Green v. U.S. Cash Advance Ill., LLC

Decision Date20 September 2013
Docket NumberNo. 13–1262.,13–1262.
Citation724 F.3d 787
PartiesJoyce GREEN, Plaintiff–Appellee, v. U.S. CASH ADVANCE ILLINOIS, LLC, and Title Loan Company, both doing business as The Loan Machine, Defendants–Appellants.
CourtU.S. Court of Appeals — Seventh Circuit


Sean Morales Doyle (argued), Attorney, Despres, Schwartz & Geoghegan, Chicago, IL, Michael P. Persoon, Despres, Schwartz & Geoghegan, Chicago, IL, for PlaintiffAppellee.

Peter M. King (argued), Attorney, Canel, King & Jones, Chicago, IL, for DefendantsAppellants.

Before EASTERBROOK, Chief Judge, and BAUER and HAMILTON, Circuit Judges.


Joyce Green contends that U.S. Cash Advance, from which she borrowed money, misstated the loan's annual percentage rate and so violated the Truth in Lending Act, 15 U.S.C. § 1606. The lender asked the district judge to stay the litigation and direct arbitration under ¶ 17 of the loan agreement:

ARBITRATION: All disputes, claims or controversies between the parties of this Agreement, including all disputes, claims or controversies arising from or relating to this Agreement, no matter by whom or against whom, including the validity of this Agreement and the obligations and scope of the arbitration clause, shall be resolved by binding arbitration by one arbitrator by and under the Code of Procedure of the National Arbitration Forum. This arbitration agreement is made pursuant to a transaction in interstate commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C. Section 1. The parties agree and understand that they choose arbitration instead of litigation to resolve disputes. The parties understand that they have a right or opportunity to litigate disputes through a court, but that they prefer to resolve their disputes through arbitration, except as provided herein. THE PARTIES WOULD HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE DISPUTES THROUGH A COURT BUT HAVE AGREED TO RESOLVE DISPUTES THROUGH BINDING ARBITRATION, EXCEPT THAT THE TITLE LENDER MAY CHOOSE AT TITLE LENDER'S SOLE OPTION TO SEEK COLLECTION OF PAYMENT(S) DUE IN COURT RATHER THAN THROUGH ARBITRATION. THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A COURT ACTION BY TITLE LENDER. The parties agree and understand that all other laws and actions, including, but not limited to, all contract, tort and property disputes will be subject to binding arbitration in accord with this Agreement.

The agreement was signed on May 8, 2012. But the National Arbitration Forum has not been accepting new consumer cases for arbitration since July 2009, when it settled a suit by Minnesota's Attorney General, who believed that the Forum was biased in merchants' favor. The lender asked the district court to appoint a substitute arbitrator under 9 U.S.C. § 5. The judge declined, stating that the identity of the Forum as the arbitrator is “an integral part of the agreement”, that ¶ 17 is void, and that the dispute will be resolved on the merits in court. 2013 WL 317046, 2013 U.S. Dist. LEXIS 11346 (N.D.Ill. Jan. 25, 2013). The lender has taken an interlocutory appeal, as 9 U.S.C. § 16(a)(1)(B) permits.

The district judge's belief that ¶ 17 requires the arbitration to be conducted by the Forum departs from its language, which says that any dispute “shall be resolved by binding arbitration by one arbitrator by and under the Code of Procedure of the National Arbitration Forum.” (Emphasis added.) The agreement calls for use of the Forum's Code of Procedure, not for the Forum itself to conduct the proceedings. If ¶ 17 were designed to require arbitration to be conducted by the Forum exclusively, the reference to its Code would be surplusage; the only reason to refer to the Code is to create the possibility of arbitration outside the Forum's auspices, but using its rules of procedure.

Green observes that Rule 1.A of the Code includes this language: “This Code shall be administered only by the National Arbitration Forum or by any entity or individual providing administrative services by agreement with the National Arbitration Forum.” Rule 48.C qualifies this, however: “In the event a court of competent jurisdiction shall find any portion of this Code ... to be in violation of the law or otherwise unenforceable, that portion shall not be effective and the remainder of the Code shall remain effective.” Rule 48.D continues: “If Parties are denied the opportunity to arbitrate a dispute, controversy or Claim before the Forum, the Parties may seek legal and other remedies in accord with applicable law.” One would suppose that 9 U.S.C. § 5 is such an “applicable law.”

Rule 1.A is “unenforceable” in light of the Forum's decision to cease conducting arbitrations. What's more, no author can control how or by whom a written work is used. Copyright law allows owners to decide how to use the texts; a declaration at the beginning of a detective novel that the reader must follow the text consecutively would not prevent the reader from skipping to the end to learn whodunit. The list of exclusive rights, 17 U.S.C. § 106, does not include a right to control how the owner of a copy uses the information it contains. Cf. Baker v. Selden, 101 U.S. 99, 25 L.Ed. 841 (1879) (despite the author's prohibition, the buyer of a book may make and sell forms that implement the book's ideas); American Dental Association v. Delta Dental Plans Association, 126 F.3d 977 (7th Cir.1997). Patent law allows a proprietor to control how a patented article is used; with the exception of the rights in § 106, copyright law does not. The Forum does not require buyers to sign contracts promising to use the Code in whole, or not at all. Compare ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir.1996). So the exclusivity claim in Rule 1.A is not enforceable, and an agreement to conduct arbitration under the Forum's Code, with the Forum itself on the sidelines, is valid. Rules 48.C and 48.D say as much. All that remains is the selection of an arbitrator, and a district court can use § 5 to make the appointment.

Suppose this is wrong and that an arbitrator is forbidden to use the Forum's Code of Procedure but must employ different rules. Would that affect the desirability of arbitration, from either a lender's perspective or a customer's? If, as the district judge thought, the designation of the Forum (or at least of its Code) is “integral” to the agreement, this implies a belief that the customer, the lender, or both would rather litigate than arbitrate under any other rules or in any other forum. Does that belief have any support? When the Forum stopped accepting arbitrations, did any merchant revise its contracts to eliminate the arbitration clause? Has any customer insisted on the Forum as a condition of agreeing to arbitration? The district court did not identify anyone, ever, for whom the answer has been “the National Arbitration Forum or no arbitration at all.”

Two courts of appeals have held that the identity of the Forum as arbitrator is not “integral” to arbitration agreements and that § 5 may be used to appoint a substitute. Khan v. Dell, Inc., 669 F.3d 350 (3d Cir.2012); Pendergast v. Sprint Nextel Corp., 691 F.3d 1224, 1236 n. 13 (11th Cir.2012); Brown v. ITT Consumer Financial Corp., 211 F.3d 1217, 1222 (11th Cir.2000). The Supreme Court must have assumed this in CompuCredit Corp. v. Greenwood, ––– U.S. ––––, 132 S.Ct. 665, 181 L.Ed.2d 586 (2012), which held that claims under the Credit Repair Organizations Act are arbitrable. The agreement in that case specified use of the Forum, see id. at 677 n. 2 (Ginsburg, J., dissenting), yet the Court saw no obstacle to enforcing the arbitration clause. We grant that Ranzy v. Tijerina, 393 Fed.Appx. 174 (5th Cir.2010), deems designation of the Forum “important” to arbitration and makes an agreement unenforceable once the Forum becomes unavailable, but Ranzy is not precedential. The decisions of the third and eleventh circuits, and the assumption of the Supreme Court, deserve greater weight.

Ranzy relied on In re Salomon Inc. Shareholders' Derivative Litigation, 68 F.3d 554 (2d Cir.1995). The agreement in that case named the New York Stock Exchange as the exclusive forum for private dispute resolution. The Exchange's rules gave it discretion whether to hear a dispute or send the parties to court. The Exchange's Secretary thought that litigation would be preferable (the dispute arose from allegations that traders had rigged the trading price of Treasury securities), and the Exchange's Board agreed. After the Exchange returned the case to court, the district judge declined to appoint a substitute arbitrator under § 5. The second circuit affirmed, observing among other things that the parties had bargained not only for the Stock Exchange as the sole private forum but also for a procedure under which the Exchange could decide that litigation would be preferable. To use § 5 to appoint a substitute arbitrator would be to defeat both aspects of the contractual choice and override the chosen arbitrator's decision. Paragraph 17 of the agreement between Green and U.S. Cash Advance differs in both respects that the second circuit thought important. It does not name the Forum as an “exclusive” private adjudicator, and it does not refer the dispute to a body that had, and used, discretion to send it back to court.

Salomon implemented the parties' agreement that the chosen arbitrator may rule in favor of litigation. Green wants us to defeat her agreement with the lender—for that agreement conclusively chooses private dispute resolution. We are skeptical of decisions that allow a court to declare a particular aspect of an arbitration clause “integral” and on that account scuttle arbitration itself. Section 5 reads:

If in the agreement provision be made for a method of naming or...

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    ...cases for arbitration since July 2009, when it settled a suit brought by Minnesota's Attorney General. See Green v. U.S. Cash Advance Ill., LLC , 724 F.3d 787, 788 (7th Cir. 2013). Thus, Plaintiffs argue that the unavailability of the forum mentioned in the NAF Arbitration Clause renders th......
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    ...substituting an arbitrator. This case is therefore distinctly different from the situation that we faced in Green v. U.S. Cash Advance Illinois, LLC, 724 F.3d 787 (7th Cir.2013). In Green, a lender moved to dismiss a plaintiff's claims under the Truth in Lending Act on the ground that the l......
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1 books & journal articles
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    • Washington University Law Review Vol. 97 No. 6, August 2020
    • August 1, 2020
    ...Weiner (In re Salomon Inc. S'holders' Derivative Litig.), 68 F.3d 554, 561 (2d Cir. 1995). But see Green v. U.S. Cash Advance Ill., LLC, 724 F.3d 787, 793 (7th Cir. 2013) (rejecting the "integral-part" test and concluding "(c]ourts should not use uncertainty in just how that would be accomp......

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