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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.

  • Spencer Wilson
  • On Remand

Case Documents

  • Order denying defendants' petition for writ of certiorari

    U.S. Supreme Court

  • New Mexico Supreme Court opinion

    Ruling that the Internet payday lenders CLK Management Cash Advance Network cannot compel arbitration of Andrea Felts' claims under the New Mexico Unfair Practices Act and the New Mexico Small Loans Act.

  • Answer brief in response to CANI's brief in chief

    Arguing that the issue of whether the defendant's arbitration clause is unenforceable was properly decided by the court -- not the arbitrator -- because there was no clear and unmistakable evidence that Felts agreed to have the arbitrator decide this issue, and that the court below properly struck the arbitration clause in its entirety, rather than just striking the class action ban and enforcing the remainder of the clause.

  • Answer brief in response to CLK's opening brief

    Arguing that Concepcion does not bar New Mexico courts from striking down class action bans in cases where plaintiffs can demonstrate that the class action mechanism is essential to vindicate their statutory rights, and that Felts here demonstrated through admissible evidence that enforcing the ban in this case would, in fact, effectively prevent her from vindicating her rights under New Mexico law.

  • Appeals court opinion

    Holding the trial court's decision and striking down the lender's motion to compel arbitration.

  • Plaintiff's answer brief

    Arguing that the district court's order denying defendants' motions to compel arbitration should be affirmed.