Chartwell Halts Two Delaware Class Action Suits
A payday and installment loan lender licensed by the Delaware Banking Commission.
In the first action, the class representative instituted suit in the United States District Court for the District of Delaware, claiming the terms of the lender’s installment loan agreement were unconscionable, its loans preying upon unsophisticated borrowers and resulting in alleged illegal interest rates in violation of the Delaware Consumer Fraud Act. The plaintiff, also claiming the lender breached a duty of fair dealing, brought the action on behalf of herself and all others similarly situated, citing the lender’s advertising literature boasting it extended thousands of loans to Delaware residents.
A second class action, brought in the same court, mirrored the allegations of the first class action complaint, defining the second class as those borrowers who executed pay-day loan agreements with the same lender. As did the installment loan agreements, the payday loan agreements included an arbitration provision with an opt-out provision, requiring notice of same within ten days of the borrower’s and the lender’s execution of the payday loan agreement.
Dubrow and Teitelbaum filed motions to stay and compel arbitration or, alternatively, to dismiss both actions for lack of subject matter jurisdiction under the Class Action Fairness Act ("CAFA”), the lender confirming that the first class action plaintiff was the only borrower who opted out of the installment loan agreement’s arbitration provision, and that neither the second class action plaintiff nor any borrowers under the payday loan agreements had opted out of those agreements’ arbitration provisions. Not withstanding the first class action plaintiff’s arguments the court should address the alleged unconscionability of the entire installment loan agreement (citing, indicia of unconscionability under applicable Delaware law) the lender’s motions, relying upon U.S. Supreme Court and Third Circuit Court of Appeal opinions, argued the court could only extract the arbitration provision to determine its conscionability, on its face, and was not permitted to view the contract as a whole for, otherwise, the court would be encroaching upon the province of the arbitrator should the arbitration provision be upheld. The lender filed a similar motion in the second class action; however, before the plaintiff responded to same, both cases were dismissed, without prejudice, per stipulation of counsel.
Kenneth Dubrow, with the assistance of Jessica Teitelbaum, temporarily, and possibly, permanently, defeated two class actions instituted against Chartwell’s client.