Eleventh Circuit Holds that Borrower’s TILA Claims Are Subject to Agreement’s Forum Selection Clause
The Eleventh Circuit Court of Appeals recently held that a borrower’s Truth-in-Lending-Act (“TILA”) claim fell within the scope of a loan agreement’s forum selection clause. Stiles v. Bankers Healthcare Grp., Inc., ___ Fed. App’x ___, 2016 WL 308705 (11th Cir. Jan. 26, 2016).
The forum selection clause at issue was included in a 2008 commercial loan agreement entered into between the borrower, Dr. Warren Stiles, and the lender, Bankers Healthcare Group, Inc. The 2008 loan agreement used Dr. Stiles’s medical practice as collateral, named him as the Debtor, and listed the medical practice’s address. The forum selection clause stated, “Venue for any action brought hereunder, shall be the choice of the Creditor, and shall be limited to either Onondaga County, New York or Broward County, Florida.” A renewal of the loan agreement in 2012 had the same terms as the 2008 loan agreement, including the forum selection clause, but listed Dr. Stiles and his wife’s residential address rather than the medical practice’s address.
Dr. Stiles defaulted on the loan. The lender informed him that it intended to file a debt-collection action in the state court of Onondaga County, New York. However, a few days later, Dr. Stiles and his wife filed an action against the lender in the U.S. District Court for the Middle District of Alabama, asserting TILA claims in relation to the agreements. The plaintiffs’ position was that the forum selection clause did not apply because, in the plaintiffs’ view, a TILA claim is distinct from an action concerning the terms and conditions of a contract. The plaintiffs argued that the term “hereunder” referred to the loan agreement itself, and that the scope of the forum selection clause was strictly limited to “claims concerning the parties’ contractual obligations.” The lender filed a motion to dismiss, invoking the forum selection clause. The district court found the forum selection clause was enforceable and dismissed the complaint.
On appeal, the Eleventh Circuit Court of Appeals affirmed the district court’s dismissal. The Eleventh Circuit rejected the plaintiffs’ position, holding that it was “too restrictive.” The Court of Appeals found that the term “hereunder” encompasses “not only breach of contract claims but all claims, including statutory claims that arise from the contractual relationship between the parties.” The Court elaborated, “because Defendant’s alleged obligations under TILA, if any, assume the existence of a contract that lacks the necessary disclosures mandated by that statute, we therefore interpret ‘hereunder’ to encompass Plaintiffs’ TILA claims.”