In 2006, Congress passed the Military Lending Act (MLA) to address the “real threat to our national defense” posed by predatory lending to servicemembers.  Among other things, the Act provides that creditors may not require servicemembers to participate in arbitration in relation to consumer loans. 

In 2019, while Adam Steines was on active-duty status with the U.S. Army and thus covered by the MLA, he and his wife Miranda Steines signed an agreement with Westgate, a timeshare resort company. Despite the MLA’s anti-arbitration provisions, Westgate included a clause that required arbitration of any “controversy between the parties . . . arising out of or relating to th[e] Agreement . . . including the validity, scope or applicability of this provision to arbitrate.” 

In 2022, the Steines filed a putative class action against Westgate, charging that the company entered into timeshare agreements with military servicemembers and veterans that “systematically failed” to comply with the MLA by failing to make standard disclosures and including prohibited arbitration clauses. 

Westgate moved to compel arbitration under the Federal Arbitration Act (FAA), arguing that the MLA does not apply to loans financing timeshare purchases. Furthermore, Westgate invoked the “Delegation Clause” in its arbitration agreement with the Steines, which requires an arbitrator to decide whether the arbitration clause is valid. Westgate contended that this Clause means that an arbitrator—rather than a court—should decide the initial question of whether the MLA applies. 

In December 2022, the District Court for the Middle District of Florida ruled in favor of the Steines, rejecting both of Westgate’s arguments and denying its motion to compel arbitration. Westgate appealed to the Eleventh Circuit. 

On June 28, 2023, CAC filed an amicus curiae brief in support of the Steines. Our brief makes two main points. 

First, we explained that the MLA overrides the FAA by prohibiting the arbitration of all disputes relating to the extension of consumer credit to servicemembers. Subsections 987(e)(3) and 987(f)(4) of the MLA—both of which explicitly address arbitration—clearly override the FAA. Section 987(e)(3) provides that “it shall be unlawful for any creditor to extend consumer credit to a [servicemember] with respect to which . . . the creditor requires the borrower to submit to arbitration . . . in the case of a dispute.”  Section 987(f)(4) states that any “agreement to arbitrate any dispute involving the extension of consumer credit” to a covered servicemember is unenforceable, “[n]otwithstanding [the FAA], or any other Federal or State law, rule, or regulation.” The Supreme Court has pointed to § 987(e)(3) as evidence that Congress “has . . . shown that it knows how to override the Arbitration Act when it wishes.’” 

Second, we argued that the MLA’s prohibition on arbitration overrides the Delegation Clause in the Steines’ timeshare agreement. The text and history of the MLA make clear that the Act prohibits the arbitration of even threshold arbitrability disputes. The plain text of § 987(e)(3) makes it unlawful for a creditor, in relation to an extension of consumer credit to a military borrower, to require the borrower to submit to arbitration in the case of a dispute. The text includes no limits on the type of dispute and thus covers a dispute about whether the MLA applies in the first place. Furthermore, § 987(f)(4) provides an independent reason that the Steines may not be compelled to arbitrate, as it applies to “any dispute involving the extension of consumer credit.” 

In addition, our brief explained that requiring plaintiff servicemembers to participate in mandatory arbitration not only disregards the breadth of the MLA’s text—it also flatly contradicts Congress’s plan in passing the MLA, which was to protect servicemembers from participating in mandatory arbitration at all. Forcing servicemembers to arbitrate threshold issues like whether arbitration is required would undermine lawmakers’ goals in passing the MLA. 

In September 2024, the Eleventh Circuit ruled in favor of the Steines, agreeing with our position that, by passing the MLA, Congress demonstrated clear and unambiguous intent to supersede the FAA and prohibit lenders of consumer credit from requiring servicemembers to participate in any arbitration related to consumer loans. Because “the MLA plainly overrides the FAA,” the court reasoned “the delegation clause cannot be enforced,” and the Steines’s lawsuit can proceed in federal court. Finally, the Court rejected Westgate’s argument that the MLA would not apply to this case because its transaction with the Steines fell into the MLA’s exception for residential mortgages. On this point, the Eleventh Circuit concluded that the timeshare could not be considered a “dwelling” and, accordingly, remained outside the scope of the exception.