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4th Circuit won't recognize tribal authority in online lending case

Wednesday, February 3, 2016

A still image of a television ad for Western Sky Financial before it ceased operations.

An arbitration agreement that subjected consumers to the jurisdiction of the Cheyenne River Sioux Tribe cannot be enforced, the 4th Circuit Court of Appeals ruled on Tuesday.

Western Sky Financial included the provision in an agreement with people who accepted loans from the defunct online lending company. A federal judge recognized the provision but the 4th Circuit said it was unfair because it deprives consumers of their rights under federal law.

"[A] party may not underhandedly convert a choice of law clause into a choice of no law clause -- it may not flatly and categorically renounce the authority of the federal statutes to which it is and must remain subject," Judge J. Harvie Wilkinson III wrote in the 23-page decision.

Indianz.Com SoundCloud: 4th Circuit Court of Appeals Oral Arguments in James Hayes v. Delbert Services Corporation

Western Sky was owned by Martin Webb, a Cheyenne River Sioux citizen. The tribe was not involved in the business and did not approve it.

The lawsuit was filed against Delbert Services Corporation, a company that was the servicing agent for Western Sky, which went out of business after being hit with enforcement actions and lawsuits in several states.

Get the Story:
Appeals court puts payday loan lawsuit back before judge (AP 2/3)

4th Circuit Court of Appeals Decision:
James Hayes v. Delbert Services Corporation (February 2, 2016)