Joshua Harris and Donita Olds borrowed $600 each from W6LS Inc., doing business as WithU Loans, at annual interest rates of approximately 498% in 2022 and 2023. The defendants, organized under the laws of the Otoe-Missouria Tribe of Indians, later faced a putative class action alleging violations of Illinois rate-cap statutes, federal RICO, and the Electronic Funds Transfer Act. W6LS and co-defendant Caliber Financial Services Inc. moved to compel individual arbitration under agreements requiring disputes to be resolved under tribal law and federal contract principles.
Circuit Judge Kolar found the arbitration clause invalid for lack of mutual assent, writing that defendants 'drafted an arbitration agreement directing an arbitrator to apply a body of law that did not exist, which they maintained a unilateral ability to invent.' The court explained that the Otoe-Missouria Tribe adopted its Contract Code in May 2024, well after the loans were made, and federal arbitration law provides no substantive contract formation rules. 'It is one thing for parties to agree to be bound by a settled body of law that is subject to later change; it is quite another to select a non-existent body of law, which is subject to later invention,' Judge Kolar wrote.
The Northern District of Illinois initially denied defendants' arbitration motion under the 'prospective waiver' doctrine, finding the agreement would force plaintiffs to waive their Illinois law rights. Defendants immediately appealed under the Federal Arbitration Act, arguing the tribal law provision was valid because the subsequently-enacted tribal code applied retroactively to contracts from April 2018 onward.
The Seventh Circuit's ruling provides clarity on arbitration agreements that reference non-existent governing law, though the panel avoided addressing whether the prospective waiver doctrine applies to state law rights after the Supreme Court's 2022 Viking River Cruises decision. The decision could affect other tribal lending arrangements that rely on subsequently-enacted tribal law to govern consumer loan disputes. 'We cannot say, therefore, that there was a "meeting of the minds" as to an essential element of the parties' bargain to arbitrate,' the court concluded.