The Eleventh Circuit Finds Delegation Provisions Enforceable in Agreement to Arbitrate Implicating Tribal Law

By Heidi McNeil Staudenmaier and Amanda Z. Weaver, Ph.D.

On October 3, 2024, the Eleventh Circuit issued an opinion finding that arbitration agreements consumers entered into with a Tribal entity contained enforceable delegation provisions, meaning that an arbitrator, rather than a federal court, was empowered to determine whether the arbitration agreements were subject to arbitration. See Dunn v. Global Trust Mgmt., LLC, Nos. 21-10120, 21-10121 (11th Cir. Oct. 3, 2024).

Plaintiffs had opened accounts with and then obtained loans from MobiLoans, LLC, a company owned and operated by the Tunica-Biloxi Tribe of Louisiana. Id. at 3. Plaintiffs ultimately defaulted on their loans, for which Global Trust acquired the defaulted loans from MobiLoans. Id. Global Trust then sought to collect on the debts that Plaintiffs owed. Id. Plaintiffs filed complaints, asserting claims under both the Federal Debt Collection Practices Act and the Florida Consumer Collection Practices Act, alleging that their loan agreements were unenforceable based on interest rates exceeding the maximum allowed under Florida law. Id. at 10. 

Global Trust moved to compel arbitration, but the district court ultimately found that the delegation provisions were unenforceable and that the arbitration agreements were unconscionable as a whole. Id. at 10-11.

The Eleventh Circuit noted that, during the process of opening their MobiLoans accounts, Plaintiffs consented to the applicable terms and conditions. Id. at 4. This included acknowledging that MobiLoans was a “Tribal lending company,” and an arbitration provision in the applicable agreements, providing that the parties agreed to resolve a dispute “by arbitration in accordance with Tribal Law” and, as to one of the Plaintiffs’ applicable agreements, also under “applicable federal law.” Id. at 4-9. The arbitration agreements contained provisions that “delegated threshold questions of arbitrability to an arbitrator.” Id. at 3.

The Court first approached the analysis of delegation provisions pursuant to the Federal Arbitration Act (“FAA”), noting that the U.S. Supreme Court has held that parties may delegate the threshold question of arbitrability to an arbitrator, rather than to a judge. Id. at 13-14. If a delegation provision is in an arbitration agreement, then the court is required to determine (1) if the delegation provision applies to arbitrability in the first instance; (2) whether the plaintiff is challenging the delegation provision directly; and (3) if so, whether the delegation provision is enforceable under the FAA. Id. at 19.

The Eleventh Circuit limited its review to Plaintiffs’ arguments about the delegation provisions, noting that while Plaintiffs made other arguments regarding why the arbitration agreements as a whole were unconscionable, those could not be considered if the delegation agreements were enforceable, as such arguments would be for the arbitrator to decide. Id. at 20. 

The Court analyzed whether the delegation provisions “prospectively waive Plaintiffs’ rights under the FAA,” finding that the provisions incorporate, rather than preclude, the FAA and analyzing that application of Tribal law does not itself conflict with the FAA, and further concluding that the contractual language does not prevent Plaintiffs’ ability to challenge the enforceability of the arbitration agreements under the FAA. Id. at 22-27. The Court emphasized the narrow nature of its holding, however, taking care to state that it was not addressing “whether the arbitration agreements are enforceable, or whether the choice-of-law provisions apply to that issue.” Id. at 33-34.

The Eleventh Circuit noted several areas in its decision where other Circuit Courts of Appeals had held differently on related arguments with arbitration agreements incorporating Tribal law, including the Second, Third, and Fourth Circuits. Id. at 27, 29 n.7. The Eleventh Circuit distinguished the other decisions, including based on the difference of the specific provision at issue (namely, the delegation provision) and the unique wording thereof.

In brief, this case demonstrates the importance of the precise wording and scope of an arbitration agreement that incorporates Tribal law. The Eleventh Circuit has remanded the case, including to consider whether the defendant waived the ability to compel arbitration in the first instance. Id. at 34.