Opinion ID: 76988
Heading Depth: 2
Heading Rank: 7

Heading: The Arbitration Provision

Text: 43 Section 16-17-2(c)(2) of the Georgia Act declares arbitration clauses in payday loan contracts void if the payday loan contract is “unconscionable.” See Ga. Code Ann. § 16-17-2(c)(2). The out-of-state banks and payday stores contend that the provisions of the Georgia Act dealing with arbitration are preempted by the Federal Arbitration Act. The plaintiffs, however, lack standing to challenge the arbitration provisions in the Act.28 For a plaintiff to have standing to sue in federal court, he must allege in his complaint, or otherwise through the course of the proceedings, “that he has suffered an injury in fact”; in other words, “some harm to a legal interest that is actual or imminent, not conjectural or hypothetical.” Bowen v. First Family Fin. Servs., Inc., 233 F.3d 1331, 1339 (11th Cir. 2000) (internal quotation marks and citation omitted). In the context of a plaintiff’s challenge to the enforceability of 28 In Jenkins v. First Am. Cash Adv. of Ga., 400 F.3d 868 (11th Cir. 2005), this Court addressed a situation in which a borrower in Georgia brought a class action against two national banks, raising state law claims challenging payday loan agreements. The Jenkins Court addressed a situation in which the borrower and the national bank has signed an Arbitration Agreement stipulation that all disagreements were governed by the Federal Arbitration Act. This Court determined that the arbitration agreements in payday loans by national banks were not unconscionable, and, thus, were enforceable. Id. at 881. In Jenkins, the appellant also argued that the “underlying payday loan contracts are illegal and void ab initio under Georgia law.” Id. This Court concluded that because the Arbitration Agreements were valid, the underlying legality of the payday lending transactions was “an issue for an arbitrator, not the court, to decide.” Id. at 882. Because we conclude that the plaintiffs do not have standing to challenge the arbitration provisions in the Georgia Act, we need not determine what import Jenkins has on those provisions. 44 an arbitration clause in a loan agreement, we have held that the plaintiff must allege that an arbitration between the lender and the borrower is imminent or “certainly impending.” Id. at 1340 (quoting Whitmore v. Arkansas, 495 U.S. 149, 158, 110 S. Ct. 1717, 1724-25 (1990)). There simply being “a ‘perhaps’ or ‘maybe’ chance that the arbitration agreement will be enforced . . . is not enough to give [the plaintiffs] standing to challenge its enforceability.” Id. It follows that in order to challenge the validity of a statute that tends to undermine the enforceability of an arbitration agreement, a party must show harm to its interest in enforcing the agreement that is actual or imminent. The party seeking an injunction against enforcement of the statute must show that arbitration, which is a prerequisite to application of the statute, is imminent or certainly impending. It is not enough that there may be arbitration and that the statute may be applied if there is. The plaintiffs have not met their burden in this regard. They have not even alleged in their complaint or in their motion for a preliminary injunction that any breaches of the loan agreements have occurred or are imminent. They have not alleged that if there are breaches there will be arbitration. The agreement gives either party the right to elect arbitration but does not require disputes to be 45 arbitrated if neither party elects it.29 Maybe there will be breaches, and maybe in connection with those breaches someone will elect arbitration, and maybe if that happens the Georgia statutory provision in question will be asserted and applied. But maybe is not enough. See id. Having failed to demonstrate imminent or certainly impending injury from Ga. Code Ann. § 16-17-2(c)(2), the out-of-state banks and payday stores lack standing to challenge this provision. It necessarily follows that the district court did not abuse its discretion in denying them a preliminary injunction against enforcement of the provision. The Act contains another provision that refers to arbitration. Specifically, the aiding or abetting provision of § 16-17-2(d) mandates that “any arbiter or arbitration company” that aids or abets a violation of the Act will be subject to sanctions under the Act. The out-of-state banks and payday stores argue that § 1617-2(d) is preempted by the FAA because it is “repugnant” to the FAA. It is not clear from the Georgia Act what action by an arbitrator would amount to aiding or abetting a violation of the Act, nor is it apparent why the Georgia General Assembly saw fit to specially include arbitrators in the aiding or 29 We are referring specifically to the arbitration portion of the loan agreement between Bankwest, Advance America, and the borrower. As we stated before, we have been led to believe that this agreement is typical. 46 abetting provision. Although we question the validity of a regulation that would subject an arbitrator to liability merely for deciding a payday loan dispute in accordance with the arbitration clause in a payday loan contract, we need not decide that issue, because neither the out-of-state banks nor the payday stores are arbitrators. The plaintiffs in this case will never be prosecuted or sued as arbitrators for acting in contravention of the Act. Therefore, the out-of-state banks and payday stores have asserted no injury-in-fact particular to them, see Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 103, 118 S. Ct. 1003, 1016 (1998), nor have they alleged facts sufficient to stand in the place of the arbitrators. See Powers v. Ohio, 499 U.S. 400, 410-11, 111 S. Ct. 1364, 1370-71 (1991) (holding that in order for a litigant to bring an action on behalf of a third party, the litigant must demonstrate that (1) he has “suffered an ‘injury in fact,’ thus giving him or her a ‘sufficiently concrete interest’ in the outcome of the issue in dispute”; (2) he has “a close relation to the third party”; and (3) there is “some hindrance to the third party’s ability to protect his or her own interests” (internal citations omitted)). In short, the out-of-state banks and payday stores lack standing to challenge the arbitration provisions.