The Court concluded that an inherent conflict existed because "without the possibility of class action liability looming on a creditor's horizon, there is a very real possibility that these entities will not voluntarily comply with the Truth-in-Lending regulations." Johnson v. Tele-Cash, Inc., 82 F. Supp.2d 264, 271 (D.Del. 1999). We agree that if Johnson is to prevail, it must be on the basis of demonstrating an inherent conflict.
To that extent, Plaintiffs view a conflict between TILA and the FAA. Plaintiffs also rely on Johnson v. Tele-Cash, Inc., 82 F. Supp.2d 264 (D.Del. 1999), in support of their argument that TILA claims preempt the FAA. There the plaintiff obtained a short-term loan from a bank and executed a loan agreement, which included an arbitration clause.
We should not presume that Congress meant to allow statutory damages for failure to comply with the "more conspicuously" standard when it omitted such a provision.But see Johnson v. Tele-Cash, Inc., 82 F. Supp. 2d 264 (D. Del. 1999) (presuming that Congress meant to treat a violation of ยง 1632(a) as a violation of ยง 1683(a)(3) and (a)(4)), aff'd in part and rev'd in part on other grounds, 225 F.3d 366 (3rd Cir. 2000). Relying on Dixey, Trustee argues that Ninth Circuit law would support statutory damages for not disclosing the terms "finance charge" and "annual percentage rate" more conspicuously.
Green Tree Fin. Corp.-Ala. v. Randolph, No. 99-1235, 2000 WL 1803919, at *7 (U.S. Dec. 11, 2000); see also RCW 7.04.010. He cites Johnson v. Tele-Cash, Inc., 82 F. Supp.2d 264 (D.Del. 1999), for the proposition that there is an inherent conflict between arbitration and statutory provisions that encourage class participation. Johnson involved the Truth in Lending Act (TILA), 15 U.S.C. ยง 1601 et seq., and the Electronic Fund Transfer Act (EFTA), 15 U.S.C. ยง 1693 Johnson, 82 F. Supp.2d at 266.
The Third Circuit reversed a district court decision which had concluded that "an inherent conflict existed because `without the possibility of class action liability looming on a creditor's horizon, there is a very real possibility that these entities will not voluntarily comply with the Truth-in-Lending regulations.'" Id. at 371 (quoting Johnson v. Tele-Cash, Inc., 82 F. Supp.2d 264, 271 (D.Del. 1999)). After reviewing the text of the statute and the legislative history, the court found no inherent conflict and determined that the right to proceed as a class action is a procedural matter arising from the Federal Rules of Civil Procedure.
The Third Circuit reversed a district court decision which had concluded that "an inherent conflict existed because `without the possibility of class action liability looming on a creditor's horizon, there is a very real possibility that these entities will not voluntarily comply with the Truth in Lending regulations.'" Id. at 371 (quoting Johnson v. Tele-Cash, Inc., 82 F.Supp.2d 264, 271 (D.Del. 1999)). "Because neither the TILA nor the EFTA explicitly precludes the selection of arbitration instead of litigation, a party who agrees to arbitrate, but then asserts that his or her statutory claim cannot be vindicated in an arbitral forum, faces a heavy burden."
Lozada, however, is not binding on this Court and is at odds with the reasoning of nearly every other court that has considered the issue. Notably, the Lozada court relies principally on Johnson v. Tele-Cash. Inc., 82 F. Supp.2d 264, 268-71 (D. Del. 1999), the district court opinion that was reversed by the Court of Appeals for the Third Circuit in Johnson, 225 F.3d at 371-78. See Lozada 91 F. Supp.2d at 1104-05.
On February 16, 2000, Joe Vera ("Vera") filed a class action lawsuit under the Truth In Lending Act ("TILA"), 15 U.S.C. ยง 1601 et seq. (1994) against First USA Bank, N.A. ("First USA"). On April 5, 2000, the court stayed this matter pending an appeal of the court's decision in Johnson v. Telecash, Inc., 82 F. Supp.2d 264, (D.Del. 1999). On April 29, 2000, the Third Circuit reversed the court's decision.
In the alternative, Ms. Furgason contends that if the court finds that the arbitration agreements preclude class arbitration (which would also preclude arbitration of Furgason's RICO claims as class claims), then the court should declare that the arbitration agreements are contrary to public policy and unenforceable. On this point, Ms. Furgason relies on Johnson v. Tele-Cash, Inc., 82 F. Supp.2d 264 (D. Del. 1999), which held that an arbitration clause in a payday loan contract was not enforceable because it prohibited class treatment of claims under the Truth in Lending Act, which the district court concluded could not be pursued effectively except on a class basis. However, the Third Circuit reversed that decision in Johnson v. West Suburban Bank, 225 F.3d 366 (3d Cir. 2000), and ordered arbitration of the plaintiff's claims. In doing so, the Third Circuit assumed that the plaintiff would not be able to pursue his claims on a class basis in arbitration.
Plaintiffs argue that the arbitration provision is substantively unconscionable because the arbitration of claims arising under the TILA would violate Congressional intent to allow and encourage the enforcement of TILA through class relief. They therefore assert that the waiver of judicial forum violates the underlying purposes of TILA. A few courts have held that arbitration clauses are unenforceable as to TILA claims because they contravene the clear Congressional intent to encourage compliance with TILA through availability of class actions. See Johnson v. Tele-Cash, Inc., 82 F. Supp.2d 264, 270 (D.Del. 1999) (holding that inherent conflict existed between TILA right to class action and arbitration clause and refusing to enforce); Baron I, 75 F. Supp.2d at 1370-71 (holding that arbitration clause that defeats purpose of TILA is unenforceable); Powertel, 743 So.2d at 573 (prohibition on class relief renders arbitration agreement unenforceable under TILA); cf. Bantolina v. Aloha Motors, Inc., 419 F. Supp. 1116, 1120 (D.Haw. 1976) (recognizing that Congress concluded that class actions were "necessary to elevate truth-in-lending lawsuits from the ineffective `nuisance category' to the type of suit which has enough sting to insure that management will strive with diligence to achieve compliance.") (quoting Federal Reserve Board, 1972 Annual Report on Truth in Lending). The Northern District of Illinois, in contrast, has on several occasions rejected the contention that waiver of class relief undermines the remedial purpose of TILA, holding that Congressional intent to encourage class actions