Felts v. CLK Management, Inc.

Felts v. CLK Management, Inc.

In this case in which Public Justice is co-counsel on behalf of a class of New Mexico payday lending customers, the New Mexico Supreme Court has ruled that, under state consumer protection laws, an Internet payday lender cannot compel arbitration of the plaintiff’s claims.

In its earlier appeal to the New Mexico Court of Appeals, Public Justice had urged the court to uphold the trial court’s order denying the defendant payday lenders’ motion to compel arbitration. The trial court ruled that it — not the arbitrator — should determine the enforceability of the payday lenders’ arbitration clause, and that the class action ban within that clause violated fundamental New Mexico public policy, thus rendering the entire clause substantively unconscionable and unenforceable.

During the appeal, the U.S. Supreme Court decided Rent-A-Center West v. Jackson, another Public Justice case, where the Court provided guidance on the issue of when the arbitrator, as opposed to a court, decides issues of enforceability of the arbitration clause. Public Justice argued that, under the framework established in Rent-A-Center, the issue of enforceability of the arbitration clause here was appropriately for the court — not the arbitrator — to decide, because the defendants’ arbitration clause failed to clearly and unmistakably delegate this issue to the arbitrator, and any purported delegation argued by the defendants would fail under generally applicable principles of New Mexico contract law. Public Justice also argued that the trial court properly ruled that the defendants’ class action ban violates New Mexico public policy because the ban effectively exculpates the defendants from liability to their customers for relatively small-value, but demonstrably complex, consumer claims.

In February 2013, the U.S. Supreme Court denied defendants’ petition for writ of certiorari.

Public Justice’s Paul Bland, Amy Radon and Spencer Wilson are working on the case.