George Hengle v. Sherry Treppa

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-1062
GEORGE HENGLE; SHERRY BLACKBURN; WILLIE ROSE; ELWOOD
BUMBRAY; TIFFANI MYERS; STEVEN PIKE; SUE COLLINS; LAWRENCE
MWETHUKU, on behalf of themselves and all individuals similarly situated,
Plaintiffs – Appellees,
v.
SHERRY TREPPA, Chairperson of the Habematolel Pomo of Upper Lake Executive
Council, in her official capacity; TRACEY TREPPA, Vice-Chairperson of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
KATHLEEN TREPPA, Treasurer of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; CAROL MUNOZ, Secretary of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
JENNIFER BURNETT, Member-At-Large of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; AIMEE JACKSON-PENN, Member-At-
Large of the Habematolel Pomo of Upper Lake Executive Council, in her official
capacity; VERONICA KROHN, Member-At-Large of the Habematolel Pomo of
Upper Lake Executive Council, in her official capacity,
Defendants – Appellants,
and
SCOTT ASNER; JOSHUA LANDY,
Defendants.
------------------------------
STATE OF NEW MEXICO; HABEMATOLEL POMO OF UPPER LAKE
CONSUMER FINANCIAL SERVICES REGULATORY COMMISSION;
NATIVE AMERICAN FINANCE OFFICERS ASSOCIATION; NATIONAL
CONGRESS OF AMERICAN INDIANS; NATIONAL CENTER FOR
AMERICAN INDIAN ECONOMIC DEVELOPMENT; NATIONAL INDIAN
GAMING ASSOCIATION; ASSOCIATION ON AMERICAN INDIAN AFFAIRS,
Amici Supporting Appellants,
UNITED STATES OF AMERICA,
Amicus Supporting Affirmance.
No. 20-1063
GEORGE HENGLE; SHERRY BLACKBURN; WILLIE ROSE; ELWOOD
BUMBRAY; TIFFANI MYERS; STEVEN PIKE; SUE COLLINS; LAWRENCE
MWETHUKU, on behalf of themselves and all individuals similarly situated,
Plaintiffs – Appellees,
v.
SCOTT ASNER; JOSHUA LANDY,
Defendants – Appellants,
and
SHERRY TREPPA, Chairperson of the Habematolel Pomo of Upper Lake Executive
Council, in her official capacity; TRACEY TREPPA, Vice-Chairperson of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
KATHLEEN TREPPA, Treasurer of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; CAROL MUNOZ, Secretary of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
JENNIFER BURNETT, Member-At-Large of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; AIMEE JACKSON-PENN, Member-At-
Large of the Habematolel Pomo of Upper Lake Executive Council, in her official
capacity; VERONICA KROHN, Member-At-Large of the Habematolel Pomo of
Upper Lake Executive Council, in her official capacity,
Defendants.
2
------------------------------
STATE OF NEW MEXICO; HABEMATOLEL POMO OF UPPER LAKE
CONSUMER FINANCIAL SERVICES REGULATORY COMMISSION;
NATIVE AMERICAN FINANCE OFFICERS ASSOCIATION; NATIONAL
CONGRESS OF AMERICAN INDIANS; NATIONAL CENTER FOR
AMERICAN INDIAN ECONOMIC DEVELOPMENT; NATIONAL INDIAN
GAMING ASSOCIATION; ASSOCIATION ON AMERICAN INDIAN AFFAIRS,
Amici Supporting Appellants,
UNITED STATES OF AMERICA,
Amicus Supporting Affirmance.
No. 20-1358
GEORGE HENGLE; SHERRY BLACKBURN; WILLIE ROSE; ELWOOD
BUMBRAY; TIFFANI MYERS; STEVEN PIKE; SUE COLLINS; LAWRENCE
MWETHUKU, on behalf of themselves and all individuals similarly situated,
Plaintiffs – Appellees,
v.
SCOTT ASNER; JOSHUA LANDY,
Defendants – Appellants,
and
SHERRY TREPPA, Chairperson of the Habematolel Pomo of Upper Lake Executive
Council, in her official capacity; TRACEY TREPPA, Vice-Chairperson of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
KATHLEEN TREPPA, Treasurer of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; CAROL MUNOZ, Secretary of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
JENNIFER BURNETT, Member-At-Large of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; AIMEE JACKSON-PENN, Member-At-
3
Large of the Habematolel Pomo of Upper Lake Executive Council, in her official
capacity; VERONICA KROHN, Member-At-Large of the Habematolel Pomo of
Upper Lake Executive Council, in her official capacity,
Defendants.
------------------------------
STATE OF NEW MEXICO; HABEMATOLEL POMO OF UPPER LAKE
CONSUMER FINANCIAL SERVICES REGULATORY COMMISSION;
NATIVE AMERICAN FINANCE OFFICERS ASSOCIATION; NATIONAL
CONGRESS OF AMERICAN INDIANS; NATIONAL CENTER FOR
AMERICAN INDIAN ECONOMIC DEVELOPMENT; NATIONAL INDIAN
GAMING ASSOCIATION; ASSOCIATION ON AMERICAN INDIAN AFFAIRS,
Amici Supporting Appellants,
UNITED STATES OF AMERICA,
Amicus Supporting Affirmance.
No. 20-1359
GEORGE HENGLE; SHERRY BLACKBURN; WILLIE ROSE; ELWOOD
BUMBRAY; TIFFANI MYERS; STEVEN PIKE; SUE COLLINS; LAWRENCE
MWETHUKU, on behalf of themselves and all individuals similarly situated,
Plaintiffs – Appellees,
v.
SHERRY TREPPA, Chairperson of the Habematolel Pomo of Upper Lake Executive
Council, in her official capacity; TRACEY TREPPA, Vice-Chairperson of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
KATHLEEN TREPPA, Treasurer of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; CAROL MUNOZ, Secretary of the
Habematolel Pomo of Upper Lake Executive Council, in her official capacity;
JENNIFER BURNETT, Member-At-Large of the Habematolel Pomo of Upper Lake
Executive Council, in her official capacity; AIMEE JACKSON-PENN, Member-At-
4
Large of the Habematolel Pomo of Upper Lake Executive Council, in her official
capacity; VERONICA KROHN, Member-At-Large of the Habematolel Pomo of
Upper Lake Executive Council, in her official capacity,
Defendants – Appellants,
and
SCOTT ASNER; JOSHUA LANDY,
Defendants.
------------------------------
STATE OF NEW MEXICO; HABEMATOLEL POMO OF UPPER LAKE
CONSUMER FINANCIAL SERVICES REGULATORY COMMISSION;
NATIVE AMERICAN FINANCE OFFICERS ASSOCIATION; NATIONAL
CONGRESS OF AMERICAN INDIANS; NATIONAL CENTER FOR
AMERICAN INDIAN ECONOMIC DEVELOPMENT; NATIONAL INDIAN
GAMING ASSOCIATION; ASSOCIATION ON AMERICAN INDIAN AFFAIRS,
Amici Supporting Appellants,
UNITED STATES OF AMERICA,
Amicus Supporting Affirmance.
Appeal from the United States District Court for the Eastern District of Virginia, at
Richmond. David J. Novak, District Judge. (3:19-cv-00250-DJN)
Argued: January 26, 2021 Decided: November 16, 2021
Before NIEMEYER, KING, AND RUSHING, Circuit Judges.
Affirmed by published opinion. Judge Rushing wrote the opinion, in which Judge
Niemeyer and Judge King joined.
5
ARGUED: Rakesh N. Kilaru, WILKINSON STEKLOFF LLP, Washington, D.C.;
Matthew E. Price, JENNER & BLOCK, LLP, Washington, D.C., for Appellants. Matthew
W. H. Wessler, GUPTA WESSLER PLLC, Washington, D.C., for Appellees. ON BRIEF:
James Rosenthal, Kosta Stojilkovic, Beth Wilkinson, Matthew Skanchy, Betsy Henthorne,
Jaclyn Delligatti, WILKINSON STEKLOFF LLP, Washington, D.C., for Appellants.
Leonard Anthony Bennett, CONSUMER LITIGATION ASSOCIATES, P.C., Newport
News, Virginia; Kristi Cahoon Kelly, Andrew J. Guzzo, Casey Shannon Nash, KELLY
GUZZO PLC, Fairfax, Virginia, for Appellees. Brian C. Rabbitt, Acting Assistant
Attorney General, Teresa A. Wallbaum, Assistant Chief, Organized Crime and Gang
Section, Criminal Division, Jeffrey Bossert Clark, Assistant Attorney General, Eric Grant,
Deputy Assistant Attorney General, Brian C. Toth, Environment and Natural Resources
Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Amicus United States of America. Hector Balderas, Attorney General, Tania Maestas,
Chief Deputy Attorney General, OFFICE OF THE ATTORNEY GENERAL OF NEW
MEXICO, Santa Fe, New Mexico; William H. Hurd, TROUTMAN SANDERS LLP,
Richmond, Virginia, for Amicus State of New Mexico. Bruce A. Finzen, Minneapolis,
Minnesota, Brendan V. Johnson, Timothy W. Billion, ROBINS KAPLAN LLP, Sioux
Falls, South Dakota; Sarah J. Auchterlonie, BROWNSTEIN HYATT FARBER
SCHRECK LLP, Denver, Colorado, for Amicus Habematolel Pomo of Upper Lake
Consumer Financial Services Regulatory Commission. Jonodev Chaudhuri, Washington,
D.C., E. King Poor, Chicago, Illinois, Nicole Simmons, QUARLES & BRADY LLP,
Phoenix, Arizona, for Amici The Native American Finance Officers Association, National
Congress of American Indians, National Center for American Indian Economic
Development, National Indian Gaming Association, and Association on American Indian
Affairs.
6
RUSHING, Circuit Judge:
The named plaintiffs in this case, all Virginia consumers, received short-term loans
from online lenders affiliated with a federally recognized Native American tribe.
Eventually the borrowers defaulted and brought a putative class action against tribal
officials and two non-members affiliated with the tribal lenders to avoid repaying their
debts, which they alleged violated Virginia and federal law. The defendants moved to
compel arbitration under the terms of the loan agreements and to dismiss the complaint on
various grounds.
The district court denied the motions to compel arbitration and, with one significant
exception relevant here, denied the motions to dismiss. Four of those rulings are now
before us in this interlocutory appeal. First, the district court found the arbitration provision
unenforceable as a prospective waiver of the borrowers’ federal rights. Second, the district
court denied the tribal officials’ motion to dismiss the claims against them on the ground
of tribal sovereign immunity. Third, the district court held the loan agreements’ choice of
tribal law unenforceable as a violation of Virginia’s strong public policy against
unregulated lending of usurious loans. Fourth, the district court dismissed the federal claim
against the tribal officials, ruling that the Racketeer Influenced and Corrupt Organizations
Act (RICO) does not authorize private plaintiffs to sue for injunctive relief. For the reasons
explained below, we affirm all four rulings on appeal.
I.
The Habematolel Pomo of Upper Lake (the Tribe) is a federally recognized Native
American tribe in northern California. Through its Tribal Executive Council, the Tribe
7
started an online lending business consisting of four incorporated lending portfolios:
Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial,
Inc., and Majestic Lake Financial, Inc. (collectively, the Tribal Lenders). The Tribal
Lenders were allegedly operated by non-tribal companies owned by non-tribal Defendants
Scott Asner and Joshua Landy on non-tribal land in Overland Park, Kansas. Eventually,
Upper Lake Processing Service, Inc. (ULPS)—a tribal entity—acquired the Tribal
Lenders, although ULPS allegedly continues to operate out of Overland Park, Kansas,
employing non-tribal employees and distributing most of its revenues to non-tribal entities
and individuals.
The Tribal Lenders extend low-dollar, high-interest loans that must be repaid on a
short timeline. Plaintiffs are Virginia consumers who each received an online loan from
one of the Tribal Lenders while living in Virginia. Although Virginia usury law generally
prohibits interest rates over 12%, the law of the Tribe contains no usury limit. The interest
rates on Plaintiffs’ loans—which varied in principal amounts from $300 to $1,575—ranged
from 544% to 920%. For example, Plaintiff George Hengle borrowed $600 at an interest
rate of 636%, with the result that he owed $2,400 over the roughly 10-month life of the
loan.
To obtain their loans, Plaintiffs each electronically signed a “Consumer Loan and
Arbitration Agreement,” which we refer to as the “loan agreement.” The “Governing Law”
provision of the loan agreement stipulates that the agreement “shall be governed by
applicable tribal law, including but not limited to the Habematolel Tribal Consumer
Financial Services Regulatory Ordinance.” J.A. 1186.
8
The loan agreements each also contain a materially identical “Arbitration
Provision,” under which borrowers waive their right to resolve disagreements in court and
agree to submit “all disputes, including the scope and validity of this Arbitration
Provision,” to an arbitrator. J.A. 1184; see J.A. 1184 (defining “disputes” subject to
arbitration to include “the validity and scope of this Arbitration Provision and any claim or
attempt to set aside this Arbitration Provision”). But in addition to selecting the arbitral
forum and specifying the procedures to be used therein, the arbitration provision also
contains its own choice-of-law clauses. To begin, the arbitration provision states that
dispute[s] will be governed by the laws of the Habematolel Pomo of Upper
Lake and such rules and procedures used by the applicable arbitration
organization applicable to consumer disputes, to the extent those rules and
procedures do not contradict the express terms of this Arbitration Provision
or the law of the Habematolel Pomo of Upper Lake, including the limitations
on the arbitrator below.
J.A. 1185. Immediately below that paragraph, the arbitration provision explains that a
borrower may request the arbitration take place close to his or her residence but
such election to have binding arbitration occur somewhere other than on
Tribal land shall in no way . . . allow for the application of any other law
other than the laws of the Habematolel Pomo of Upper Lake.
J.A. 1185. Directly below that paragraph, the arbitration provision specifies:
The arbitrator shall apply applicable substantive Tribal law consistent with
the Federal Arbitration Act (FAA), and applicable statutes of limitation, and
shall honor claims of privilege recognized at law. . . . If allowed by statute
or applicable law, the arbitrator may award statutory damages and/or
reasonable attorneys’ fees and expenses.
J.A. 1185. Regarding confirmation of an award, the arbitration provision authorizes the
parties “to enforce an arbitration award before the applicable governing body of the
9
Habematolel Pomo of Upper Lake Tribe.” J.A. 1885. As for enforcement of the agreement
to arbitrate, the provision states:
This Arbitration Provision is made pursuant to a transaction involving both
interstate commerce and Indian commerce under the United States
Constitution and other federal and tribal laws. Thus, any arbitration shall be
governed by the FAA and subject to the laws of the Habematolel Pomo of
Upper Lake. If a final non-appealable judgment of a court having jurisdiction
over this transaction and the parties finds, for any reason, that the FAA does
not apply to this transaction, then Our agreement to arbitrate shall be
governed by the laws of the Habematolel Pomo of Upper Lake Tribe.
J.A. 1185. Finally, the arbitration provision contains a severability clause, stating that “[i]f
any of this Arbitration Provision is held invalid, the remainder shall remain in effect.” J.A.
1185.
After receiving their loans from the Tribal Lenders, Plaintiffs, on behalf of
themselves and a putative class of similarly situated individuals, brought suit in the U.S.
District Court for the Eastern District of Virginia against Asner, Landy, and the members
of the Tribal Executive Council in their official capacity (the Tribal Officials), alleging
violations of RICO and Virginia usury and consumer finance laws. From the Tribal
Officials, Plaintiffs sought only prospective declaratory and injunctive relief. From Asner
and Landy, Plaintiffs sought prospective and monetary relief.
In response, all Defendants moved to compel arbitration. Alternatively, both the
tribal and non-tribal Defendants moved to dismiss Plaintiffs’ claims against them on
numerous grounds. As relevant to this appeal, all Defendants argued that Tribal law, rather
than Virginia law, applied to the loan agreements, therefore the interest rates were not
usurious and the loans were not unlawful debts for purposes of RICO. The Tribal Officials
10
separately asserted that sovereign immunity precluded Plaintiffs’ claims against them and
that, in any event, RICO did not permit private plaintiffs to seek prospective injunctive
relief.
The district court denied Defendants’ motions to compel arbitration. Hengle v.
Asner, 433 F. Supp. 3d 825, 845–859 (E.D. Va. 2020). The court acknowledged that the
arbitration provision delegates threshold questions of arbitrability to the arbitrator, but the
court found the delegation clause unenforceable because the arbitration provision
prospectively waives federal and state law defenses to arbitrability. Assessing the validity
of the arbitration provision as a whole, the court concluded that it similarly accomplished
an impermissible waiver of otherwise available statutory claims, including RICO claims.
Because it found the offending provisions inseverable, the district court held the arbitration
provision unenforceable in its entirety.
Moving to the various motions to dismiss, the district court held that the loan
agreement’s selection of tribal law violated Virginia’s compelling public policy against the
unregulated lending of usurious loans. Id. at 864–868. Applying Virginia’s choice-of-law
rules, the court determined that Virginia law applies to the loan agreements, therefore
Plaintiffs stated a plausible claim that the loans violate Virginia usury law and constitute
an unlawful debt under RICO. The district court also rejected the Tribal Officials’ assertion
of sovereign immunity, holding that the Tribal Officials were subject to suits for
prospective injunctive relief. Id. at 871–880. But the court dismissed the RICO claim
against the Tribal Officials, reasoning that RICO authorizes private plaintiffs to sue only
for money damages, not injunctive or declaratory relief. Id. at 880–886. The court certified
11
its RICO and choice-of-law rulings for interlocutory appeal. Hengle v. Asner, No. 3:19-
cv-250, 2020 WL 855970 (E.D. Va. Feb. 20, 2020); see 28 U.S.C. § 1292(b).
II.
We now have jurisdiction to review the four rulings appealed: (1) denial of
Defendants’ motions to compel arbitration, (2) denial of the Tribal Officials’ motion to
dismiss the claims against them on sovereign-immunity grounds, (3) denial of Defendants’
motions to dismiss pursuant to the governing-law clause, and (4) dismissal of Plaintiffs’
RICO claim against the Tribal Officials. See 9 U.S.C. § 16(a)(1) (denial of motion to
compel arbitration); 28 U.S.C. § 1292(b) (orders certified for interlocutory appeal); Eckert
Int’l Inc. v. Gov’t of the Sovereign Democratic Republic of Fiji, 32 F.3d 77, 79 (4th Cir.
1994) (denial of sovereign immunity). We review de novo the district court’s decision
declining to compel arbitration and its rulings on the motions to dismiss for failure to state
a claim. Chorley Enter., Inc. v. Dickey’s Barbecue Rests., Inc., 807 F.3d 553, 563 (4th Cir.
2015); Buscemi v. Bell, 964 F.3d 252, 262 (4th Cir. 2020), cert. denied sub nom. Kopitke
v. Bell, 141 S. Ct. 1388 (2021). As for the district court’s denial of the Tribal Officials’
motion to dismiss for lack of subject matter jurisdiction on immunity grounds, we review
“factual findings with respect to jurisdiction for clear error and the legal conclusion that
flows therefrom de novo.” Williams v. Big Picture Loans, LLC, 929 F.3d 170, 176 (4th
Cir. 2019) (internal quotation marks omitted).
III.
We begin with Defendants’ motions to compel arbitration under the terms of the
parties’ agreements. “[A]rbitration is a matter of contract.” Rent-A-Center, W., Inc. v.
12
Jackson, 561 U.S. 63, 67 (2010); Am. Express Co. v. Italian Colors Rest., 570 U.S. 228,
233 (2013). In the Federal Arbitration Act (FAA), Congress provided that arbitration
agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Courts therefore must
enforce arbitration agreements “on an equal footing with other contracts,” AT&T Mobility
LLC v. Concepcion, 563 U.S. 333, 339 (2011) (citing Buckeye Check Cashing, Inc. v.
Cardegna, 546 U.S. 440, 443 (2006)), and “may invalidate an arbitration agreement based
on ‘generally applicable contract defenses,’” Kindred Nursing Ctrs. Ltd. P’ship v. Clark,
137 S. Ct. 1421, 1426 (2017) (quoting Concepcion, 563 U.S. at 339).
One such generally applicable defense is the so-called “prospective waiver”
doctrine, under which an agreement that prospectively waives “a party’s right to pursue
statutory remedies” is unenforceable as a violation of public policy. Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 637 n.19 (1985); see also Italian Colors,
570 U.S. at 235–236; 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 273–274 (2009); Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991). Although parties possess broad
latitude to specify the rules under which their arbitration will be conducted, they must
preserve the ability to assert federal statutory causes of action so that “the statute[s] will
continue to serve both [their] remedial and deterrent function[s].” Gilmer, 500 U.S. at 28(quoting Mitsubishi Motors, 473 U.S. at 637). If a “prospective litigant effectively may
vindicate its statutory cause of action in the arbitral forum,” then courts should enforce the
parties’ agreement to arbitrate. Mitsubishi Motors, 473 U.S. at 637. But where an
arbitration agreement prevents a litigant from vindicating federal substantive statutory
13
rights, courts will not enforce the agreement. Id.; see also Italian Colors, 570 U.S. at 236
(recognizing that federal courts would invalidate an agreement “forbidding the assertion of
certain statutory rights”); 14 Penn Plaza, 556 U.S. at 273 (acknowledging that “a
substantive waiver of federally protected civil rights will not be upheld”). Pursuant to the
prospective waiver doctrine, courts—including this one—have refused to enforce
“arbitration agreements that limit a party’s substantive claims to those under tribal law, and
hence forbid federal claims from being brought.” Williams v. Medley Opportunity Fund
II, LP, 965 F.3d 229, 238 (3d Cir. 2020); see Gibbs v. Haynes Invs., LLC, 967 F.3d 332,
339–345 (4th Cir. 2020); Gibbs v. Sequoia Cap. Operations, LLC, 966 F.3d 286, 292–294
(4th Cir. 2020); Dillon v. BMO Harris Bank, N.A., 856 F.3d 330, 333–337 (4th Cir. 2017);
Hayes v. Delbert Servs. Corp., 811 F.3d 666, 673–676 (4th Cir. 2016); see also Gingras v.
Think Fin., Inc., 922 F.3d 112, 126–128 (2d Cir. 2019).
Of course, “parties may agree to have an arbitrator decide . . . gateway questions of
arbitrability,” such as the validity and scope of the agreement, and the parties here have
clearly done so. Henry Schein v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019)
(internal quotation marks omitted); see J.A. 1184 (agreeing to arbitrate “all disputes,
including the scope and validity of this Arbitration Provision”; defining “disputes” subject
to arbitration to include “the validity and scope of this Arbitration Provision and any claim
or attempt to set aside this Arbitration Provision”). An agreement to arbitrate gateway
questions—called a “delegation clause”—is “‘simply an additional, antecedent agreement
the party seeking arbitration asks the federal court to enforce, and the FAA operates on this
additional arbitration agreement just as it does on any other.’” Henry Schein, 139 S. Ct. at
14
529 (quoting Rent-A-Center, 561 U.S. at 70). As with any other agreement to arbitrate,
when a party challenges a delegation clause specifically, the court must evaluate the
validity of the delegation “before ordering compliance” with the clause. Rent-A-Center,
561 U.S. at 71; see Minnieland Priv. Day Sch., Inc. v. Applied Underwriters Captive Risk
Assurance Co., 867 F.3d 449, 455 (4th Cir. 2017). 1
A party may contest the enforceability of the delegation clause with the same
arguments it employs to contest the enforceability of the overall arbitration agreement.
Sequoia Cap., 966 F.3d at 291. For example, in Rent-A-Center, the plaintiff argued that
the entire arbitration agreement was unconscionable, in part because of limitations on
arbitral discovery. Rent-A-Center, 561 U.S. at 74. Those allegedly unconscionable limits
applied both during arbitration of the underlying employment dispute and during
arbitration of the threshold enforceability question under the delegation clause. As the
Court explained, the plaintiff could have challenged the delegation provision specifically
by arguing that the discovery limitations “as applied to the delegation provision rendered
that provision unconscionable.” Id. To make such a claim, the plaintiff “would have had
to argue that the limitation upon the number of depositions causes the arbitration of his
1
Relying on Henry Schein, Defendants argue that if an agreement delegates
arbitrability questions to an arbitrator, that ends the matter and the court may proceed no
further. But while Henry Schein emphasized that courts may not “short-circuit” valid
delegation clauses, 139 S. Ct. at 527, it did not undermine the principle that a court must
consider a litigant’s challenge to the validity of a delegation clause “before ordering
compliance with that agreement under § 4” of the FAA, Rent-A-Center, 561 U.S. at 71.
Accord Haynes Invs., 967 F.3d at 339 n.4 (calling Henry Schein “inapposite”); Williams,
965 F.3d at 237 n.7 (noting that “[s]everal appellate courts have rejected similar
arguments” and “we agree with them”).
15
claim that the [arbitration agreement] is unenforceable to be unconscionable. That would
be, of course, a much more difficult argument to sustain than the argument that the same
limitation renders arbitration of his factbound employment-discrimination claim
unconscionable.” Id. Because the plaintiff did not contest the validity of the delegation
clause in particular, the Court was required to enforce the delegation, leaving the plaintiff’s
challenges to the arbitration agreement as a whole for the arbitrator to decide. Id. at 72.
Plaintiffs here have specifically challenged the validity of the delegation clause—
and the arbitration provision as a whole—as a prospective waiver of their right to pursue
federal substantive statutory remedies. So we must assess the enforceability of the
delegation clause before we may compel arbitration under its terms. See Minnieland, 867
F.3d at 455. Because we do not write on a clean slate, a brief examination of our relevant
precedent is in order.
A.
This is not the first time this Court has encountered a prospective waiver challenge
to an arbitration provision with a delegation clause in a tribal lending agreement. In four
prior cases, this Court has assessed arbitration provisions requiring application of tribal law
to the practical exclusion of other law and, in each case, has held the arbitration provision
(including the delegation clause) invalid as a prospective waiver of federal rights. 2
2
Other circuits have reached the same conclusion. See, e.g., Williams, 965 F.3d at
240–241, 243 n.14 (3d Cir.) (holding delegation clause and arbitration agreement
unenforceable as prospective waiver); Gingras, 922 F.3d at 127 (2d Cir.) (holding
arbitration agreement, including delegation clause, unenforceable as prospective waiver).
After oral argument in this case, the Ninth Circuit upheld a delegation clause in a tribal
16
The inaugural case in this uniform line of precedent was Hayes v. Delbert Services
Corp., 811 F.3d 666 (4th Cir. 2016). The arbitration agreement there, which included a
delegation clause, required the arbitrator to apply “‘the laws of the [tribe] and the terms of
this Agreement’” and confirmed that the arbitrator would not apply “‘any law other than
the law of the [tribe] to this Agreement’” no matter where the arbitration occurred. Id. at
675; see id. at 670, 671 n.1. The Hayes Court concluded that these “‘choice of law’
provision[s] . . . waive[d] all of a potential claimant’s federal rights.” Id. at 675. The Court
acknowledged that a party to an arbitration agreement “may of course agree to waive
certain rights,” but it “may not flatly and categorically renounce the authority of the federal
statutes to which it is and must remain subject.” Id. Because the arbitration agreement at
issue in Hayes took this step “plainly forbidden” by public policy, the Court held it “invalid
and unenforceable” as a whole. Id. The Court further refused to sever the errant provisions
because contravening public policy was an animating purpose of the arbitration agreement,
as illustrated by provisions in the underlying loan agreement claiming that “‘no United
States state or federal law applies to this Agreement.’” Id. at 676.
A year later, the Court in Dillon v. BMO Harris Bank, N.A., 856 F.3d 330 (4th Cir.
2017), considered an arbitration agreement that “implicitly accomplish[ed] what the
lending agreement by construing the arbitration agreement’s definition of “dispute” to “not
clearly foreclose[]” the arbitrator from considering the borrowers’ prospective waiver
argument, although it acknowledged that the arbitrator may “decide the prospective-waiver
doctrine has no application to the parties’ contract because it arises under federal law.”
Brice v. Haynes Invs., LLC, 13 F.4th 823, 830–831 (9th Cir. 2021). As the Ninth Circuit
acknowledged, our Court reached the opposite conclusion when considering “identical”
loan agreements in Haynes Investments. Id. at 833.
17
[Hayes agreement] explicitly stated, namely, that the arbitrator shall not allow for the
application of any law other than tribal law.” Dillon, 856 F.3d at 335. 3 The arbitration
agreement provided that “‘any dispute . . . will be resolved by arbitration in accordance
with the law of the [tribe]’” and instructed the arbitrator to “‘apply the laws of the [tribe]
and the terms of this Agreement.’” Id. at 332, 335. The underlying loan agreement also
stated that both it “‘and the Agreement to Arbitrate are governed by [tribal law]’ and
‘[n]either this Agreement nor the Lender is subject to the laws of any state of the United
States.’” Id. at 335 (alterations in original). The Dillon Court found these provisions
indistinguishable in substance from the provisions held unenforceable in Hayes and
likewise interpreted the terms as “an unambiguous attempt to apply tribal law to the
exclusion of federal and state law.” Id. at 336. The Court further noted that other terms in
the underlying loan agreement “evince[d] an explicit attempt to disavow the application of
federal or state law to any part of the contract,” such as a provision stating that “‘no other
state or federal law or regulation shall apply to this Agreement, its enforcement or
interpretation.’” Id. at 336. Viewing the arbitration agreement in light of the whole
contract, the Dillon Court concluded that the arbitration agreement functioned “as a
prospective waiver of federal statutory rights and, therefore, [was] unenforceable as a
matter of law.” Id. As in Hayes, the Court refused to sever the unenforceable choice-of-
law provisions from the remainder of the arbitration agreement. See id. at 336–337.
3
The Dillon agreement also contained a delegation clause, but the Court did not
separately address it.
18
Most recently, this Court considered arbitration agreements in loan contracts issued
by two online lenders associated with Native American tribes in Gibbs v. Haynes
Investments, LLC, 967 F.3d 332 (4th Cir. 2020), and Gibbs v. Sequoia Capital Operations,
LLC, 966 F.3d 286 (4th Cir. 2020). In both cases, which involved the same agreements,
the Court determined that “because the choice-of-law provisions contained in both
[lenders’] arbitration agreements operate as prospective waivers, the delegation clauses
(and therefore the arbitration agreements) are unenforceable.” Haynes Invs., 967 F.3d at
341; see also Sequoia Cap., 966 F.3d at 293–294. The arbitration agreements in both cases
contained choice-of-law provisions stating that the agreements “‘shall be governed by
tribal law’”; requiring the arbitrator to “‘apply Tribal law and the terms of this
Agreement’”; mandating that the arbitrator’s decision “‘be consistent with . . . Tribal
Law,’” including the “‘remedies available under Tribal Law’”; and providing that any
award inconsistent with tribal law may be “‘set aside by a Tribal court upon judicial
review.’” Haynes Invs., 967 F.3d at 342 (ellipses in original); see also Sequoia Cap., 966
F.3d at 293. However, the arbitration agreements were “careful to state that they [did] not
explicitly disclaim federal law” and even included an agreement that the parties would
“look to the [FAA] and judicial interpretation thereof for guidance” in any arbitration.
Haynes Invs., 967 F.3d at 342 n.6; see also Haynes Invs. J.A. 341 (loan agreement stating
that “[t]he Agreement to Arbitrate also comprehends the application of the [FAA], as
provided below”). Still the Court concluded that the choice-of-law provisions practically
precluded application of federal law because they “provide[d] that tribal law preempts the
19
application of any contrary law—including contrary federal law.” Haynes Invs., 967 F.3d
at 342; see also Sequoia Cap., 966 F.3d at 293.
The Court noted other clauses within the arbitration agreements that “reinforce[d]
this point.” Haynes Invs., 967 F.3d at 343. For example, the arbitration agreements
provided “that arbitration may be held within thirty miles of the claimant’s residence, but
only to the extent that such accommodation will not be construed ‘to allow for the
application of any law other than Tribal Law.’” Id.; see also Sequoia Cap., 966 F.3d at
293. The agreements limited appeal and confirmation of arbitral awards to tribal courts
applying tribal law. Haynes Invs., 967 F.3d at 343; see also Sequoia Cap., 966 F.3d at 293.
And the Court’s review of tribal law indicated that “the relevant tribal codes would not
permit [the borrowers] to effectively vindicate the federal protections and remedies they
seek—that is, the borrowers could not assert a RICO claim seeking treble damages” against
the defendants. Haynes Invs., 967 F.3d at 343; see also Sequoia Cap., 966 F.3d at 293.
Because the arbitration agreements “provide[d] that tribal law shall preempt the application
of any contrary law, and the effect of such provisions [was] to thereby make unavailable
to the borrowers the effective vindication of federal statutory protections and remedies,”
the Court in both cases concluded the arbitration agreements “amount[ed] to a prospective
waiver,” rendering those “agreements, including the delegation clauses, . . .
unenforceable.” Haynes Invs., 967 F.3d at 344–345; see also Sequoia Cap., 966 F.3d at
294.
20
B.
We see no material distinction between the case at hand and the precedent set forth
in Haynes Investments, Sequoia Capital, Dillon, and Hayes. As in those cases, the choice-
of-law clauses of this arbitration provision, which mandate exclusive application of tribal
law during any arbitration, operate as prospective waivers. In effect, those clauses would
require the arbitrator to determine whether the arbitration provision impermissibly waives
federal substantive rights without recourse to federal substantive law. As a result, the
delegation clause is unenforceable as a violation of public policy. And as we shall see
below in Part III.C, the entire arbitration provision is similarly invalid as a prospective
waiver of Plaintiffs’ rights to pursue federal statutory remedies.
The arbitration provision here states that any arbitration “will be governed by the
laws of the [Tribe]” and the rules and procedures of the arbitration organization
administering the arbitration “to the extent those rules and procedures do not contradict the
express terms of this Arbitration Provision or the law of the [Tribe], including the
limitations on the arbitrator below.” J.A. 1185. The two immediately subsequent
paragraphs dictate that “[t]he arbitrator shall apply applicable substantive Tribal law” and,
regardless of where the arbitration occurs, shall “in no way . . . allow for the application of
any other law other than the laws of the [Tribe].” J.A. 1185. 4 These clauses mirror those
of the arbitration agreement in Hayes, which the Court found “almost surreptitiously
4
The arbitrator’s decision is not appealable, and the parties “retain the right to
enforce an arbitration award before the applicable governing body of the [Tribe].” J.A.
1185.
21
waive[d] a potential claimant’s federal rights through the guise of a choice of law clause.”
811 F.3d at 675. Specifically, the Hayes Court quoted two provisions that together created
an “outright prohibition” on asserting federal rights: (1) a provision stating that the
arbitration agreement “‘shall be governed by the law of the [tribe]’” and the arbitrator “‘will
apply the laws of the [tribe] and the terms of this Agreement,’” and (2) a clause stating that
“no matter where the arbitration occurs, the arbitrator will not apply ‘any law other than
the law of the [tribe].’” Id. In accord with Hayes, we understand the clause prohibiting
application of “any other law,” in tandem with the clauses requiring the arbitrator to apply
tribal law, to require exclusive application of tribal law in arbitration. See id.; Dillon, 856
F.3d at 336 (“Just as we did in Hayes, we interpret these terms in the arbitration agreement
as an unambiguous attempt to apply tribal law to the exclusion of federal and state law.”).
Like the arbitration agreements in Haynes Investments and Sequoia Capital, the
terms of the arbitration provision here “do not explicitly disclaim the application of federal
law,” but “the practical effect is the same” because this arbitration provision demands
exclusive application of tribal law, thereby preempting application of other authority.
Haynes Invs., 967 F.3d at 342; see also Williams, 965 F.3d at 240 (“Because the arbitration
agreement mandates that only tribal law applies in arbitration, federal law does not.”). A
prospective waiver may be “implicitly accomplish[ed]” by provisions that disallow
“application of any law other than tribal law.” Dillon, 856 F.3d at 335; see also Williams,
965 F.3d at 241 (rejecting the argument that an agreement “must affirmatively disclaim
federal law” to “be invalid under the prospective waiver doctrine”). That is the case here.
By requiring the arbitrator to apply tribal law, expressly prohibiting “the application of any
22
other law other than the laws of the [Tribe],” and accommodating other rules and
procedures only “to the extent [they] do not contradict the express terms of this Arbitration
Provision or the law of the [Tribe],” J.A. 1185, the arbitration provision requires
application of tribal law to the exclusion of federal (and state) law.
As a result, the choice-of-law clauses of the arbitration provision operate as a
prospective waiver twice over, waiving not only a borrower’s right to pursue federal
statutory remedies (as we shall see below) but also the very federal and state defenses to
arbitrability that preserve that right. See Williams, 965 F.3d at 243 n.14 (reasoning that
enforcing the delegation clause in an arbitration provision that excludes reliance on federal
or state law “would effectively allow [the lender] to subvert federal public policy and deny
[the borrower] the effective vindication of her federal statutory rights before the arbitration
of her claims even began” (alterations in original) (internal quotation marks omitted)). A
delegation clause that requires an arbitrator to determine whether a valid and enforceable
arbitration agreement exists without access to the substantive federal law necessary to
make that determination results in the “sort of farce” we have previously refused to enforce
under the FAA. Hayes, 811 F.3d at 674. The delegation clause is therefore unenforceable
as a violation of public policy. See Haynes Invs., 967 F.3d at 345 (holding delegation
clause unenforceable as a violation of public policy); Sequoia Cap., 966 F.3d at 294 (same);
Hayes, 811 F.3d at 675 (same); Williams, 965 F.3d at 243 (same); Gingras, 922 F.3d at
126–127 (same).
Defendants counter that the arbitration provision explicitly refers to the FAA,
thereby giving the arbitrator access to the only law he or she needs for deciding
23
enforceability. We disagree that the two clauses referencing the FAA, in context of the
arbitration provision as a whole, can be construed to save the delegation clause. See
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 (1995) (applying the
“cardinal principle of contract construction” that “a document should be read to give effect
to all its provisions and to render them consistent with each other”); Doctors Co. v.
Women’s Healthcare Assocs., Inc., 740 S.E.2d 523, 526 (Va. 2013) (“[W]hen considering
the meaning of any part of a contract, we will construe the contract as a whole.” (internal
quotation marks omitted)). 5
The first clause Defendants highlight states that “[t]he arbitrator shall apply
applicable substantive Tribal law consistent with the Federal Arbitration Act (FAA).” J.A.
1185. But this clause does not require the content of tribal law to be consistent with the
FAA or limit its application in the arbitration to the extent it is consistent with the FAA.
Rather, the clause merely asserts that applying tribal law is consistent with the FAA’s
requirements. The context of the arbitration provision confirms this interpretation, as other
paragraphs require the arbitrator to apply tribal law and forbid the arbitrator to apply “any
other law.” J.A. 1185.
The second clause on which Defendants rely appears in a paragraph about judicial
enforcement of the arbitration provision. In full, it provides:
5
Pursuant to the governing-law clause of the loan agreement, tribal law controls
interpretation of the agreement. However, the parties have not provided the Court with
any tribal law concerning contract interpretation. Therefore, we will apply the contract
interpretation principles of the forum, Virginia. See MacDonald v. CashCall, Inc., 883
F.3d 220, 228 (3d Cir. 2018).
24
This Arbitration Provision is made pursuant to a transaction involving both
interstate commerce and Indian commerce under the United States
Constitution and other federal and tribal laws. Thus, any arbitration shall be
governed by the FAA and subject to the laws of the [Tribe]. If a final non-
appealable judgment of a court having jurisdiction over this transaction and
the parties finds, for any reason, that the FAA does not apply to this
transaction, then Our agreement to arbitrate shall be governed by the laws of
the [Tribe].
J.A. 1185. The first sentence of the paragraph pertains to the FAA’s jurisdictional
requirement that an arbitration provision be part of a “maritime transaction or a contract
evidencing a transaction involving commerce” for a court to enforce it. 9 U.S.C. § 2; see
9 U.S.C. § 1 (defining “commerce”). 6 The second sentence confirms that, because the loan
agreement falls within the FAA’s jurisdictional bounds, the FAA governs enforceability of
the arbitration provision. And the third sentence clarifies that, should a court find the loan
agreement does not involve interstate or Indian commerce as asserted, the laws of the Tribe
will determine the validity of the arbitration provision. See Hengle, 433 F. Supp. 3d at
854–855.
Defendants would have us take the clause stating that “any arbitration shall be
governed by the FAA” out of its context and construe it as a portal through which all federal
and state law defenses to arbitrability are imported into the agreement and made available
for application by the arbitrator. But that interpretation would create conflict with the other
terms of the arbitration provision, which require that the arbitration be “governed by the
6
Similarly, the arbitration agreements in Haynes Investments, Sequoia Capital,
Dillon, and Hayes generally stated either that they were made pursuant to “a transaction
involving interstate commerce” or “a transaction involving the Indian Commerce Clause
of the Constitution of the United States of America.” See, e.g., Dillon, 856 F.3d at 335;
Hayes, 811 F.3d at 675; Haynes Invs. J.A. 343, 384.
25
laws of the [Tribe]” and forbid the arbitrator to apply “any other law other than the laws of
the [Tribe].” J.A. 1185. We must read the arbitration provision to give effect to all its
terms and “to render them consistent with each other.” Mastrobuono, 514 U.S. at 63; see
also Babcock & Wilcox Co. v. Areva NP, Inc., 788 S.E.2d 237, 244 & n.8 (Va. 2016)
(affirming that each part of a contract must, if possible, be given effect and interpreted in
light of all the other parts). Reading these clauses together, the most harmonious
construction that gives effect to each clause is to read the “governed by the FAA” clause
as asserting that the arbitration provision falls within the purview of the FAA and should
accordingly be enforced by a court of competent jurisdiction, but, once the court conveys
the dispute to the arbitrator, he or she “must apply only the laws of the Tribe to the
exclusion of Plaintiffs’ potential federal and state statutory rights, including defenses to
arbitrability arising under federal and state law.” Hengle, 433 F. Supp. 3d at 855.
In response, Defendants contend that we overread the clause forbidding application
of “any other law,” which they say merely prevents application of the forum State’s law if
the arbitration occurs off tribal land. But the text of the clause proscribes “application of
any other law other than the laws of the [Tribe],” not only the law of the forum State. J.A.
1185 (emphasis added). Defendants’ interpretation is also in considerable tension with our
precedent finding similar clauses indicative of a prospective waiver of federal law. For
example, the Hayes Court construed a materially identical clause stating that, although a
borrower could choose the arbitration be conducted within thirty miles of his or her
residence, such accommodation “shall not be construed in any way . . . to allow for the
application of any law other than the law of the [tribe].” Hayes J.A. 155; see Hayes, 811
26
F.3d at 675. The Court held that this clause, in conjunction with a provision requiring
application of tribal law, “almost surreptitiously waive[d] a potential claimant’s federal
rights.” Hayes, 811 F.3d at 675. And in Haynes Investments and Sequoia Capital, we
found a similar clause “reinforce[d] th[e] point” that “tribal law preempts the application
of any contrary law—including contrary federal law.” Haynes Invs., 967 F.3d at 342; see
id. at 343 (describing a clause “provid[ing] that arbitration may be held within thirty miles
of the claimant’s residence, but only to the extent that such accommodation will not be
construed ‘to allow for the application of any law other than Tribal Law’”); see also
Sequoia Cap., 966 F.3d at 293. Absent a contrary indication in the contract, precedent
constrains us to give the equivalent clause in this arbitration provision an equivalent
construction.
Finally, we note that some of the arbitration agreements in Haynes Investments and
Sequoia Capital provided that “the parties additionally agree to look to the [FAA] and
judicial interpretations thereof for guidance in any arbitration.” Haynes Invs. J.A. 343; see
id. at 341 (“The Agreement to Arbitrate also comprehends the application of the [FAA], as
provided below.”); Haynes Invs., 967 F.3d at 342 n.6 (acknowledging these provisions).
Despite these explicit references to the FAA, the Court held that the “practical effect” of
the arbitration agreements’ terms requiring the arbitrator to apply tribal law and render a
decision consistent with tribal law was to preempt the application of contrary federal law,
thereby invalidating the delegation clause. Haynes Invs., 967 F.3d at 342. We follow those
precedents here in concluding that the arbitration provision’s references to the FAA, read
in context, do not mend the prospective waiver of federal law wrought by the arbitration
27
provision’s other terms. 7 Although “we remain cognizant of the ‘strong federal policy in
favor of enforcing arbitration agreements,’” we must interpret the arbitration provision
according to its terms and our precedent. Hayes, 811 F.3d at 671 (quoting Dean Witter
Reynold, Inc. v. Byrd, 470 U.S. 213, 217 (1985)). By preventing the arbitrator from
applying federal law, the arbitration provision necessarily restrains the arbitrator from
considering federal law defenses to arbitrability, thereby precluding Plaintiffs from
effectively vindicating their federal statutory rights. The delegation clause is therefore
unenforceable as a violation of public policy.
C.
Because the delegation clause is unenforceable, we must address Plaintiffs’
challenge to the validity of the arbitration provision as a whole. We agree with the district
court that the choice-of-law clauses previously discussed operate as a prospective waiver
of the borrowers’ federal statutory rights and remedies. Therefore, the entire arbitration
provision is unenforceable.
As previously discussed, by requiring the arbitrator to apply tribal law, expressly
prohibiting “the application of any other law other than the laws of the [Tribe],” and
7
Defendants’ reliance on Porter Hayden Co. v. Century Indemnification Co., 136
F.3d 380 (4th Cir. 1998), is unavailing. There, no party contested the validity or
enforceability of the arbitration agreement, and the Court applied the “presumption of
arbitrability” to construe the agreement to require arbitration of the appellant’s timeliness
defenses. Id. at 382 (internal quotation marks omitted); see id. at 383 (applying the “federal
policy favoring arbitration” to resolve ambiguity in the scope of the arbitration clause
(internal quotation marks omitted)). Here, by contrast, we are asked to determine the
enforceability—not the scope—of the delegation clause, which the presumption of
arbitrability does not resolve. See Granite Rock v. Int’l Bhd. of Teamsters, 561 U.S. 287,
301–303 (2010).
28
accommodating other rules and procedures only “to the extent [they] do not contradict the
express terms of this Arbitration Provision or the law of the [Tribe],” J.A. 1185, the
arbitration provision unambiguously attempts to apply tribal law to the exclusion of
substantive federal law. See Hayes, 811 F.3d at 675; cf. Dillon, 856 F.3d at 336. As a
result, it functions as a prospective waiver of the borrowers’ rights to pursue federal
statutory remedies, including the remedies under RICO that Plaintiffs seek here. See
Haynes Invs., 967 F.3d at 344 (holding arbitration agreement prospectively waived RICO
claims); Sequoia Cap., 966 F.3d at 294 (same); Williams, 965 F.3d at 240–243 (same);
Gingras, 922 F.3d at 127 (same). 8
Defendants emphasize that the disputes subject to arbitration explicitly include “all
tribal, federal or state law claims” and “all claims based upon a violation of any tribal, state
or federal constitution, statute or regulation.” J.A. 1184 (emphases added). Thus, they
urge, the arbitration provision contemplates arbitration of federal claims. But as we
reasoned in Sequoia Capital, “such language does not counteract the effect of the choice-
of-law provisions.” 966 F.3d at 293. Indeed, the arbitration agreements in Hayes, Dillon,
Haynes Investments, and Sequoia Capital each required federal claims to be sent to
arbitration, but the Court in each case nevertheless found that the agreements prevented
8
Citing cases that involved international arbitration agreements, Defendants
contend that courts cannot entertain prospective waiver challenges prior to arbitration but
may do so only afterward, at the award-enforcement stage. We have previously rejected
this argument in the context of tribal lending arbitration agreements because considerations
about the difficulty of applying the public policy defense “‘neutrally on an international
scale’” at the arbitration-enforcement stage “are not at play here.” Haynes Invs., 967 F.3d
at 344 n.10 (quoting Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 373 (4th Cir. 2012));
see also Sequoia Cap., 966 F.3d at 294.
29
effective vindication of federal statutory claims. See Sequoia Cap., 966 F.3d at 293; see
also Hayes J.A. 155; Dillon J.A. 184; Haynes Invs. J.A. 342. If anything, such language
highlights the arbitration provision’s impermissible tactic of compelling arbitration of
federal claims only to then nullify those claims by precluding application of federal law.
See Hayes, 811 F.3d at 673–674 (“With one hand, the arbitration agreement offers an
alternative dispute resolution procedure in which aggrieved persons may bring their claims,
and with the other, it proceeds to take those very claims away.”).
Reading the arbitration provision as encompassing disputes it does not empower the
arbitrator to resolve is far from fanciful. As another example, the provision requires that
all class claims be sent to arbitration but, a few paragraphs later, explicitly forbids class
arbitration. See J.A. 1184. We offer this example not to criticize the contractual waiver of
class proceedings, which is unquestionably permissible, see Concepcion, 563 U.S. at 344–
352, but merely to illustrate that interpreting this arbitration provision to waive claims
explicitly within its scope is not contradictory but rather, in some instances, exactly what
the contract intends. The difference, of course, is that waiver of a party’s substantive
federal rights in arbitration is forbidden. See Italian Colors, 570 U.S. at 235–236.
Defendants further argue that the arbitration provision’s invocation of tribal law
cannot be interpreted to displace federal law because the Tribe’s Consumer Financial
Services Ordinance incorporates federal law in many respects. But although the Ordinance
requires lending businesses to comply with various federal laws, it would not permit
Plaintiffs to assert their RICO claim for treble damages. First, although Section 7.1 of the
Ordinance requires lenders to “comply with . . . all other applicable Tribal, and federal laws
30
as applicable,” J.A. 267, RICO is “noticeably absent from the list [in Section 7.2] of federal
consumer protection statutes with which a lender must comply,” Haynes Invs., 967 F.3d at
343; see J.A. 267–268. Second, the Ordinance does not include a private right of action
for violations of its provisions or any federal laws. Cf. Haynes Invs., 967 F.3d at 344.
Although the Ordinance includes a consumer complaint procedure, the tribal commission
tasked with reviewing a lender’s handling of a complaint may “grant or deny any relief as
the Commission determines appropriate,” and its award “may not exceed the amount of the
Consumer’s debt plus reimbursement of payments.” J.A. 280. The Ordinance authorizes
arbitration to review the tribal commission’s decision but limits the arbitrator’s award to
“the maximum value of the Loan at issue” and forbids the award of “punitive damages” or
“equitable relief.” J.A. 281.
In line with our review of materially similar tribal ordinances in Haynes Investments
and Sequoia Capital, we conclude that a claimant proceeding under tribal law would be
unable to assert a RICO claim against individuals associated with a tribal lender and
certainly could not pursue RICO’s treble damages remedy. See Haynes Invs., 967 F.3d at
343–344; Sequoia Cap., 966 F.3d at 293. As the district court correctly determined, the
Ordinance “precludes consumers from vindicating their federal statutory rights by
replacing the remedial and deterrent remedies selected by Congress with the Tribe’s own
remedial scheme—the exact concern that gave rise to the prospective waiver doctrine.”
Hengle, 433 F. Supp. 3d at 859.
Finally, we reject Defendants’ plea to compel arbitration on the premise that
estoppel will prevent them from arguing to the arbitrator that federal law does not apply.
31
The Tribal Lenders drafted an invalid contract that strips borrowers of their substantive
federal statutory rights; we cannot save that contract by revising it on appeal. We have
refused similar invitations in previous cases, and we do so again here. See Sequoia Cap.,
966 F.3d at 293 n.4; Dillon, 856 F.3d at 336.
D.
The question then becomes whether we can sever the errant clauses and enforce the
remainder of the arbitration provision. Like the arbitration agreements in Hayes and
Dillon, this arbitration provision contains a severability clause stating that “[i]f any of this
Arbitration Provision is held invalid, the remainder shall remain in effect.” J.A. 1185; see
Hayes J.A. 156; Dillon J.A. 185. But the existence of a severability clause cannot save an
arbitration provision if the invalid terms are integral to the agreement. See Schuiling v.
Harris, 747 S.E.2d 833, 836–837 (Va. 2013); Eschner v. Eschner, 131 S.E. 800, 802 (Va.
1926); see also Williams, 965 F.3d at 244 n.17.
In line with Hayes, Dillon, and every court of appeals to consider the question, we
conclude that the choice-of-law clauses applying tribal law to the exclusion of federal law
cannot be severed because they “go[] [to] the ‘essence’” of the agreement to arbitrate.
Hayes, 811 F.3d at 676 (quoting 8 Samuel Williston & Richard A. Lord, A Treatise on the
Law of Contracts § 19:73 (4th ed. 1993)); see Dillon, 856 F.3d at 336 (concluding “the
offending provisions go to the core of the arbitration agreement” (internal quotation marks
omitted)); Williams, 965 F.3d at 243–244 & n.17 (finding terms requiring exclusive
application of tribal law to be inseverable, despite severability clause); Gingras, 922 F.3d
at 128 (rejecting severability); cf. MacDonald, 883 F.3d at 230–232 (finding clause
32
selecting illusory tribal arbitral forum to be inseverable, despite severability clause). Read
as a whole, the arbitration provision communicates an intent to require arbitration of all
disputes, including those arising under federal law, while depriving borrowers of any
remedy under federal law. That forbidden purpose to squelch federal claims in
contravention of public policy goes to the core of the agreement to arbitrate. We
accordingly cannot sever the invalid clauses and, as a result, the entire arbitration provision
is unenforceable.
IV.
We move next to the question of tribal sovereign immunity. Plaintiffs sought
declaratory and injunctive relief against the Tribal Officials under Virginia law and RICO,
which, as relevant here, defines “unlawful debt” by reference to state law. See 18 U.S.C.
§ 1961(6). In the district court, the Tribal Officials moved to dismiss Plaintiffs’ claims
against them for lack of subject matter jurisdiction, contending that they enjoy the same
immunity from suit as the Tribe and such immunity extends to suits seeking to enjoin
violations of state law. This presents a question of first impression in our Circuit.
Indian tribes possess a unique status in our federal system. As “domestic dependent
nations,” they “exercise inherent sovereign authority,” yet they are “subject to plenary
control by Congress.” Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 788 (2014)
(internal quotation marks omitted). One of the “core aspects of sovereignty” afforded to
tribes is “the ‘common-law immunity from suit,’” not only in tribal courts but also in state
and federal courts. Id. (quoting Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978)).
Absent waiver or congressional abrogation, tribal immunity extends even to suits arising
33
from a Tribe’s commercial activities off tribal lands. See Kiowa Tribe of Okla. v. Mfg.
Techs., Inc., 523 U.S. 751, 760 (1998).
But the Supreme Court has consistently recognized that tribal immunity does not
bar suits against “individuals, including tribal officers, responsible for unlawful conduct.”
Bay Mills, 572 U.S. at 796. For example, tribal immunity does not immunize individual
tribal members from suits “to enjoin violations of state law.” Puyallup Tribe v. Dep’t of
Game, 433 U.S. 165, 171–172 (1977) (suit to enjoin off-reservation fishing in violation of
state law); cf. Okla. Tax Comm’n v. Citizen Band of Potawatomi Indian Tribe, 498 U.S.
505, 514 (1991) (“We have never held that individual agents or officers of a tribe are not
liable for damages in actions brought by the State.”); Lewis v. Clarke, 137 S. Ct. 1285,
1291–1292 (2017) (denying immunity in negligence action brought against tribal employee
under state law for tort committed within the scope of his employment). And, by analogy
to Ex parte Young, 209 U.S. 123 (1908), tribal officers are “not protected by the tribe’s
immunity from suit” when a plaintiff seeks to enjoin a violation of federal law. Santa
Clara Pueblo, 436 U.S. at 59 (suit for declaratory and injunctive relief alleging that tribal
ordinance violated federal law).
The Tribal Officials assert that sovereign immunity bars Plaintiffs’ claims against
them seeking prospective relief to enjoin violations of state law. We agree with the district
court that the Supreme Court’s decision in Bay Mills forecloses the Tribal Officials’
argument. Tribal sovereign immunity does not bar state law claims for prospective
injunctive relief against tribal officials for conduct occurring off the reservation. See
34
Gingras, 922 F.3d at 120; Alabama v. PCI Gaming Auth., 801 F.3d 1278, 1290 (11th Cir.
2015).
In Bay Mills, the Bay Mills Indian Community—a federally recognized Native
American tribe—opened an off-reservation gaming facility in Michigan on land the tribe
had purchased. Michigan sued to enjoin operation of the new casino. It alleged Bay Mills
violated the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. § 2701 et seq., and the
compact between the parties pursuant to that law because the facility was located beyond
Indian lands. Congress adopted the IGRA in response to California v. Cabazon Band of
Mission Indians, 480 U.S. 202 (1987), “which held that States lacked any regulatory
authority over gaming on Indian lands” but “left fully intact a State’s regulatory power
over tribal gaming outside Indian territory,” Bay Mills, 572 U.S. at 794. Through the
IGRA, Congress granted States “‘some measure of authority over gaming on Indian
lands,’” thereby abrogating tribal sovereign immunity to that extent. Id. (quoting Seminole
Tribe of Fla. v. Florida, 517 U.S. 44, 58 (1996)). But, the Court held, a State’s suit to
enjoin gaming activity off Indian lands does not fall within the IGRA and is accordingly
outside the statute’s abrogation of immunity. Id. at 791.
Even so, the Court explained, Michigan was not without recourse for the tribe’s
alleged violations of state law. Though the State could not sue the tribe for illegal gaming,
it could “resort to other mechanisms, including legal actions against the responsible
individuals.” Id. at 785. Because “Indians going beyond reservation boundaries are subject
to any generally applicable state law[,] . . . Michigan could, in the first instance, deny a
license to Bay Mills for an off-reservation casino.” Id. at 795–796 (internal quotation
35
marks omitted). “And if Bay Mills went ahead anyway, Michigan could bring suit against
tribal officials or employees (rather than the Tribe itself) seeking an injunction for, say,
gambling without a license.” Id. at 796 (citing Mich. Comp. Laws Ann. §§ 432-220,
600.3801(1)(a)). The Court explained: “As [we] ha[ve] stated before, analogizing to Ex
parte Young, . . . tribal immunity does not bar such a suit for injunctive relief against
individuals, including tribal officers, responsible for unlawful conduct.” Id. at 796 (citing
Santa Clara Pueblo, 436 U.S. at 59).
We agree with the Second and Eleventh Circuits that this “plain statement” by the
Supreme Court “blessed Ex parte Young-by-analogy suits against tribal officials for
violations of state law.” Gingras, 922 F.3d at 121; see also PCI Gaming Auth., 801 F.3d
at 1290 (“[T]ribal officials may be subject to suit in federal court for violations of state law
under the fiction of Ex parte Young when their conduct occurs outside of Indian lands.”).
Though the tribe itself retains sovereign immunity, it cannot shroud its officials with
immunity in federal court when those officials violate applicable state law. 9 Accordingly,
sovereign immunity does not bar Plaintiffs’ claims for prospective injunctive relief to
restrain the Tribal Officials from off-reservation conduct that allegedly violates state law.
9
The Tribal Officials assert that Plaintiffs’ lawsuit is in substance a suit against the
Tribe because Plaintiffs seek to avoid repaying money loaned from the tribal treasury and
because the lawsuit aims to prevent the Tribe from enforcing its laws. Without
commenting on the legality of any particular relief that may eventually be awarded in this
suit, we observe that the fact some relief permissible under Ex parte Young will affect a
sovereign’s treasury or prevent an official from enforcing a duly enacted law does not
transform a suit against an official into one against the sovereign itself. See Edelman v.
Jordan, 415 U.S. 651, 667–668 (1974); Ex parte Young, 209 U.S. at 159–160.
36
The Tribal Officials assert that we should not follow Bay Mills because its
statements about suing tribal officials to enforce state law were dicta and, if taken seriously,
would “silently overrul[e]” multiple settled precedents. Opening Br. 68. We are not
persuaded.
As an initial matter, we cannot ignore the Supreme Court’s explicit guidance simply
by labeling it “dicta.” Although the Court’s extended discussion of the alternative remedies
available to Michigan may not have been strictly “necessary to the outcome” in Bay Mills,
neither was it “peripheral” or so cursory as to suggest the Court gave less than “full and
careful consideration” to the matter. Payne v. Taslimi, 998 F.3d 648, 654–655 (4th Cir.
2021) (internal quotation marks omitted). Indeed, the availability of alternative remedies
featured in both of the Court’s holdings. Regarding the IGRA, the Court explained that
Congress abrogated tribal immunity solely with respect to gaming on Indian lands because
States already had other ways to vindicate gaming-law violations outside Indian territory.
See Bay Mills, 572 U.S. at 795–797. And regarding the Court’s decision not to overrule
Kiowa, it reasoned that “[a]dhering to stare decisis is particularly appropriate here given
that the State . . . has many alternative remedies,” but “the situation [c]ould be different if
no alternative remedies were available.” Id. at 799 n.8.
Even if the Supreme Court’s discussion of alternative remedies were dicta, we are
“obliged to afford ‘great weight to Supreme Court dicta.’” Fusaro v. Cogan, 930 F.3d 241,
254 (4th Cir. 2019) (quoting Nat’l Labor Rels. Bd. v. Bluefield Hosp. Co., 821 F.3d 534,
541 n.6 (4th Cir. 2016)); see also Manning v. Caldwell, 930 F.3d 264, 281 (4th Cir. 2019)
(en banc) (“[W]e routinely afford substantial, if not controlling deference to dicta from the
37
Supreme Court.”); In re Bateman, 515 F.3d 272, 282 (4th Cir. 2008) (acknowledging that
Supreme Court dicta “should have considerable persuasive value in the inferior courts”
(internal quotation marks omitted)). “[W]e cannot simply override a legal pronouncement
endorsed . . . by a majority of the Supreme Court,” particularly when the supposed dicta
“‘is recent and not enfeebled by later statements.’” McCravy v. Metro. Life Ins. Co., 690
F.3d 176, 181 n.2 (4th Cir. 2012) (quoting Gaylor v. United States, 74 F.3d 214, 217 (10th
Cir. 1996)). The lengthy discussion of alternative remedies, including a suit against tribal
officers to restrain violations of state law, was important, if not essential, to the Court’s
analysis in Bay Mills. We see no ground on which we can disregard the Court’s clear
endorsement of such suits.
The Tribal Officials caution that following Bay Mills would contravene the Supreme
Court’s instruction that the overriding basis for the Ex parte Young doctrine is to vindicate
the supreme authority of federal law. See Pennhurst State Sch. v. Halderman, 465 U.S. 89,
105–106 (1984). In Pennhurst, the Supreme Court refused to extend the Ex parte Young
rationale to suits against state officials alleging violations of their own State’s laws. As the
Court explained, “it is difficult to think of a greater intrusion on state sovereignty than
when a federal court instructs state officials on how to conform their conduct to state law,”
a result that “conflicts directly with the principles of federalism that underlie the Eleventh
Amendment.” Id. at 106. But the sovereignty and federalism concerns underpinning
Pennhurst are not implicated here. In suits against tribal officials like Bay Mills
envisioned, federal courts are called upon to instruct tribal officials on how to conform
their conduct to state law. The Court’s recognition in Bay Mills that tribal officials may be
38
sued for violations of state law “thus stands in harmony with Pennhurst.” Gingras, 922
F.3d at 123; see also PCI Gaming Auth., 801 F.3d at 1290.
Bay Mills also does not upset core principles of tribal sovereign immunity as the
Tribal Officials contend. Ex parte Young-style claims do not accomplish an extra-
congressional abrogation of tribal immunity but rather present a long-recognized exception
to sovereign immunity. Cf. Antrican v. Odom, 290 F.3d 178, 184 (4th Cir. 2002)
(describing Ex parte Young as an “exception to sovereign immunity” based on the “fiction”
that a state officer acting in violation of federal law “loses the cloak of [s]tate immunity”
(internal quotation marks omitted)); Santa Clara Pueblo, 436 U.S. at 59 (“[A]n officer of
the [tribe] . . . is not protected by the tribe’s immunity from suit.”); Narragansett Indian
Tribe v. Rhode Island, 449 F.3d 16, 30 (1st Cir. 2006) (“Whatever the scope of a tribal
officer’s official capacity, it does not encompass activities that range beyond the authority
that a tribe may bestow.”). And though the Supreme Court has applied the same “general
rules” to States and tribes when it comes to individual- and official-capacity suits, Lewis,
137 S. Ct. at 1292, it has acknowledged that tribal immunity is not identical to the immunity
the States enjoy, see Three Affiliated Tribes of Fort Berthold Rsrv. v. Wold Eng’g, 476 U.S.
877, 890 (1986).
Alternatively, accepting that the Supreme Court meant what it said in Bay Mills, the
Tribal Officials attempt to distinguish the case on two primary grounds. First, the Tribal
Officials argue that Bay Mills addressed only a State’s ability to sue tribal officials for
violations of state law, whereas Plaintiffs here are private individuals. But “there is no
warrant in [precedent] for making the validity of an Ex parte Young action turn on the
39
identity of the plaintiff.” Va. Off. of Prot. & Advoc. v. Stewart, 563 U.S. 247, 256 (2011).
Indeed, the principle that a tribe cannot authorize its officials to violate applicable state law
applies equally regardless of who sues to enforce state law. Cf. Gingras, 922 F.3d at 124
(noting that States often authorize private parties to “act as ‘private attorneys general’ to
enforce state law”). That the Supreme Court spoke in terms of a State’s ability to sue tribal
officials—because that was the posture of the case before it—does not limit the principle
it recognized in Bay Mills to those facts. As the Court explained elsewhere in its opinion,
“tribal immunity applies no less to suits brought by States . . . than to those by individuals.”
Bay Mills, 572 U.S. at 789.
Second, the Tribal Officials assert that the conduct at issue here occurred on the
reservation, unlike the off-reservation gaming in Bay Mills. See Mescalero Apache Tribe
v. Jones, 411 U.S. 145, 148–149 (1973) (“Absent express federal law to the contrary,
Indians going beyond reservation boundaries have generally been held subject to non-
discriminatory state law otherwise applicable to all citizens of the State.”). They note in
particular that each loan agreement states it was “made and accepted in the sovereign
territory of the Habematolel Pomo of Upper Lake.” J.A. 1186. But as the district court
aptly observed, the conduct alleged is not limited to where the parties “made and accepted”
the agreements. See Hengle, 433 F. Supp. 3d at 875–876 & n.13. For example, Defendants
allegedly marketed their lending businesses throughout the country, including in Virginia,
and Plaintiffs resided on non-Indian lands when they applied for their loans online.
Defendants allegedly collected loan payments from Plaintiffs while they resided in Virginia
from bank accounts maintained there, and the effects of Defendants’ allegedly illegal
40
activities were felt by Plaintiffs in Virginia. These activities are “directly analogous to the
lending activity that other courts have found to clearly constitute off-reservation conduct
subject to nondiscriminatory state regulation.” Id. at 876; see, e.g., Gingras, 922 F.3d at
121; Otoe-Missouria Tribe of Indians v. N.Y. State Dep’t of Fin. Servs., 974 F. Supp. 2d
353, 360–361 (S.D.N.Y. 2013); Colorado v. W. Sky Fin., LLC, 845 F. Supp. 2d 1178, 1181
(D. Colo. 2011); United States v. Hallinan, No. 16-cr-130, 2016 WL 7477767, at *1 n.2
(E.D. Pa. Dec. 29, 2016). Indeed, the Tribal Officials have not brought to our attention any
court reaching a contrary conclusion. Plaintiffs seek to enjoin off-reservation conduct,
bringing their suit within Bay Mills’ ambit.
In sum, substantive state law applies to off-reservation conduct, and although the
Tribe itself cannot be sued for its commercial activities, its members and officers can be.
Cf. Kiowa, 523 U.S. at 755 (“There is a difference between the right to demand compliance
with state laws and the means available to enforce them.”). The Supreme Court has
explicitly blessed suits against tribal officials to enjoin violations of federal and state law.
See Bay Mills, 572 U.S. at 795–796. We therefore affirm the district court’s ruling that
tribal sovereign immunity does not bar Plaintiffs’ claims for injunctive and declaratory
relief against the Tribal Officials.
V.
All Defendants moved to dismiss the complaint because Plaintiffs’ claims depend
on Virginia usury law, while the governing-law clause of the loan agreements elects tribal
law to govern the loans. The district court held the governing-law clause unenforceable as
a violation of “Virginia’s compelling public policy against the unregulated lending of
41
usurious loans.” Hengle, 433 F. Supp. 3d at 867. Because the complaint stated a plausible
claim that the loans violate Virginia’s usury statute and are an “unlawful debt” under RICO,
the court denied Defendants’ motions to dismiss on this ground. See 18 U.S.C. § 1961(6)
(defining “unlawful debt” as a debt incurred in connection with the business of lending
money “at a rate usurious under State or Federal law, where the usurious rate is at least
twice the enforceable rate”); Va. Code Ann. § 6.2-303. The district court certified for
interlocutory review the question of law whether enforcement of the governing-law clause
would violate Virginia’s compelling public policy.
The parties agree that Virginia’s choice-of-law rules direct our inquiry. See ITCO
Corp. v. Michelin Tire Corp., 722 F.2d 42, 49 n.11 (4th Cir. 1983). Under Virginia law,
parties to a contract are free to specify the law that governs their agreement. See Union
Cent. Life Ins. Co. v. Pollard, 26 S.E. 421, 422 (Va. 1896). Virginia courts accordingly
give contractual choice-of-law clauses “full effect except in unusual circumstances.”
Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 624 (4th Cir. 1999) (citing Tate v.
Hain, 25 S.E.2d 321, 324 (Va. 1943)); see also Paul Bus. Sys., Inc. v. Canon USA, Inc.,
397 S.E.2d 804, 807 (Va. 1990). One such circumstance occurs when a foreign law not
only differs from Virginia law but is contrary to compelling public policy of the
Commonwealth; in that case, Virginia courts will not lend their aid to enforce the obligation
under foreign law. See Willard v. Aetna Cas. & Sur. Co., 193 S.E.2d 776, 778 (Va. 1973)
(“Comity does not require the application of another state’s substantive law if it is contrary
to the public policy of the forum state.”); Tate, 25 S.E.2d at 325 (recognizing that the
42
parties’ choice of law is controlling “unless it be so much in conflict with the public policy
of Virginia that it would not be given recognition in its courts”).
The loan agreements here obligate Plaintiffs to pay interest at rates between 544%
and 920% on principal amounts ranging from $300 to $1,575 over the course of ten months.
The governing-law clause in the loan agreements selects tribal law, which contains no
usury cap or limits of any kind on the interest a lender can charge. Virginia law caps
general interest rates at 12%. Va. Code Ann. § 6.2-303(A). The Supreme Court of Virginia
has not addressed whether unregulated usurious lending of low-dollar loans with triple-
digit interest rates violates compelling Virginia public policy so as to overcome a
contractual choice of foreign law. We therefore must apply Virginia law to predict how
that court would rule. See Wells v. Liddy, 186 F.3d 505, 527–528 (4th Cir. 1999).
Defendants assert that the Supreme Court of Virginia’s decision in Settlement
Funding, LLC v. Von Neumann-Lillie, 645 S.E.2d 436 (Va. 2007), forecloses Plaintiffs’
argument at the outset but, like other courts, we conclude that Settlement Funding does not
answer the public policy question presented here. See Hengle, 433 F. Supp. 3d at 865–
866; Gibbs v. Haynes Invs., LLC, 368 F. Supp. 3d 901, 929 n.49 (E.D. Va. 2019);
Commonwealth v. NC Fin. Sols. of Utah, LLC, 100 Va. Cir. 232, 2018 WL 9372461, at
*12 (Va. Cir. Ct. 2018). In Settlement Funding, a bank extended a $29,000 loan to the
borrower at an effective annual interest rate of 22.531%, to be repaid over a period of 178
months. 645 S.E.2d at 437; see Commonwealth v. Settlement Funding, LLC, 70 Va. Cir.
203, 2006 WL 727873, at *1 (Va. Cir. Ct. 2006). The loan agreement contained a Utah
choice-of-law clause. The borrower eventually defaulted on the loan and raised several
43
affirmative defenses to the bank’s collection action, including a usury defense based on
Virginia law. Settlement Funding, 645 S.E.2d at 438. The bank responded that the usury
defense was improper because the loan agreement designated Utah law as controlling and
Utah law did not contain a usury cap but instead provided that the unconscionability of
consumer loan interest rates “be determined by the market conditions.” Id. at 438–439
(internal quotation marks omitted). The trial court declined to apply Utah law. Though it
acknowledged that Utah law would apply pursuant to the choice-of-law clause, the trial
court found the bank produced no proper proof of Utah law at trial and, without proof of
Utah law, the court applied a presumption that Utah law was identical to Virginia law. The
Supreme Court of Virginia reversed. The court held that the bank had “provided the circuit
court with sufficient information regarding the substance of Utah law[,] . . . [t]herefore, the
circuit court erred in refusing to apply Utah law in the construction of the loan agreement.”
Id. at 439.
From this, Defendants contend that the Supreme Court of Virginia has concluded
that a choice-of-law clause selecting foreign law that permits interest rates above Virginia’s
usury cap never violates public policy. We cannot agree. The Settlement Funding court
said nothing about public policy but addressed only the evidentiary question whether the
bank had met its burden to prove the substance of Utah law. Although the borrower
asserted public policy as an alternative argument on appeal, the bank replied that the trial
court did not address this issue. Br. of Appellee at 2–5, Settlement Funding, 645 S.E.2d
436, 2006 WL 4701777; Reply Br. of Appellant at 2, Settlement Funding, 645 S.E.2d 436,
2007 WL 2296007. The Supreme Court of Virginia likewise did not address the public
44
policy point but ruled solely on the issue raised and decided below. Moreover, the interest
charged under Utah law in Settlement Funding was roughly 10 percentage points greater
than Virginia’s 12% cap. In stark contrast, the interest charged here under tribal law
exceeds Virginia’s cap by roughly 500 to 900 percentage points. We can infer no directive
on the question before us from the decision in Settlement Funding.
We therefore must discern Virginia public policy by reference to its statutes and
caselaw. See Paul Bus. Sys., 397 S.E.2d at 808. Of course, in one sense every statutory
enactment expresses the public policy of the Commonwealth. But “[m]erely because one
state’s law differs from Virginia’s does not, ipso facto, justify refusal to adhere to comity
principles,” or choice-of-law clauses would rarely be enforced. Chesapeake Supply &
Equip. Co. v. J.I. Case Co., 700 F. Supp. 1415, 1421 (E.D. Va. 1988). Virginia public
policy must be “compelling” to override the parties’ selection of a different State’s laws,
Willard, 193 S.E.2d at 779, such that enforcement of the foreign law would be “shocking
to one’s sense of right,” Tate, 25 S.E.2d at 325; see Chesapeake Supply, 700 F. Supp. at
1421.
Since as early as 1734, the Virginia legislature has regulated usurious loans based
upon “considerations of public policy.” See Town of Danville v. Pace, 66 Va. 1, 19–20
(1874). “The usury statutes represent a clarification of the public policy of the state that
usury is not to be tolerated, and [a] court should therefore be chary in permitting this policy
to be thwarted.” Radford v. Cmty. Mortg. & Inv. Corp., 312 S.E.2d 282, 285 (Va. 1984)
(brackets omitted) (quoting Heubusch v. Boone, 192 S.E.2d 783, 789 (Va. 1972)). Current
Virginia law prohibits loans with interest rates greater than 12%. See Va. Code Ann. § 6.2-
45
303(A). The General Assembly exempts certain entities from the general usury cap but
subjects those entities to specific licensure and regulatory requirements, including separate
interest-rate limits. See id. § 6.2-303(B); see, e.g., id. § 6.2-1500 et seq. (licensure and
regulation of consumer finance companies); id. § 6.2-1800 et seq. (licensure and regulation
of short-term lenders); id. § 6.2-2200 et seq. (licensure and regulation of motor vehicle title
lenders). Any contract violating the usury limit is “void,” meaning the lender cannot
collect “any principal, interest, fees, or other charges in connection with the contract.” Id.
§ 6.2-303(F) (effective Jan. 1, 2021). And a borrower who paid usurious interest may sue
to recover not only the excess interest paid but also “[t]wice the total amount of interest
paid” during the two years preceding the lawsuit, in addition to court costs and attorney’s
fees. Id. § 6.2-305(A).
Virginia’s legislature has signaled the importance it attaches to the usury laws by
enacting an anti-waiver provision, which states that “[a]ny agreement or contract in which
the borrower waives the benefits of [Virginia’s usury laws] or releases any rights he may
have acquired under [those laws] shall be deemed to be against public policy and void.”
Id. § 6.2-306(A). 10 An anti-waiver provision can be evidence that a state usury statute
represents a fundamental policy of the State that overcomes a contractual choice-of-law
10
Defendants argue that the anti-waiver provision does not apply to their loan
agreements because they were not made under Virginia law. But the question currently
before us is the strength and import of Virginia’s public policy against unregulated usurious
lending, not the proper application of Virginia law to these loan agreements. For similar
reasons, the parties’ dispute about whether Virginia’s licensure requirement for consumer
finance companies applied to the Tribal Lenders before the recent amendment to the statute
is inapposite to the question before this Court. See Va. Code Ann. § 6.2-1501(A) (effective
Jan. 1, 2021).
46
clause. See, e.g., Kaneff v. Del. Title Loans, 587 F.3d 616, 622–624 (3d Cir. 2009)
(concluding that Pennsylvania’s “antipathy to high interest rates such as the 300.01 percent
interest charged in the contract at issue, represents such a fundamental policy that we must
apply Pennsylvania law” after assessing, inter alia, the Pennsylvania usury statute’s anti-
waiver provision and enforcement mechanisms); Clerk v. First Bank of Del., 735 F. Supp.
2d 170, 178 (E.D. Pa. 2010) (applying Kaneff to conclude that Pennsylvania’s fundamental
public policy against usury overcame the parties’ selection of Delaware law in the
contract). Importantly, Virginia’s anti-waiver provision does more than prohibit waivers
of Virginia’s usury laws: it specifically instructs that contracts in derogation of those laws
are “against public policy and void.” Va. Code Ann. § 6.2-306(A). We have previously
found a similar statement by the legislature, combined with an anti-waiver provision, to
evince a State’s fundamental public policy. See Volvo Constr. Equip. N. Am., Inc. v. CLM
Equip. Co., 386 F.3d 581, 609–610 (4th Cir. 2004) (analyzing the Arkansas Franchise Act).
As we observed in that case, “a legislature simplifies the task of determining whether a
state statute embodies fundamental policy when it expressly states” as much. Id. at 609(discussing a Maine law providing that a contract “in violation of this chapter is deemed
against public policy and is void and unenforceable” (internal quotation marks omitted)).
Considering the foregoing evidence of Virginia policy, at least one Virginia court
has held that Virginia’s “long-recognized . . . public policy against allowing usury by
unregulated lenders” rendered a Utah choice-of-law provision unenforceable. NC Fin.
Sols., 2018 WL 9372461, at *11–*12. In that case, a Chicago-based internet lender
allegedly provided closed-end installment loans to Virginia consumers at annual interest
47
rates ranging from 35% to 155%. Id. at *1. Virginia sued the lender, alleging violations
of the Virginia Consumer Protection Act, and in defense the lender relied on a Utah choice-
of-law clause in its loan agreements. The court acknowledged that the parties’ contractual
choice of law should generally be enforced but found that two independent special
circumstances compelled rejection of Utah law: first, Utah law was not reasonably related
to the purpose of the agreement and, second, application of Utah law was “barred by the
strong public policy of the forum state, Virginia.” Id. at *10. The court discerned
Virginia’s strong policy against unregulated usurious lending from the Commonwealth’s
statutory usury cap, extensive regulation of entities entitled to charge higher rates, anti-
waiver statute, caselaw expounding the importance of the usury laws, and broader statutory
scheme regulating “deceptive trade practices connected to a usurious loan transaction.” Id.
at *11–*12. In view of this strong public policy, the Virginia court declined to enforce the
Utah choice-of-law clause.
Our review likewise leads us to conclude that the Supreme Court of Virginia would
not enforce the governing-law clause because it violates Virginia’s compelling public
policy against unregulated usurious lending. We acknowledge that contractual choice-of-
law clauses should be enforced absent unusual circumstances, but the circumstances here—
unregulated usurious lending of low-dollar short-term loans at triple-digit interest rates to
Virginia borrowers—unquestionably “shock[s] . . . one’s sense of right” in view of
48
Virginia law. Tate, 25 S.E.2d at 325. We accordingly affirm the district court’s judgment
declining to enforce the governing-law clause. 11
VI.
Plaintiffs also seek prospective injunctive relief against the Tribal Officials pursuant
to RICO. The district court granted the Tribal Officials’ motion to dismiss the RICO claims
against them, ruling that RICO does not give private plaintiffs a right to injunctive relief.
Our sister circuits are evenly divided on this question, which presents an issue of first
impression for our Court. See Chevron Corp. v. Donziger, 833 F.3d 74, 138–139 (2d Cir.
2016) (holding that equitable relief is available); Nat’l Org. for Women, Inc. v. Scheidler,
267 F.3d 687, 697 (7th Cir. 2001), rev’d on other grounds, 537 U.S. 393 (2003) (same);
Dixie Carriers, Inc. v. Channel Fueling Serv., Inc., 843 F.2d 821, 829–830 (5th Cir. 1988)
(holding that equitable relief is not available); Religious Tech. Ctr. v. Wollersheim, 796
F.2d 1076, 1084 (9th Cir. 1986) (same).
As Plaintiffs do not contest, they may not seek equitable remedies under RICO
unless Congress has authorized them to do so. See Transamerica Mortg. Advisors, Inc. v.
Lewis, 444 U.S. 11, 19 (1979) (“[I]t is an elemental canon of statutory construction that
where a statute expressly provides a particular remedy or remedies, a court must be chary
of reading others into it.”); cf. Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320, 327
(2015) (“The power of federal courts of equity to enjoin unlawful executive action is
11
The district court also ruled that the governing-law clause does not violate the
prospective waiver doctrine—a conclusion Plaintiffs resist on appeal. Because we hold the
governing-law clause unenforceable on other grounds, we need not address Plaintiffs’
alternative argument.
49
subject to express and implied statutory limitations.”). We thus begin with “a careful
consideration” of the statutory text. Brnovich v. Democratic Nat’l Comm., 141 S. Ct. 2321,
2337 (2021).
RICO’s civil remedies section provides, in pertinent part:
(a) The district courts of the United States shall have jurisdiction to
prevent and restrain violations of section 1962 of this chapter by issuing
appropriate orders, including, but not limited to: ordering any person to
divest himself of any interest, direct or indirect, in any enterprise; imposing
reasonable restrictions on the future activities or investments of any person,
including, but not limited to, prohibiting any person from engaging in the
same type of endeavor as the enterprise engaged in . . . ; or ordering
dissolution or reorganization of any enterprise . . . .
(b) The Attorney General may institute proceedings under this
section. Pending final determination thereof, the court may at any time enter
such restraining orders or prohibitions, or take such other actions, including
the acceptance of satisfactory performance bonds, as it shall deem proper.
(c) Any person injured in his business or property by reason of a
violation of section 1962 of this chapter may sue therefor in any appropriate
United States district court and shall recover threefold the damages he
sustains and the cost of the suit, including a reasonable attorney’s fee . . . .
18 U.S.C. § 1964(a)–(c).
Section 1964(a) authorizes district courts to employ a broad range of equitable
remedies to prevent and restrain violations of RICO’s substantive provisions. Cf. Steel Co.
v. Citizens for a Better Env’t, 523 U.S. 83, 90 (1998) (explaining that a similarly worded
provision “specif[ies] the remedial powers of the court”). But this provision, by itself, says
nothing about who may invoke the court’s remedial powers.
Subsections (b) and (c) create the causes of action specifying who may sue for which
forms of relief. Section 1964(b) provides that the Attorney General “may institute
50
proceedings under this section”—a clear cross-reference to the broad remedial powers
authorized in Section 1964(a). It also specifies that district courts may order interim forms
of equitable relief while the Attorney General’s “proceedings under this section” are
pending.
In contrast, Section 1964(c), which applies to private litigants, does not refer to the
remedial powers authorized in Section 1964(a). See Wollersheim, 796 F.2d at 1082 (“In
contrast to part (b), there is no express authority [in part (c)] to private plaintiffs to seek the
equitable relief available under part (a).”). It instead creates a cause of action for private
parties injured by violations of Section 1962 to “sue therefor” and “recover . . . damages.”
18 U.S.C. § 1964(c). By authorizing the government to “institute proceedings under”
Section 1964 and not giving private plaintiffs the same authority, Congress expressed its
intent to withhold from private plaintiffs the ability to invoke the injunctive power granted
to the courts in Section 1964(a). We accordingly cannot agree with the Seventh Circuit
that the opening sentence of Section 1964(b), authorizing the Attorney General to “institute
proceedings under this section,” and the opening clause of Section 1964(c), authorizing
plaintiffs injured by RICO violations to “sue therefor,” are “equivalent.” Scheidler, 267
F.3d at 697. We refuse to read such material differences out of the statutory text.
As this Court has previously observed, Section 1964(c) “makes no mention
whatever of injunctive or declaratory relief.” Johnson v. Collins Ent. Co., 199 F.3d 710,
726 (4th Cir. 1999); see also Dan River, Inc. v. Icahn, 701 F.2d 278, 290 (4th Cir. 1983)
(observing that Section 1964(c) “has nothing to say about injunctive relief,” in “sharp
contradistinction to” Section 1964(b)). Of course, that subsection also does not expressly
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limit private plaintiffs to the treble damages and costs authorized there. But Congress’s
use of significantly different language to create the governmental right of action in Section
1964(b) and the private right of action in Section 1964(c) compels us to conclude by
negative implication that, although the government may sue for prospective relief, private
plaintiffs may sue only for treble damages and costs.
For similar reasons, we cannot agree with the Seventh and Second Circuits that
Section 1964(a) by itself authorizes private parties to seek equitable relief. Those courts
reason that Section 1964(b) “mentions only interim remedies,” Scheidler, 267 F.3d at 696,
so the government’s authority to seek permanent injunctions must proceed from Section
1964(a) alone and, “[b]y parity of reasoning,” Section 1964(a) must also authorize private
parties to seek equitable relief, Donziger, 833 F.3d at 138–139. But a flawed premise leads
to a flawed conclusion. It is Section 1964(b)’s cross-reference to Section 1964(a) that
authorizes the government to seek permanent injunctions. See 18 U.S.C. § 1964(b) (“The
Attorney General may institute proceedings under this section.” (emphasis added)).
Section 1964(c) tellingly contains no similar language or any other reference to equitable
relief. Because we reject the Seventh and Second Circuits’ restrictive reading of Section
1964(b), we also necessarily reject their conclusion that Section 1964(a) by itself authorizes
private parties to seek injunctive relief.
Our reading of the statute does not reduce Section 1964(a) to a merely jurisdictional
provision. See Donziger, 833 F.3d at 138; Scheidler, 267 F.3d at 697. Instead, it honors
the distinct text Congress used in each subsection—describing courts’ remedial powers
under RICO in (a) and creating two different causes of action with corresponding remedies
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for two different categories of plaintiffs in (b) and (c). Further, while we recognize that
RICO’s “terms are to be ‘liberally construed to effectuate its remedial purposes,’” Boyle v.
United States, 556 U.S. 938, 944 (2009) (quoting Section 904(a), 84 Stat. 947, note
following 18 U.S.C. § 1961), even a liberal construction of Section 1964 cannot import
into the statute a remedy that Congress has chosen not to provide.
Plaintiffs urge us to consider by analogy the antitrust statutes. Indeed, the Supreme
Court has acknowledged that Congress “modeled” Section 1964(c) on Section 4 of the
Clayton Act, 15 U.S.C. § 15, which borrowed its language from Section 7 of the Sherman
Act. Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 267 (1992). But a comparison to the
antitrust statutes does not help Plaintiffs’ cause.
Like Section 1964(a), the introductory clause of Section 4 of the Sherman Act
(currently codified at 15 U.S.C. § 4) grants district courts authority to “prevent and
restrain” violations of the Act. See also Ch. 647, 26 Stat. 209, 209–210 (1890) (Section 4
of the Sherman Act as originally enacted). Subsequent clauses of 15 U.S.C. § 4 vest the
Attorney General with the duty to “institute proceedings in equity” and authorize interim
relief, paralleling RICO’s Section 1964(b). See also 26 Stat. at 209–210. By contrast,
under 15 U.S.C. § 15—the analogue to Section 1964(c)—any person injured in his business
or property by a violation of the antitrust laws “may sue therefor in any district court of the
United States . . . and shall recover threefold the damages by him sustained, and the cost
of suit, including a reasonable attorney’s fee.” See also 26 Stat. at 210 (Section 7 of the
Sherman Act as originally enacted).
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The Supreme Court has recognized that neither of these provisions authorize private
parties to sue for injunctive relief. See Gen. Inv. Co. v. Lake Shore & Mich. S. Ry. Co., 260
U.S. 261, 286 (1922) (explaining that a “suit for an injunction, brought by a private
corporation,” could not be maintained under the Sherman Act because its civil remedies
were “exclusive” and “consisted only of [] suits for injunctions brought by the United
States in the public interest under section 4” and “private actions to recover damages
brought under section 7”); Paine Lumber Co. v. Neal, 244 U.S. 459, 471 (1917) (holding
that “a private person cannot maintain a suit for an injunction under” Section 4 of the
Sherman Act). Congress’s use of parallel language in Section 1964(a), (b), and (c) suggests
that these provisions similarly do not authorize private RICO plaintiffs to sue for injunctive
relief. See Northcross v. Bd. of Educ., 412 U.S. 427, 428 (1973) (reasoning that “similarity
of language” between two statutes is “a strong indication that the two statutes should be
interpreted pari passu”); see also Holmes, 503 U.S. at 268 (“We may fairly credit the 91st
Congress, which enacted RICO, with knowing the interpretation federal courts had given
the words earlier Congresses had used first in § 7 of the Sherman Act, and later in the
Clayton Act’s § 4.”).
Plaintiffs would have us look to 15 U.S.C. § 26, wherein the Clayton Act explicitly
provides that private parties “shall be entitled to sue for and have injunctive relief” against
loss or damage threatened by a violation of the antitrust laws. But this provision has no
analogue in the RICO statute. Notably, this provision was not part of the Sherman Act but
was added to the Clayton Act to “fill[] a gap in the Sherman Act by authorizing equitable
relief in private actions.” California v. Am. Stores Co., 495 U.S. 271, 287 (1990); see also
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Gen. Inv. Co., 260 U.S. at 287. The problem for Plaintiffs is that this gap remains unfilled
in RICO. Unlike 15 U.S.C. §§ 4 and 15, this provision of the Clayton Act has no RICO
counterpart; nowhere in the RICO statute has Congress explicitly authorized private actions
for injunctive relief as it has done in 15 U.S.C. § 26. That provision of the Clayton Act,
and the absence of a parallel provision in RICO, cuts against Plaintiffs’ interpretation of
Section 1964(a). Were the text in Section 1964(a) and (c) sufficient to create a right for
private parties to seek injunctive relief, as Plaintiffs urge, Congress would not have needed
to enact 15 U.S.C. § 26.
We may accept as true that “the Supreme Court regularly treats the remedial sections
of RICO and the Clayton Act identically, regardless of superficial differences in language.”
Scheidler, 267 F.3d at 700. But the differences between RICO and the Clayton Act in this
instance are not superficial. That Congress provided private antitrust plaintiffs a separate
right to prospective injunctive relief under a materially similar remedial structure confirms
that RICO, by lacking that separate provision, also lacks the separate right. See
Wollersheim, 796 F.2d at 1087.
Because the text of Section 1964 is unambiguous and the statutory scheme is
coherent and consistent, “[o]ur inquiry must cease.” Robinson v. Shell Oil Co., 519 U.S.
337, 340 (1997); see also Alexander v. Sandoval, 532 U.S. 275, 288 n.7 (2001) (“[T]he
interpretive inquiry begins with the text and structure of the statute and ends once it has
become clear that Congress did not provide a cause of action.” (internal citation omitted)).
The Tribal Officials and the United States as amicus curiae point out that, on at least two
occasions, Congress declined to pass legislation that would have added to RICO an explicit
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right for private plaintiffs to seek injunctive relief, and the Fifth and Ninth Circuits have
found this history persuasive. See Dixie Carriers, Inc., 843 F.2d at 829–830; Wollersheim,
796 F.2d at 1084–1086. Although we agree with those courts that Congress has not
authorized private RICO plaintiffs to seek injunctive relief, see Dixie Carriers, 843 F.2d at
830; Wollersheim, 796 F.2d at 1084, we do so based on the text of the statute and without
considering these failed legislative proposals, which “are ‘a particularly dangerous ground
on which to rest’” statutory interpretation, Solid Waste Agency of N. Cook Cnty. v. U.S.
Army Corps of Eng’rs, 531 U.S. 159, 169–170 (2001) (quoting Cent. Bank of Denver, N.A.
v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 187 (1994)). Congress’s intention
is revealed in the text of the statute it enacted, and for the reasons explained here, Section
1964 does not authorize private RICO plaintiffs to sue for prospective injunctive relief.
VII.
For the foregoing reasons, we affirm the district court’s judgment on each of the
four issues raised in this interlocutory appeal. The arbitration provision’s delegation clause
and the provision as a whole are unenforceable under our precedent because they
prospectively waive Plaintiffs’ substantive federal statutory rights. Tribal sovereign
immunity does not shield the Tribal Officials from Plaintiffs’ claims to enjoin violations
of state law. Under Virginia law, the district court cannot enforce the loan agreement’s
choice of tribal law to govern these loans because tribal law’s authorization of triple-digit
interest rates on low-dollar, short-term loans violates Virginia’s compelling public policy
against unregulated usurious lending. And the district court correctly dismissed Plaintiffs’
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RICO claim against the Tribal Officials because RICO does not authorize private plaintiffs
to sue for injunctive relief.
AFFIRMED
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