## Facts

- Terry Johnson entered into a short-term, high-interest consumer loan transaction involving West Suburban Bank and related entities.
- The loan documents included required federal lending disclosures and an arbitration clause requiring disputes to be resolved in arbitration rather than court.
- Johnson alleged the transaction violated the Truth in Lending Act (TILA) by failing to properly disclose the finance charge and annual percentage rate.
- Johnson also alleged violations of the Electronic Fund Transfer Act (EFTA) based on the loan’s electronic repayment mechanism.
- Johnson filed a putative class action in federal district court seeking relief on behalf of similarly situated borrowers.
- Defendants moved to compel arbitration and to dismiss or stay the litigation based on the arbitration clause.
- The district court denied the motion, reasoning that enforcing arbitration conflicted with TILA and EFTA enforcement schemes that contemplate class actions.
- Defendants appealed.

## Issues

1. Whether TILA and EFTA claims may be compelled to arbitration under the Federal Arbitration Act (FAA) when the plaintiff seeks to proceed on a class basis.
2. Whether TILA’s or EFTA’s text or legislative history shows congressional intent to preclude arbitration.
3. Whether requiring individual arbitration, rather than class litigation, prevents effective enforcement of statutory rights under TILA and EFTA.

## Decision

- The Third Circuit reversed the district court.
- The court held TILA and EFTA claims are arbitrable under the FAA.
- The court concluded neither statute contains an express bar to arbitration or demonstrates a conflict with arbitration sufficient to invalidate the agreement.
- The court rejected the argument that statutory provisions addressing class actions create a nonwaivable right to proceed as a class in court.
- The court directed that the dispute be referred to arbitration pursuant to the parties’ agreement.

## Legal Principles

- Under the FAA, statutory claims are arbitrable absent a clear congressional command to the contrary or a genuine conflict between arbitration and the statute’s purposes.
- The party resisting arbitration bears a heavy burden to show that arbitration is incompatible with the federal statute at issue.
- Statutory references to class actions generally describe a procedural device and do not, without clearer direction, create a substantive entitlement to class-wide adjudication that overrides an arbitration agreement.
- Assertions that small-dollar claims are economically difficult to pursue individually do not, by themselves, invalidate arbitration where the statute provides remedies such as statutory damages and fee shifting that support individual enforcement.

## Conclusion

The Third Circuit enforced the arbitration clause and required arbitration of TILA and EFTA claims, holding that class-action-related provisions in those statutes do not preclude arbitration and that the plaintiff did not show congressional intent or a statutory conflict sufficient to defeat the FAA’s mandate to enforce arbitration agreements.


Johnson v. West Suburban Bank, 225 F.3d 366 (3d Cir. 2000)