Chartwell Halts Two Delaware Class Action Suits

Jessica A. Teitelbaum

JESSICA A. TEITELBAUM concentrates her practice on civil litigation, defending construction-related claims on behalf of developers, general contractors, subcontractor trades, design professionals, and product manufacturers. Her practice includes defense of contract and insurance disputes, product liability claims, premises liability claims, real estate claims, and personal injury claims in Florida federal and state courts. She has also defended, to complete victory via summary judgment, a variety of federal flood insurance claims...

Kenneth M. Dubrow

KENNETH M. DUBROW is co-managing partner of Chartwell Law’s Philadelphia office, serves as counsel to the firm and is chair of the firm’s general litigation department. His multifaceted practice encompasses litigation on behalf of law firms and lawyers, commercial and class action litigation, as well as general liability defense. Mr. Dubrow is known for his strategic and results-oriented approach to litigation in which he focuses on his clients' business and legal...

The Client:
A payday and installment loan lender licensed by the Delaware Banking Commission.
The Situation:
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.
The Solution:
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. 
The Results:
Kenneth Dubrow, with the assistance of Jessica Teitelbaum, temporarily, and possibly, permanently, defeated two class actions instituted against Chartwell’s client.