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Washington-Highly controversial “payday loans” form the backdrop to a U.S. Supreme Court challenge in which the justices will determine who decides-court or arbitrator-the validity of an allegedly illegal contract containing a mandatory arbitration clause. “A big debate in arbitration law is what issues are for courts to decide and what issues are for arbitrators,” said veteran high court litigator Mark Levy of Kilpatrick Stockton’s Washington office. “There has been a movement in the Supreme Court and other courts saying that more and more things are to be decided by arbitrators. “But what do you do with the arbitration clause embedded in this larger contract when there is nothing wrong with the arbitration clause itself?” he asked. “Is it a ground to avoid arbitration that the surrounding contract is unlawful?” The Florida Supreme Court answered yes in a putative class action brought under Florida law by John Cardegna and Donna Reuter on behalf of a class of Florida consumers against Buckeye Check Cashing Inc. The consumers alleged that Buckeye, falsely portraying itself as a legitimate check-cashing service, illegally collected usurious interest from thousands of Florida residents for so-called payday loans. Buckeye moved to enforce arbitration of the claim. The state supreme court is out of step with six federal circuits that have considered the issue, noted arbitration scholar Jean Sternlight of the William S. Boyd School of Law at the University of Nevada, Las Vegas. But it is consistent with three other state supreme courts. The U.S. Supreme Court has had a strong and continuing interest in arbitration issues in recent years, said Sternlight. That interest and a “pretty sharp split” between the federal and state courts probably attracted the justices to the Buckeyecase, she said. Oral arguments in the case, Buckeye Check Cashing Inc. v. Cardegna, No. 04-1264, are set for Nov. 29.
Documents filed in Buckeye Check Cashing Inc. v. Cardegna

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