You Can’t Be Compelled To Arbitrate In A Nonexistent Forum

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Arbitration (pd)This one may seem obvious, but, in MacDonald v. Cashcall, Inc., the U.S. Court of Appeals for the Third Circuit held that a contractual arbitration provision that calls for arbitration in an "illusory forum" is not enforceable. So, if you were thinking about trying to compel arbitration in Wakanda or before the Jedi Council, better think twice.

In MacDonald, plaintiff entered into a loan agreement with a entity known as Western Sky in connection with a $5,000 loan. The loan agreement stated that it was "subject solely to the jurisdiction of the Cheyenne River Sioux Tribe," and "governed by the . . . laws of the Cheyenne River Sioux Tribe." It also contained an arbitration provision requiring that any disputes arising out of the agreement be "conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of [the agreement]." But the agreement also provided that either party, after demanding arbitration, could select an arbitrator from the American Arbitration Association ("AAA") or Judicial Arbitration and Mediation Services ("JAMS") to administer the arbitration, and, if it did, "the arbitration [would] be governed by the chosen arbitration organization's rules and procedures" to the extent that they did not contradict the "law of the Cheyenne River Sioux Tribe." The agreement also contained a severability clause, providing that, if any provision of the agreement was deemed invalid, the remaining provisions would remain in effect.

Although plaintiff originally borrowed $5,000, "[h]e was charged a $75 origination fee and a 116.73% annual interest rate over the seven-year term of the loan, resulting in a $35,994.28 finance charge." After paying approximately $15,493 on the loan, which included $38.50 in principal, $15,256.65 in interest, and $197.85 in fees, plaintiff filed a putative class action lawsuit against defendants, asserting federal RICO claims and state law claims for usury and consumer fraud. Defendants moved to compel arbitration. The district court denied the motion, holding that the loan agreement's "express disavowal of federal and state law rendered the arbitration agreement invalid as an unenforceable prospective waiver of statutory rights." Defendants appealed. 

Continue reading “You Can’t Be Compelled To Arbitrate In A Nonexistent Forum”

This Never Would Have Happened On The Nina, Pinta, Or Santa Maria.

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Columbus boats (pd)

If the name of your company is Christopher Columbus, LLC then it is probably reasonable for you to expect that you will be subject to the maritime jurisdiction of the federal courts. Nonetheless, this was the issue presented in a recent Third Circuit decision, In The Matter Of The Complaint Of Christopher Columbus, LLC (t/a Ben Franklin Yacht), As Owner Of The Vessel Ben Franklin Yacht, For Exoneration From Or Limitation Of Liability.

The case involved a "drunken brawl which erupted among passengers who were enjoying a cruise on the Delaware River onboard the vessel Ben Franklin Yacht." Specifically, plaintiffs alleged that they were assaulted by other passengers on the vessel while the boat was docking, and at least one alleged that the assault continued in the parking lot near the dock. They alleged that the boats crew members caused their injuries by "providing inadequate security and overserving alcohol to passengers." Plaintiffs sued in state court, and Defendant responded by filing a "limitation action" in federal court. (A "limitation action" is a unique wrinkle in maritime law that allows the "owner of a vessel" to limit its liability to "an amount equal to the value of the owner's interest in the vessel and pending freight.") Both sides then moved for summary judgment. But, while these motions were pending, the district court, sua sponte, invited briefing on whether the court had jurisdiction. After briefing and oral argument, the district court found that maritime jurisdiction was lacking and, therefore, dismissed defendant's limitation action.

Defendant appealed. This is where, I think, it gets interesting, at least for someone who does not generally practice maritime law. (Although I did write about a different case not too long ago, which is actually cited in the Christopher Columbus case, so maybe I am developing a niche.) 

Continue reading “This Never Would Have Happened On The Nina, Pinta, Or Santa Maria.”

Urban Development Incentives Under Attack

by:  Katharine A. Muscalino

Revitalizing the downtowns of New Jersey’s poorest cities has always been an uphill battle, with cities struggling to find developers and businesses willing to invest in their most blighted areas.  Urban facelifts and retail opportunities are in danger of becoming even more scarce, as New Jersey considers eliminating or diluting its urban enterprise zone legislation.

Under the current urban enterprise zone law, blighted cities can attract developers and businesses with special tax incentives and grants, and get a return on some of the urban enterprise zone revenues.  Specifically, developers within the urban enterprise zone qualify for tax exemptions and abatements, and redevelopment bonding and grants.  Businesses are permitted to charge half of standard sales taxes, attracting both new retailers and new customers to the downtowns.  The result is a major overhaul for Main Street and an influx of new commerce.

Cities may be losing this tool for redevelopment as New Jersey state government considers reforms to the current legislation.  Following a study that recommended terminating the 28-year old program, Governor Christie’s budget calls for the state to retain more than $90 million of the urban enterprise zone revenues.  Anticipating that this retainage could undercut the urban enterprise zone program irretrievably, the New Jersey Assembly’s Commerce and Economic Development Committee is considering modifications to the urban enterprise zone statute as an alternative to the proposed budget provisions.  The Assembly’s plan would maintain incentives for developers and businesses, but curb the benefits to municipalities significantly, phasing out the use of urban enterprise zone funds for police and fire services, capping municipal collection of urban enterprise zone revenues to one third of all funds through 2022, and imposing a moratorium on future urban enterprise zone funding to cities following 2022.