delegation provision or
otherwise that forecloses the arbitrator from considering and
applying the prospective-waiver doctrine in resolving the
gateway question of whether the parties’ arbitration
agreement is enforceable. The dissent apparently infers that
because the contract states tribal law shall govern, all other
law shall not. Indeed, that it shall not apply in any way
whatsoever, whether as the source of a substantive right or a
procedural, enforceability doctrine. Not even as the source
of the enforceability doctrine designed to provide Borrowers
relief from the very contractual discrepancy that the dissent
discerns. This goes beyond an inferential leap; it interprets
the contract to say something that it does not say.
The closest the contracts come to the interpretation
reached by the dissent is language in the loan agreement
stating: “This Agreement and the Agreement to Arbitrate are
governed by Tribal Law and such federal law as is applicable
under the Indian Commerce Clause of the Constitution of the
United States of America.” This provision less clearly
delineates the arbitrator’s power than other, less limited
BRICE V. HAYNES INVESTMENTS 19
provisions in the arbitration agreement. Yet, from this
language the dissent reasons that the arbitrator is prohibited
from considering a prospective-waiver challenge to
enforceability of the arbitration agreement. How? The
dissent cites the principle of “expressio unius est exclusio
alterius,” reasoning that because one choice-of-law
provision mentions the applicability of a limited segment of
federal law, the arbitrator cannot consider any other federal
law or federal-law-derived enforceability arguments, such as
the prospective-waiver doctrine. But what is puzzling is the
dissent reaches this conclusion even though the arbitration
agreement authorizes an arbitrator to decide disputes “based
on any legal or equitable theory . . . . includ[ing] any issue
concerning the validity, enforceability, or scope of . . . [the
arbitration agreement].” That stretches the Latin beyond
reason. Indeed, if we were to apply the principle of “the
expression of one thing implies the exclusion of others” to
that same choice-of-law section, we would wonder what the
specific, unequivocal prohibition against applying state law
implies about the application of federal law.
To be sure, to assume that the Tribal Lenders and
Investors sought to avoid the application of federal law is not
absurd given the nature of these loans and the history of these
entities. But propriety and past behavior are not our focus
when analyzing the delegation clause under the prospective-
waiver doctrine. Our focus is on whether the contractual
language forecloses, i.e., renders impossible, Borrowers’
pursuit of their federal remedies—here by making it
impossible for them to convince an arbitrator that the
arbitration agreement as a whole is invalid because it
required them to prospectively waive their federal rights.
The delegation clause and arbitration agreement here, unlike
some of the other agreements at issue in the cases discussed
below, contain no such language. Thus, contrary to the
20 BRICE V. HAYNES INVESTMENTS
district court’s analysis, we first consider the validity of the
delegation provision in its proper context as an additional,
antecedent agreement, and conclude that it is not itself an
unlawful prospective waiver because it does not prevent
Borrowers from arguing that the arbitration agreement is
unenforceable under the federal prospective-waiver
doctrine. We cannot say what the arbitrator will make of that
argument, but that uncertainty is not grounds for invalidating
the parties’ agreement to arbitrate. See Mitsubishi Motors
Corp., 473 U.S. at 637, n.19 (declining to invalidate
arbitration agreement based on speculation of how arbitrator
might apply a choice-of-law provision).
2. Contrary Out-Of-Circuit Authority
As noted above, we reach a different conclusion than
some of our sister circuits. We now address the contrary out-
of-circuit decisions and why we disagree with them. See
Padilla-Ramirez v. Bible, 882 F.3d 826, 836 (9th Cir. 2017)
(“As a general rule, we decline to create a circuit split unless
there is a compelling reason to do so.” (citation and
quotations omitted)).
a. The Decisions
i. Fourth Circuit
In Hayes v. Delbert Services Corp., the Fourth Circuit
refused to compel arbitration in a dispute between a tribal
lender and borrowers. 811 F.3d 666, 676 (4th Cir. 2016).
There, like here, the borrowers alleged the tribal lenders’
high-interest rates violated various federal laws, and, in
response, the servicing agent sought to enforce the
arbitration agreement and compel arbitration. The agreement
stated, in pertinent part, that the arbitrator will not apply “any
law other than the law of the Cheyenne River Sioux Tribe of
BRICE V. HAYNES INVESTMENTS 21
Indians to this Agreement.” Id. at 675. Although the
agreement also included a provision delegating arbitrability
questions to an arbitrator, id. at 671 n.1, the court declined
to focus on that provision, concluding that “Hayes . . .
challenged the validity of that delegation with sufficient
force and specificity to occasion our review.” Id. And in the
court’s review, it focused on the arbitration agreement as a
whole, invalidating the entire agreement under the
prospective-waiver doctrine—including, implicitly, the
delegation provision. Id. at 675. Specifically, the court held
the arbitration agreement invalid and unenforceable because
it “flatly and categorically . . . . waive[d] all of a potential
claimant’s federal rights.” Id. Indeed, the court condemned
the contract in no uncertain terms: calling it a “brazen”
attempt to “game the entire system.” Id. at 676.
A year later, in Dillon, the Fourth Circuit again
invalidated a tribal loan agreement under the prospective-
waiver doctrine, concluding that the arbitration agreement
was “an unambiguous attempt to apply tribal law to the
exclusion of federal and state law.” 856 F.3d at 336.
Comparing the Dillon agreement to the Hayes agreement,
the court concluded the Dillon agreement was
indistinguishable despite its different terms: “[t]he
arbitration agreement in this case implicitly accomplishes
what the [Hayes] Agreement explicitly stated, namely, that
the arbitrator shall not allow for the application of any law
other than tribal law.” Id. at 335. Although the Dillon
agreement included a delegation clause, the Dillon court did
not discuss it. 9
9
At oral argument before this court, counsel for Investors stated that
one of the many Dillion loan agreements was the same as the agreements
presently before us.
22 BRICE V. HAYNES INVESTMENTS
Rounding out the Fourth Circuit’s trifecta is Gibbs v.
Haynes Investments, LLC, 967 F.3d 332, 339 (4th Cir. 2020),
another tribal lending case. At first glance, Gibbs would
appear to be more of the same—but it is worth discussing for
two reasons: (1) the underlying loan agreements are identical
to those in the present case and (2) the Fourth Circuit
addressed the delegation clause more directly than it did in
Hayes or Dillon. See id. The Gibbs court noted first that it
“must decide whether the delegation provision is
unenforceable ‘upon such grounds as exist at law or in
equity.’” Id. at 338 (quoting Minnieland Priv. Day Sch., Inc.
v. Applied Underwriters Captive Risk Assurance Co., Inc.,
867 F.3d 449, 455 (4th Cir. 2017)). After noting that “[i]n
specifically challenging a delegation clause, a party may rely
on the same arguments that it employs to contest the
enforceability of other arbitration provisions,” the court
concluded that “because the choice-of-law provisions
contained in both the Plain Green and Great Plains
arbitration agreements operate as prospective waivers, the
delegation clauses (and therefore the arbitration agreements)
are unenforceable.” Id. at 338–41 (alteration in original).
Although the Fourth Circuit framed the issue as one
focused on the delegation clause specifically, its analytical
spotlight shone on the arbitration agreement generally. See
id. Like in Hayes and Dillon, the Gibbs court focused on
terms in the arbitration agreement that the delegation clause
did not reference or incorporate. And even though “[u]nlike
in Hayes and Dillon, the Plain Green and Great Plains
arbitration agreements do not explicitly preclude the
application of federal law . . . . [the court concluded] the
practical effect is the same because they do provide that
tribal law preempts the application of any contrary law—
including contrary federal law.” Id. at 341–42 (emphasis
omitted). In so concluding, the court discussed various terms
BRICE V. HAYNES INVESTMENTS 23
in the arbitration agreement at length but did not mention the
delegation clause again until its conclusion. Even then, the
court did not discuss it in any detail but merely concluded,
like the Hayes court, that prospective waiver rendered the
entire arbitration agreement—including the specific
delegation clause—unenforceable. Id. at 343–45.
ii. Third Circuit
Just a week before Gibbs, the Third Circuit addressed its
own tribal loan dispute in Williams v. Medley Opportunity
Fund II, LP, 965 F.3d 229, 238 (3d Cir. 2020). Focusing first
on the delegation clause, the Williams court concluded that
the borrowers explicitly referenced the delegation clause in
their opposition to the motion to compel, which raised a
specific challenge enabling the court to “proceed to examine
[p]laintiffs’ enforceability arguments.” Id. at 238. “Plaintiffs
contend[ed] that the arbitration agreement, including the
delegation clause, [was] unenforceable under the
prospective waiver doctrine.” Id. Considering the terms of
agreement—many of which are similar to those here—the
Third Circuit concluded that “the plain language of the
arbitration agreement and the loan agreement shows that
only tribal-law claims may be brought in arbitration.” Id.
at 239. Although the contract did not expressly forbid
application of federal law or the assertion of federal claims,
the court determined that “[b]ecause the arbitration
agreement mandates that only tribal law applies in
arbitration, federal law does not.” Id. at 240. “By limiting the
claims available to borrowers to tribal-law claims,” the court
continued, “the arbitration agreement . . . requires a
borrower to prospectively waive claims based on any other
law.” Id. at 241. In other words, “because the arbitration
agreement [was] clear that only tribal-law claims are
24 BRICE V. HAYNES INVESTMENTS
available . . . that pronouncement is enough to show that
federal-law claims are unavailable.” Id.
Nearing its conclusion, the Williams court paused to
provide—in a footnote—a bit more depth on why it
concentrated on the entire arbitration agreement rather than
the delegation clause:
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 “the 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 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.”
Id. at 243 n.14 (alterations in original) (quoting Ryan v.
Delbert Servs. Corp., No. 5:15-cv-05044, 2016 WL
BRICE V. HAYNES INVESTMENTS 25
4702352, at *5 (E.D. Pa. Sept. 8, 2016)). Thus, the Williams
court held the entire arbitration agreement was
unenforceable under the doctrine of prospective waiver. 10 Id.
iii. Second Circuit
In Gingras v. Think Finance, Inc., 922 F.3d 112, 117 (2d
Cir. 2019), the Second Circuit also considered an arbitration
agreement in loan contracts involving tribal lenders. Indeed,
that case involved the same tribal lending entity—Plain
Green, LLC—as the present case and at least one of the
former parties in this case—Sequoia. Id. at 119. Like the
Third Circuit in Williams, the Second Circuit first discussed
the delegation clause. Id. at 125–26. Although the court
noted that the delegation clause appears to give an arbitrator
“blanket authority” over disputes involving the validity,
enforceability, and scope of the arbitration agreement, it
nevertheless continued past that provision and analyzed the
enforceability of the entire arbitration agreement:
“[I]f a party challenges the validity under
[9 U.S.C.] § 2 of the precise agreement to
arbitrate at issue, the federal court must
consider the challenge before ordering
compliance with that agreement under § 4 [of
the FAA].” Plaintiffs mount a convincing
challenge to the arbitration clause itself.
Their complaint alleges that “[t]he delegation
provision of the Purported Arbitration
Agreement is also fraudulent.” That specific
attack on the delegation provision is
sufficient to make the issue of arbitrability
10
Investors stated at oral argument that one of the agreements at
issue in Williams was also the same as those presently before us.
26 BRICE V. HAYNES INVESTMENTS
one for a federal court. . . . [W]e properly
consider it on appellate review.
Id. at 126 (internal citations omitted).
Considering the arbitration agreements in their entirety,
the court concluded they were “unenforceable because they
are designed to avoid federal and state consumer protection
laws.” Id. at 127. The court further reasoned: “By applying
tribal law only, arbitration for the Plain Green borrowers
appears wholly to foreclose them from vindicating rights
granted by federal and state law.” Id. In other words, the
Gingras court applied the prospective-waiver doctrine to
invalidate the entire arbitration agreement because “tribal
law provides no guarantee that federal and state statutory
rights could be pursued, much less vindicated.” 11 Id.
b. Reason for Disagreement
In our view, our sister circuits have conflated the analysis
under Rent-A-Center. The out-of-circuit decisions
considered prospective waiver in the context of the
arbitration agreement as a whole—not as applied to the
delegation provision. Put simply, those decisions go like
this: the arbitration agreement includes a delegation
provision, but the entire arbitration agreement is
unenforceable, thus, the delegation provision is too. See,
e.g., Williams, 965 F.3d at 243 (holding “[t]he prospective
waiver of statutory rights renders the entire arbitration
agreement (delegation clause included) unenforceable”).
This approach conflicts with Rent-A-Center and our decision
in Brennan. See Rent-A-Center, 561 U.S. at 70, 74; Brennan,
11
Again, Investors stated at oral argument that the Gingras
agreements are identical to those here.
BRICE V. HAYNES INVESTMENTS 27
796 F.3d at 1132. Our sister circuits considered the wrong
thing by “confus[ing] the question of who decides
arbitrability with the separate question of who prevails on
arbitrability.” Henry Schein, Inc., 139 S. Ct. at 531. The
proper question is not whether the entire arbitration
agreement constitutes prospective waiver, but whether the
antecedent agreement delegating resolution of that question
to the arbitrator constitutes prospective waiver.
Although some of the out-of-circuit decisions properly
tee up the question, none of them follow through. Take
Gibbs: The Fourth Circuit began by noting that it must
decide whether the delegation clause itself was
unenforceable. 967 F.3d at 339. But in its analysis, it never
mentions the text of the delegation clause, which is the same
as that at issue in the present case. See id. at 340–45. The
Gibbs court does not explain how the delegation clause—
“the precise agreement to arbitrate at issue”—prospectively
waived plaintiffs’ statutory rights. Rent-A-Center, 561 U.S.
at 71. Instead, it concluded the choice-of-law and forum-
selection provisions prospectively waived plaintiffs’
statutory rights and that those terms rendered the entire
arbitration agreement—severable delegation clause
included—unenforceable. Id. Left unexplained is why an
arbitrator—charged with “applying tribal law and the terms
of the Agreement”—would rely on choice-of-law and
forum-selection terms to ignore a prospective-waiver
challenge to the enforceability of the entire arbitration
agreement where there is a delegation clause that expressly
allows a plaintiff to assert all “federal claims . . . based on
any legal or equitable theory,” including “any issue
concerning [] validity [or] enforceability.”
Trying to reconcile our sister circuits’ decisions with
Rent-A-Center, we posit that they view a party’s “specific
28 BRICE V. HAYNES INVESTMENTS
challenge” to a delegation clause as a purely formal,
procedural requirement. Perhaps in their view a party
complies with Rent-A-Center if the party claims the
delegation clause is unenforceable even if the arguments
made go only to enforceability of the arbitration agreement
as a whole. That is, so long as a party states the delegation
clause is invalid, that is enough. We disagree. We read Rent-
A-Center as requiring a substantive argument that the
delegation provision in and of itself is unenforceable. A party
challenging a delegation clause via contract-wide arguments
must show how the claimed deficiencies as applied to the
delegation clause render that specific agreement invalid. Id.
at 74. Such arguments are “of course . . . much more difficult
. . . to sustain” than arguments applying the asserted
contractual deficiency in the context of the claim potentially
being arbitrated. Id. But our focus is not on what would
happen in arbitration but on who should decide what
happens in arbitration and whether having an arbitrator
decide enforceability prevents a plaintiff from arguing that it
should not be compelled to arbitrate. While it may be
confusing, this is a necessary distinction.
Perhaps our sister circuits believe, as Borrowers
certainly do, that whether these agreements prospectively
waive Borrowers’ federal statutory rights is a foregone
conclusion. We do not dispute that Borrowers have a
reasonable argument that the arbitration agreement as
written precludes them from asserting their RICO claims or
other federal claims in arbitration. See Italian Colors,
570 U.S. at 235 (explaining that a prospective-waiver
argument is strongest when a contract eliminates the right to
pursue a statutory remedy). And if that is true, the arbitration
agreement is likely unenforceable as a prospective waiver.
See id. But, when there is a clear delegation provision, that
question is not for us—or anyone else wearing a black
BRICE V. HAYNES INVESTMENTS 29
robe—to decide. Instead, it is for the arbitrator to decide so
long as the delegation provision itself does not eliminate
parties’ rights to purse their federal remedies. Refusing to
allow an arbitrator to decide the question, even if we think
the answer is obvious, runs counter to the Supreme Court’s
clear instructions that “a court may not decide an
arbitrability question that the parties have delegated to an
arbitrator.” Henry Schein, Inc., 139 S. Ct. at 529–30 (“A
court has no business weighing the merits of the grievance
because the agreement is to submit all grievances to
arbitration, not merely those which the court will deem
meritorious.” (internal quotations and citation omitted)). No
matter the court’s view of the merits, no matter the
inefficiency, no matter the time and money potentially
saved. See id. Instead, we “must respect the parties’ decision
as embodied in the contract.” Id. at 531.
3. Practical Effects
Finally, we note the practical effects of compelling
arbitration. If Borrowers succeed in convincing an arbitrator
that the arbitration agreement is unenforceable as a
prospective waiver, Borrowers may return to federal court
and assert their claims. If Borrowers’ prospective-waiver
argument fails to convince the arbitrator because she
concludes the agreement allows Borrowers to assert their
federal claims, the obvious result is that Borrowers can bring
their federal claims in arbitration and they did not
prospectively waive anything. And if the arbitrator
concludes she cannot consider a prospective-waiver
challenge to enforceability of the arbitration agreement,
Borrowers can return to court and argue the arbitrator
exceeded her powers. See PowerAgent Inc. v. Elec. Data Sys.
Corp., 358 F.3d 1187, 1193 (9th Cir. 2004) (describing the
process for back-end review under the FAA). No matter
30 BRICE V. HAYNES INVESTMENTS
what, Borrowers will have the opportunity to assert their
federal claims or show that the arbitration agreements
“foreclosed” their ability to do so. Flowing logically from
these alternatives—one of which must occur if this dispute
continues—is our conclusion in this case: Borrowers cannot
show the delegation clause itself prospectively waives their
opportunity to pursue their federal rights. How could it
where the worst-case scenario is that an arbitrator may
prevent Borrowers from presenting their federal claims and,
if so, Borrowers will have the opportunity to object to a court
that the arbitrator exceeded her authority and ask that any
award be vacated. 12 In such circumstances, compelling
arbitration is consistent with congressional policy—strictly
enforced by the Supreme Court—of placing arbitration
agreements on equal footing with other contracts and
“reversing centuries of judicial hostility to arbitration
agreements.” Scherk v. Alberto-Culver Co., 417 U.S. 506,
510 (1974) (quoting H.R. Rep. No. 96, 68th Cong., 1st Sess.
1, 2 (1924)).
III. CONCLUSION
Though courts may deem arbitration agreements
distasteful or unjust in certain contexts, particularly where
12
We acknowledge that a federal court’s back-end review of
arbitration awards is “both limited and highly deferential and an
arbitration award may be vacated only if it is completely irrational or
constitutes manifest disregard of the law.” PowerAgent Inc., 358 F.3d
at 1193 (internal quotations and citation omitted). At least one circuit,
however, seems to recognize that whether an arbitrator erred in rejecting
a prospective-waiver challenge is reviewable. See Gibbs, 967 F.3d at 340
(“The prospective waiver issue would not become ripe for final
determination until the federal court was asked to enforce the arbitrator’s
decision.”); see also PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401,
407 (2003).
BRICE V. HAYNES INVESTMENTS 31
they limit consumer rights and remedies, both Congress and
the Supreme Court have instructed us to respect agreements
to arbitrate just as any other contractual agreement. Here,
there can be no dispute that the parties agreed to arbitrate
both their substantive disputes as well as any gateway
questions regarding enforceability of their arbitration
agreement. The latter agreement—the delegation
provision—does not prevent Borrowers from challenging
enforceability based on prospective waiver because that
doctrine arises from federal law. Therefore, we conclude that
the delegation provision is not itself invalid as a prospective
waiver and that it is for an arbitrator, not the court, to decide
whether the parties’ arbitration agreement is enforceable.
REVERSED and REMANDED with instructions to
stay the case and compel arbitration.
W. FLETCHER, Circuit Judge, dissenting:
Plaintiffs sued a number of defendants, alleging that they
conspired to charge interest rates of over 400% per annum
on internet “payday” loans, using a “rent-a-tribe” scheme in
violation of the federal Racketeer Influenced and Corrupt
Organizations Act (“RICO”) and of California usury and
unjust enrichment laws. The payday loan agreements
include agreements to arbitrate disputes related to the loan
agreements. The arbitration agreements contain provisions
that delegate to the arbitrator the task of determining the
validity of the arbitration agreement. Two of the defendants
moved to compel arbitration. The district court denied the
motion to compel, and the two defendants appealed.
There are two questions in this appeal. The first is
whether the delegation provisions in the arbitration
32 BRICE V. HAYNES INVESTMENTS
agreements are valid. The second is whether the arbitration
agreements as a whole are valid. Until now, every federal
court but one has refused to compel arbitration in cases
involving tribal internet payday loans. In that one case, the
borrowers had failed to challenge the delegation provision.
Splitting with all of our sister circuits that have addressed the
question, my colleagues hold the delegation provisions
valid. My colleagues do not reach the second question.
My colleagues misunderstand the effect of the choice-of-
law provisions in the agreements. Under the choice-of-law
provisions, the arbitrator may apply only tribal law and a
small and irrelevant subset of federal law. The prospective
waivers of most federal law and all state law prevent the
arbitrator from applying the law necessary to determine
whether the delegation provisions and the arbitration
agreements are valid. This renders both the delegation
provisions and the arbitration agreements invalid.
I strongly but respectfully dissent.
I. Background
A. “Payday” Loans
“Payday” loans are “high-cost, small-dollar loans” made
to low-income, low-credit borrowers with a “repayment
system that involves the lender withdrawing funds directly
from the borrower’s bank account.” Consumer Financial
Regulation—CFPB’s Final Payday Lending Rule Deems It
an “Unfair” and “Abusive” Practice to Make Payday Loans
Without Determining Borrower Ability to Repay, 131 Harv.
L. Rev. 1852, 1852 (2018). The loans are marketed to
financially vulnerable consumers who typically cannot make
timely payments on their loans. See CFPB Finalizes Rules
to Stop Payday Debt Traps, CFPB (Oct. 5, 2017),
BRICE V. HAYNES INVESTMENTS 33
https://www.consumerfinance.gov/about-us/newsroom/cfpb
-finalizes-rule-stop-payday-debt-traps/. Borrowers often
must choose among defaulting, re-borrowing, or skipping
other financial obligations such as payments for housing,
food, or medical care. Id. Borrowers can be caught in a
“long-term debt trap,” either “rolling over” their loan
payments or refinancing their loans, incurring substantial
new charges that often exceed the amount they receive in
credit. Id. (noting that 80% of loans are reborrowed within
a month, typically around the time the loan is due or shortly
thereafter).
Most states regulate payday loans. These states protect
their citizens from usurious payday lending either by
prohibiting payday loans entirely or by capping annual
interest rates and requiring installment repayment schedules.
See Payday, Vehicle Title, and Certain High-Cost
Installment Loans, 82 Fed. Reg. 54,472, 54,476 (Nov. 17,
2017). In California, a lender generally may not charge more
than 10% interest per annum on a loan. Cal. Const. Art. XV
§ 1. An interest rate above 10% is usurious and renders a
loan agreement void. Cal. Civ. Code § 1916-2; Heald v.
Friis-Hansen, 52 Cal. 2d 834, 838–39 (1959).
Internet payday lenders have a history of noncompliance
with state usury laws. They have used a variety of tactics to
evade state laws, including “renting bank charters.”
Consumer Fed’n of Am. and the U.S. Pub. Int. Rsch. Grp.,
Rent-A-Bank Payday Lending: How Banks Help Payday
Lenders Evade State Consumer Protections (Nov. 2001),
https://consumerfed.org/pdfs/paydayreport.pdf. Beginning
in 2005, federal regulators began cracking down on payday
lenders’ “rent-a-bank” arrangements. Creola Johnson,
America’s First Consumer Financial Watchdog Is on a
Leash: Can the CFPB Use Its Authority to Declare Payday-
34 BRICE V. HAYNES INVESTMENTS
Loan Practices Unfair, Abusive, and Deceptive?, 61 Cath.
U. L. Rev. 381, 399 n.116 (2012).
In response, several internet payday lenders replaced
banks with Indian tribes in so-called “rent-a-tribe”
arrangements where tribal shell corporations, acting as fronts
for non-Indian payday lenders, charge borrowers exorbitant
interest rates. Id. at 399. The loan agreements for tribal
internet payday lenders require that any dispute arising out
of the agreement be decided by arbitration, and that the
arbitrator decide the validity of the arbitration agreement.
Until this appeal, every federal court but one dealing
with tribal internet payday loans has refused to compel
arbitration. See Gingras v. Think Finance, Inc., 922 F.3d
112 (2d Cir. 2019) (Hall, Leval, Chin, JJ. (unanimous));
Williams v. Medley Opportunity Fund II, LP, 965 F.3d 229
(3d Cir. 2020) (Schwartz, Scirica, Cowen, JJ. (unanimous));
Gibbs v. Haynes Invs., LLC, 967 F.3d 332 (4th Cir. 2020)
(Agee, Gregory, Motz, JJ. (unanimous)); Gibbs v. Sequoia
Cap. Operations, LLC, 966 F.3d 286 (4th Cir. 2020)
(unanimous); Dillon v. BMO Harris Bank, N.A., 856 F.3d
330 (4th Cir. 2017) (Keenan, Duncan, Thacker, JJ.
(unanimous)); Hayes v. Delbert Servs. Corp., 811 F.3d 666
(4th Cir. 2016) (Wilkinson, Keenan, Harris, JJ.,
(unanimous)); Smith v. W. Sky Fin., 168 F. Supp. 3d 778
(E.D. Pa. 2016); Hengle v. Asner, 433 F. Supp. 3d 825 (E.D.
Va. 2020); Titus v. ZestFinance, Inc., 2018 WL 5084844,
at *5 (W.D. Wash. Oct. 18, 2018), vacated on other grounds
by Titus v. BlueChip Fin., 786 F. App’x 694 (9th Cir. 2019);
Ryan v. Delbert Servs. Corp., 2016 WL 4702352, at *4 (E.D.
Pa. Sept. 8, 2016); Rideout v. CashCall, Inc., 2018 WL
1220565, at *6 (D. Nev. Mar. 8, 2018); cf. Swiger v. Rosette,
989 F.3d 501 (6th Cir. 2021) (enforcing delegation provision
because plaintiff failed to challenge it).
BRICE V. HAYNES INVESTMENTS 35
B. This Litigation
Named plaintiffs-appellees are Kimetra Brice, Earl
Browne, and Jill Novorot (“Plaintiffs”). They are all
residents of California. Using the internet in California, all
three Plaintiffs obtained short-term, high-interest internet
payday loans from Great Plains Lending (“Great Plains”), a
corporation owned by the Otoe-Missouria Tribe, whose
reservation is in Oklahoma. Plaintiff Browne also obtained
such loans from Plain Green, a corporation owned by the
Chippewa Cree Tribe, whose reservation is in Montana. The
allegations in Plaintiffs’ complaint are assumed to be true.
In brief, Plaintiffs allege as follows. Defendant Kenneth
Rees owns a company called Think Finance. Think Finance
entered into agreements with the Otoe-Missouria Tribe and
the Chippewa Cree Tribe. Pursuant to the agreements, the
tribes created corporations under tribal law, Great Plains and
Plain Green, respectively. Think Finance provided each
corporation with funds to originate the high-interest internet
payday loans. Think Finance controlled the terms,
origination, and servicing of the loans.
Defendant GPL Servicing, largely owned by defendant
Victory Park Capital Advisors, raised capital for Think
Finance from third-party investors. Think Finance
guaranteed investors a fixed-rate return of 18–20%.
Defendant-appellant Haynes Investments is a private equity
firm owned and controlled by individual defendant-
appellant L. Stephen Haynes (collectively, the “Haynes
defendants”). Haynes Investments provided capital to Think
Finance for use by Plain Green. L. Stephen Haynes played
a key role in finding a bank willing to process loan payments
to Great Plains and Plain Green through an electronic system
that allowed for direct access to the borrowers’ bank
accounts.
36 BRICE V. HAYNES INVESTMENTS
With exceptions not relevant here, California’s usury law
provides that interest rates may not exceed 10% per annum.
Cal. Const. Art. 15, § 1; Cal. Civ. Code §§ 1916-2, 1916-3.
The interest rate on loans made to Plaintiffs by Great Plains
and Plain Green far exceeded 10%. Interest rates on two of
plaintiff Novorot’s loans from Great Plains were 441.38%
and 448.67% per annum.
Plaintiffs filed a putative class action in federal district
court against a number of defendants, including those named
in the brief narrative above. Their complaint alleged four
counts of violating RICO, 18 U.S.C. § 1962, one count of
violating California’s usury statute, Cal. Civ. Code § 1916–
2, and one count of unjust enrichment under California law.
The two Haynes defendants moved to compel
arbitration. No other defendant moved to compel arbitration.
The district court denied the motion. The Haynes defendants
appeal.
II. Discussion
A. Rent-A-Center
Parties to an arbitration agreement may delegate to the
arbitrator threshold determinations of the validity and scope
of the arbitration agreement. Rent-A-Center, W., Inc. v.
Jackson, 561 U.S. 63, 68–70 (2010) (validity); Henry
Schein, Inc. v. Archer and White Sales, Inc., 139 S. Ct. 524,
528 (2019) (scope). If there is a delegation provision and the
plaintiff seeks to avoid arbitration on the ground that the
arbitration agreement is invalid, a plaintiff must specifically
challenge the validity of the delegation provision, separate
from and prior to any challenge to the arbitration agreement
as a whole. Rent-A-Center, 561 U.S. at 72. A delegation
provision may be held invalid for the same reason or reasons
BRICE V. HAYNES INVESTMENTS 37
as the arbitration agreement. Id. at 74 (stating that if the
plaintiff had challenged the delegation provision on the same
ground as he challenged the arbitration agreement as a
whole, the court would have considered the challenge);
MacDonald v. CashCall, Inc., 883 F.3d 220, 226–27 (3d Cir.
2018) (“In specifically challenging a delegation clause, a
party may rely on the same arguments that it employs to
contest the enforceability of other arbitration agreement
provisions.”). Only if the delegation provision is invalid
may a court determine for itself whether the entire arbitration
agreement is also invalid. See Rent-A-Center, 561 U.S. at
71.
It is possible to read the Supreme Court’s later decision
in Schein as overruling Rent-A-Center. In Schein, the Court
held that if an arbitration agreement contains a valid
delegation provision, a court must permit the arbitrator to
determine the scope of the arbitration agreement, even if the
arguments in favor of arbitration are “wholly groundless.”
139 S. Ct. at 528. Citing Rent-A-Center, 561 U.S. at 69 n.1,
the Court wrote:
This Court has consistently held that parties
may delegate threshold arbitrability
questions to the arbitrator, so long as the
parties’ agreement does so by “clear and
unmistakable” evidence. To be sure, before
referring a dispute to an arbitrator, the court
determines whether a valid arbitration
agreement exists. See 9 U.S.C. § 2. 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.
38 BRICE V. HAYNES INVESTMENTS
Schein, 139 S. Ct. at 530 (emphasis added) (some citations
omitted).
Read on its own, the italicized language says that a court
must first decide whether the arbitration agreement as a
whole is valid. Only after determining that the arbitration
agreement is valid may the court assess the validity of the
delegation provision. So read, Schein reverses the sequence
required by Rent-A-Center. Despite the clarity of the
italicized language, I decline to so read Schein. If the Court
had intended to overrule Rent-A-Center, it surely would have
done so explicitly rather than citing the case and then
overruling its core holding.
B. Terms of the Agreements
The loan and arbitration agreements at issue have
materially similar language. The agreements at issue are so
similar that the analysis below applies to all of them. I use
the Great Plains agreement, signed by plaintiff Novorot, as
an example. There are two agreements in the Great Plains
agreement—a loan agreement and an arbitration agreement.
The arbitration agreement contains a delegation provision.
1. Definition of “Dispute” and Delegation Provision
The arbitration agreement in the Great Plains agreement
requires arbitration of any “dispute.” “Dispute” is defined
broadly to include a controversies with claims based on
federal or state law, in addition to controversies with claims
based on tribal law:
AGREEMENT TO ARBITRATE: You
and we . . . agree that any Dispute (defined
below) will be resolved by arbitration.
BRICE V. HAYNES INVESTMENTS 39
WHAT ARBITRATION IS: “Arbitration”
is having an independent third-party resolve
a Dispute. A “Dispute” is any claim or
controversy of any kind between you and us
or otherwise involving this Agreement or the
Loan. The term Dispute is to be given its
broadest possible meaning and includes,
without limitation, all federal, state or Tribal
Law claims or demands (whether past,
present, or future), based on any legal or
equitable theory and regardless of the type of
relief sought (i.e., money, injunctive relief, or
declaratory relief). A Dispute includes any
issue concerning the validity, enforceability,
or scope of this Agreement or this Agreement
to Arbitrate.
(Bolded emphasis in original; italicized emphasis added.)
The italicized last sentence of the second paragraph—the
“delegation provision”—assigns to the arbitrator the task of
resolving disputes about the validity of the arbitration
agreement.
2. Choice-of-Law Provisions
Even though a “dispute” is defined as including claims
based on federal and state law, five choice-of-law provisions
in the loan and arbitration agreements preclude the
arbitrator, when deciding a dispute, from applying most
federal law and any state law. That is, a dissatisfied
borrower may file (indeed, is quite likely to file) a complaint
alleging that the lender has violated federal and/or state law.
Such a complaint constitutes a “dispute,” and the arbitrator
is assigned the task of deciding it. However, the choice-of-
law provisions limit the law the arbitrator may apply. These
40 BRICE V. HAYNES INVESTMENTS
provisions authorize the arbitrator to apply tribal law and
small subset of federal law, and preclude the arbitrator from
applying most federal law and any state law.
There are two choice-of-law provisions in the arbitration
agreement. The most prominent provides:
APPLICABLE LAW . . . THIS
AGREEMENT TO ARBITRATE SHALL
BE GOVERNED BY TRIBAL LAW. The
arbitrator shall apply Tribal Law and the
terms of this Agreement, including this
Agreement to Arbitrate and the waivers
included herein.
(Bolded emphasis in original.) Another, in the previous
paragraph, provides: “The arbitrator has the ability to award
all remedies available under Tribal Law, whether at law or
in equity, to the prevailing party[.]”
There are three choice-of-law provisions in the loan
agreement. The first is on the first page of the loan
agreement. Under the heading “IMPORTANT
DISCLOSURE,” it provides:
YOU AGREE THAT THIS LOAN IS
MADE WITHIN THE TRIBE’S
JURISDICTION AND IS SUBJECT TO
AND GOVERNED BY TRIBAL LAW
AND NOT THE LAW OF YOUR
RESIDENT STATE. . . . YOUR
RESIDENT STATE LAW MAY HAVE
INTEREST RATE LIMITS AND OTHER
CONSUMER PROTECTION
PROVISIONS THAT ARE MORE
FAVORABLE. IF YOU WISH TO HAVE
BRICE V. HAYNES INVESTMENTS 41
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.
(Bolded emphasis in original.)
The second immediately precedes the agreement to
arbitrate. It provides:
GOVERNING LAW; NON-
APPLICABILITY OF STATE LAW;
INTERSTATE COMMERCE: This
Agreement and the Agreement to Arbitrate
are governed by Tribal Law and such federal
law as is applicable under the Indian
Commerce Clause of the Constitution of the
United States of America. . . . Neither this
Agreement nor the Lender is subject to the
laws of any state of the United States. 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 Otoe-
Missouria Tribe to any federal law unless
found expressly applicable to the operations
of the Otoe-Missouria tribe.
(Bolded emphasis in original.)
The third is at the very end of the loan agreement. The
borrower is asked to check a box:
By checking here and signing below, you
understand, acknowledge and agree that
42 BRICE V. HAYNES INVESTMENTS
. . . . this Loan is governed by the laws of
the Otoe-Missouria Tribe and is not
subject to the provisions or protections of
the laws of your home state or any other
state.
(Bolded emphasis in original.)
Each of the five choice-of-law provisions just quoted
provides that tribal law is to be applied in resolving
“disputes.” Three of them expressly preclude the application
of state law. For example, as specified in the loan
agreement, the lender is not “subject to the laws of any state
of the United States.” But see Martyn v. Leslie, 137 Cal.
App. 2d 41, 57 (Ct. App. 1955) (“[N]o borrower is estopped
from asserting usury merely because he has knowingly met
the usurious exactions of the lender.”).
One of the choice-of-law provisions allows the
application of two categories of federal law. The first is
federal law that is “applicable under the Indian Commerce
Clause.” Examples of such law include the Indian Gaming
Regulatory Act, Pub. L. No. 100-497, 102 Stat. 2467 (1988)
(codified as amended at 25 U.S.C. §§ 2701–2721), at issue
in Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996),
and the Indian Child Welfare Act, Pub. L. No. 95-608, 92
Stat. 3069 (1978) (codified as amended at 25 U.S.C.
§§ 1901–1963), at issue in Santa Clara Pueblo v. Martinez,
436 U.S. 49 (1978). The second is federal law to which the
tribe voluntarily acquiesced, provided the law is “found
expressly applicable to the operations of the Otoe-Missouria
tribe.” A statute naming the Otoe-Missouria tribe in
particular and controlling its operation would certainly be
included. It is unclear how far beyond such a law this second
BRICE V. HAYNES INVESTMENTS 43
category extends. However, for our purposes it does not
matter.
Two things about these references to federal law are
important. First, under the principle of expressio unius est
exclusio alterius (express mention of one item in a class
excludes all others in the same class), the arbitrator is
allowed to apply only federal law that comes within the two
categories mentioned in the choice-of-law provision. The
arbitrator is precluded from applying any other federal law.
Second, whatever the scope of these two categories of
federal law, the two federal statutes at issue in this appeal—
the FAA and RICO—are not included.
Consistent with the expressio unius principle, the
Haynes defendants do not argue that the arbitrator may apply
federal law outside these two categories. Rather, they argue
that tribal law will provide effective remedies to borrowers.
Without citing specific tribal laws, the Haynes defendants
argue that it is a “clear and indisputable fact that both
Chippewa Cree and Otoe-Missouria law do, in fact, provide
Plaintiffs with remedies for their claims.” They argue,
further, that “the only evidence of the Native American laws
presented to the district court definitively showed that the
Plaintiffs possess significant remedies under the Native
American laws at issue here.” Notably, the Haynes
defendants nowhere argue or even suggest that tribal law has
incorporated the FAA or RICO, or that it contains their
functional equivalents. See Gibbs, 967 F.3d at 344 (“[E]ven
if the borrowers could assert a RICO claim against the
Haynes Defendants under tribal law, the rest of the [Tribal]
Ordinance fails to clarify how any consumer could
meaningfully pursue any claims under it.”).
44 BRICE V. HAYNES INVESTMENTS
C. The FAA’s Prospective Waiver Rule
It is established law under the FAA that an arbitration
agreement prospectively waiving the right to seek federal or
non-federal (including state) statutory remedies is invalid.
The prospective waiver rule—or, as it is sometimes called,
the effective vindication exception—was first articulated in
Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614
(1985). Plaintiffs brought suit under the antitrust statutes of
the United States and of Puerto Rico. Id. at 619–20. The
Court held that an arbitration agreement is enforceable “so
long as the prospective litigant effectively may vindicate its
statutory cause of action in the arbitral forum.” Id. at 637.
The Court elaborated in a footnote, writing in dictum that
provisions in an arbitration agreement operating “as a
prospective waiver of a party’s right to pursue statutory
remedies for antitrust violations” would be struck down with
“little hesitation . . . as against public policy.” Id. at 637 n.19
(emphasis added).
In American Express v. Italian Colors Restaurant,
570 U.S. 228 (2013), the Court affirmed its earlier dictum.
At issue was a class action waiver, which the Court upheld
as not inconsistent with “effective vindication” under
Mitsubishi. The Court characterized the prospective waiver
rule as a “judge-made exception to the FAA.” Id. at 235.
The Court wrote:
[T]he exception finds its origin in the desire
to prevent “prospective waiver of a party’s
right to pursue statutory remedies,”
Mitsubishi Motors, [473 U.S.] at 737, n.19
(emphasis added). That would certainly
cover a provision in an arbitration
BRICE V. HAYNES INVESTMENTS 45
agreement forbidding the assertion of certain
statutory rights.
Id. at 236 (emphasis added).
The plaintiff in American Express had contended that the
cost of pursuing its case as an individual plaintiff was greater
than the likely recovery, and that as a practical matter the
class action waiver rendered the statutory remedy
ineffective. The Court responded, “[T]he fact that it is not
worth the expense involved in proving a statutory remedy
does not constitute the elimination of the right to pursue that
remedy.” Id. Thus, under American Express, if an
arbitration agreement renders the vindication of a statutory
right impracticable, the prospective waiver rule is not
applicable. But if the arbitration agreement prevents a party
from vindicating a statutory right by categorically
eliminating the right to pursue it, the agreement is an invalid
prospective waiver. Though the Court in Mitsubishi Motors
and American Express was dealing with waivers of federal
and non-federal statutory rights, the prospective waiver rule,
by its logic, should apply to federal and non-federal
constitutional and common law rights as well.
D. Validity of the Delegation Provision and the Arbitration
Agreement
As required by Rent-A-Center, I first address the validity
of the delegation provision. See 561 U.S. at 71, 74. I then
address the validity of the arbitration agreement as a whole.
For the reasons that follow, I conclude that both the
delegation provision and the arbitration agreement are
invalid.
46 BRICE V. HAYNES INVESTMENTS
1. Delegation Provision
The delegation provision is a severable agreement that
must be specifically challenged. Rent-A-Center, 561 U.S. at
72–73 (declining to address the plaintiff’s argument that the
arbitration agreement as a whole was unconscionable
because the plaintiff failed to specifically challenge the
validity of the delegation provision); Swiger, 989 F.3d at 507
(the plaintiff’s failure to challenge the delegation provision
specifically prevented court from “reaching the issues
addressed in [other rent-a-tribe] cases, where the plaintiffs
challenged their delegation clauses.”). As required by Rent-
A-Center, Plaintiffs have specifically challenged the
delegation provision, both in the district court and in our
court.
Under the choice-of-law provisions in the arbitration and
loan agreements, Plaintiffs prospectively waived the
application of most federal law and all state law. Absent the
choice-of-law provisions, the arbitrator could apply the
federal and state law necessary to determine the validity of
the arbitration agreement. See 9 U.S.C. § 2 (arbitration
contracts are “valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation
of any contract”). Federal-law grounds include the FAA’s
prospective waiver rule. State-law grounds include
generally applicable doctrines of fraud, duress, or
unconscionability. AT&T Mobility LLC v. Concepcion,
563 U.S. 333, 339 (2011). Without access to most federal
law and any state law, the arbitrator is unable to apply any
of these grounds. I need not reach any of the potentially
applicable state-law grounds because I conclude the
delegation provision is invalid under the federal prospective
waiver rule of the FAA.
BRICE V. HAYNES INVESTMENTS 47
By severely limiting the federal law the arbitrator may
apply, the choice-of-law provisions prospectively waive the
application of the FAA’s prospective waiver rule, in
violation of Mitsubishi Motors and American Express. See
Am. Express, 570 U.S. at 236 (“[The prospective waiver
rule] would certainly cover a provision in an arbitration
agreement forbidding the assertion of certain statutory
rights.” (emphasis added). If the arbitrator were allowed to
apply the FAA’s prospective waiver rule in determining the
validity of the arbitration agreement, the arbitrator would ask
whether the agreement impermissibly waives federal and
state statutory rights. Those statutory rights include RICO,
18 U.S.C. § 1962 (prohibited activities), and § 1964 (civil
remedies), and California’s anti-usury statute, Cal. Civ.
Code § 1916-2 (maximum interest rate and remedies),
§ 1916-3 (civil liability). If non-statutory rights are also
covered by the prospective waiver rule, state-law rights
would include unjust enrichment under California law. See
Ghirardo v. Antonioli, 924 P.2d 996, 1003 (Cal. 1996)
(describing the unjust enrichment doctrine). Because the
choice-of-law provisions prospectively waive the
prospective waiver rule, the arbitrator cannot find the
arbitration agreement invalid under either federal or state
law. The arbitrator’s validity inquiry under the delegation
provision is thus illusory, with the foreordained result that
Plaintiffs will be required to arbitrate under an agreement
that categorically forecloses relief on their federal and state
claims.
I therefore conclude under Mitsubishi Motors and
American Express that because the arbitrator cannot apply
the FAA’s prospective waiver rule in determining the
validity of the arbitration agreement, the delegation
provision is invalid.
48 BRICE V. HAYNES INVESTMENTS
2. Arbitration Agreement as a Whole
Because the delegation provision is invalid, a court
rather than the arbitrator determines the validity of the
arbitration agreement as a whole. My colleagues do not
reach this issue because they hold the delegation provision
valid. Because I conclude that the delegation provision is
invalid, I reach the issue. I conclude that the arbitration
agreement as a whole is invalid.
The FAA allows parties considerable freedom to
structure arbitration agreements. However, as discussed
above, an arbitration agreement may not operate as a
prospective waiver, preventing plaintiffs from effectively
vindicating their federal or state statutory rights. The choice-
of-law provisions, as applied to the arbitration agreement,
prospectively waive Plaintiffs’ rights under the federal
RICO and the California usury statutes, as well as under
California’s common law unjust enrichment doctrine.
The choice-of-law provisions thus foreclose the
application of relevant federal law and of any state law. The
loan and arbitration agreements’ choice-of-law provisions
prevent plaintiff Novorot from arguing that defendants
committed federal RICO violations, see 18 U.S.C. § 1962(c)
(forbidding a pattern of unlawful debt collection), 1964
(remedies for violations); from challenging the loan’s
usurious interest rate of 441.38% in violation of California
Civil Code §§ 1916-2 (maximum interest rate and remedies),
1916-3 (civil liability); and from claiming that unjust
enrichment resulted from the usurious rate. This violates the
prospective waiver rule, rendering the arbitration
agreements invalid. See Am. Express, 570 U.S. at 236.
BRICE V. HAYNES INVESTMENTS 49
E. The Majority Opinion
My colleagues hold that the delegation provision is valid.
The key to their holding is the paragraph that defines
“dispute” and contains the delegation provision. My
colleagues conclude that this paragraph authorizes the
arbitrator to apply federal law. They write:
The plain language of the delegation
provision does not foreclose the arbitrator
from considering enforceability disputes
based on federal law. The description of
what an arbitrator can decide expressly
includes enforceability disputes arising under
“federal, state, or Tribal law . . . based on any
legal or equitable theory.” This necessarily
means that Borrowers’ rights to pursue their
federal prospective-waiver argument remains
intact at this stage of the proceedings and the
delegation provision is not facially a
prospective waiver.
Maj. Op. at 15 (emphasis in original).
My colleagues misunderstand the paragraph. For the
convenience of the reader, here it is again:
“Arbitration” is having an independent third-
party resolve a Dispute. A “Dispute” is any
claim or controversy of any kind between you
and us or otherwise involving this Agreement
or the Loan. The term Dispute is to be given
its broadest possible meaning and includes,
without limitation, all federal, state or Tribal
Law claims or demands (whether past,
present, or future), based on any legal or
50 BRICE V. HAYNES INVESTMENTS
equitable theory and regardless of the type of
relief sought (i.e., money, injunctive relief, or
declaratory relief). A Dispute includes any
issue concerning the validity, enforceability,
or scope of this Agreement or this Agreement
to Arbitrate.
This paragraph is simultaneously a definitional provision
(defining “arbitration” and “dispute”) and a forum selection
clause (delegating to an arbitrator the task of deciding
“disputes”). It is not a choice-of-law provision.
My colleagues make a fundamental mistake, treating the
paragraph as if it were a choice-of-law provision. It is true
that the paragraph defines “dispute” broadly to include
controversies based on federal and state claims. It does so
because these are precisely the claims dissatisfied borrowers
are most likely to bring when challenging the loan
agreements. The defendants very much wanted such claims
to be brought before an arbitrator rather than a court. But
they did not want the claims to be decided under the federal
or state law that would provide effective remedies. They
therefore included choice-of-law provisions—five of them—
in the arbitration and loan agreements, foreclosing the
application of all but a small and irrelevant subset of federal
law and entirely foreclosing the application of state law.
In their central argument, my colleagues contend that the
paragraph defining “dispute” and containing the delegation
provision overrides the choice-of-law provisions. They
conclude that because the paragraph defines “dispute” as
including claims brought under federal law, the paragraph
authorizes the arbitrator to apply federal law. They write:
[W]e conclude that the delegation provision
is enforceable because it does not eliminate
BRICE V. HAYNES INVESTMENTS 51
Borrowers’ right to pursue in arbitration their
prospective-waiver challenge to the
arbitration agreement as a whole, even
though that challenge arises under federal
law.
Maj. Op. at 14–15 (second emphasis added). I strongly
disagree. The paragraph defines “dispute” as including
claims based on federal law, but it does not authorize the
application of federal law. My colleagues write, further, that
the choice-of-law provisions do not override the “mandate”
of the paragraph that the arbitrator apply federal law:
While the choice-of-law provisions dictating
that tribal law governs the parties’
relationship could be viewed as conflicting
with the delegation provision’s plain
meaning, they do not defeat its plainly stated
mandate that the arbitrator decide
arbitrability issues from whatever source they
arise.
Id. at 16. Again, I strongly disagree. The delegation
provision is a “plainly stated mandate” that the arbitrator
decide a “dispute,” defined as including claims under federal
law. But the delegation provision is not a “mandate”—let
alone a “plainly stated mandate”—that the arbitrator apply
federal law.
A simple example will illustrate my colleagues’
fundamental mistake. Imagine an arbitration agreement
between two parties. One party is French. The other is
English. The agreement defines a “dispute” as a
disagreement between the parties arising out of a contract
between them. One paragraph of the agreement defines
52 BRICE V. HAYNES INVESTMENTS
“dispute” as including claims based on any law, including
French and English law, and specifies that any dispute is to
be decided by an arbitrator. Another paragraph—the choice-
of-law paragraph—specifies that the arbitrator is to use
German law to decide any “dispute.” It is hornbook law that
the arbitrator must apply German law, as directed by the
choice-of-law paragraph, even if a party seeks to rely on
French or English law.
So it is here. The arbitration agreement defines “dispute”
as including claims brought under federal or state law. But
the choice-of-law provisions of the arbitration and loan
agreements specify that the arbitrator is to apply tribal law,
and a small and irrelevant subset of federal law, in deciding
a “dispute.”
In a fall-back argument, my colleagues misread the
choice-of-law provision referring to federal law. They
contend that the choice-of-law provisions, including this
one, allow the arbitrator to apply the full range of federal
law. As described above, the second choice-of-law
provision in the loan agreement authorizes the arbitrator to
apply two categories of federal law specific to Indians.
Neither category includes the FAA or RICO. Under the
venerable expressio unius interpretive principle, the
arbitrator may apply only those two categories of federal
law.
In an attempt to avoid the force of the expressio unius
principle, my colleagues quote language from the arbitration
agreement. They write that “the arbitration agreement
authorizes an arbitrator to decide disputes ‘based on any
legal or equitable theory . . . includ[ing] any issue
concerning the validity, enforceability, or scope of . . . [the
arbitration agreement].’” Maj. Op. at 19 (emphasis and
alterations in original). Therefore, according to my
BRICE V. HAYNES INVESTMENTS 53
colleagues, an argument based on the expressio unius
principle “stretches the Latin beyond reason.” The quoted
language comes from the paragraph defining “dispute.” It
does not come from a choice-of-law provision. It in no way
suggests that the expressio unius principle does not apply to
the choice-of-law provision that authorizes the arbitrator to
apply two, and only two, categories of federal law.
As noted above, the Hayes defendants do not agree with
my colleagues, and have made no arguments that would
support their conclusion. The Hayes defendants do not
contend that the arbitrator may apply federal law outside the
two specified categories of federal law. They contend,
instead, that tribal law provides effective remedies to
Plaintiffs.
Conclusion
Our sister circuits have consistently condemned the
arbitration agreements embedded in tribal internet payday
loan agreements, including those used by the very same
lenders as in this case. See Think Finance, 922 F.3d 112 (2d
Cir. 2019). In the words of the Fourth Circuit, payday
lenders use these agreements “to avoid state and federal law
and to game the entire system.” Hayes, 811 F.3d at 676.
Based on a reading of the arbitration agreement that even the
payday lenders have not been willing to advance, my
colleagues improperly force vulnerable borrowers into
arbitration.
I strongly but respectfully dissent.