Arbitration and Delegation Fail for Lack of Mutual Assent When They Require Application of Nonexistent (and Unilaterally Inventable) Tribal Contract Law

I. Introduction

In Joshua Harris v. W6LS, Inc., Illinois borrowers Joshua Harris and Donita Olds brought a putative class action against W6LS, Inc. (doing business as WithU/WithU Loans) and Caliber Financial Services, Inc., challenging $600 online loans carrying nearly 500% annual interest rates. Plaintiffs alleged violations of Illinois rate-cap and consumer-protection statutes and asserted federal claims including RICO and the Electronic Funds Transfer Act.

Defendants moved to compel individual arbitration under loan agreements containing (1) a broad arbitration clause and (2) a delegation provision assigning “all questions of arbitrability” (including formation, enforceability, and scope) to the arbitrator. Critically, those gateway issues were to be decided under “Applicable Law,” defined as “Tribal Law and applicable federal law.” Yet the Tribe’s Tribal Contract Code did not exist when plaintiffs signed (it was adopted May 2, 2024), and “federal law” supplied no substantive contract-formation rules.

The district court denied arbitration on the prospective waiver theory (forcing waiver of Illinois statutory rights). On appeal, the Seventh Circuit affirmed—but on a narrower ground: ordinary contract formation. The court held the delegation and arbitration agreements failed for lack of mutual assent because they selected a nonexistent body of governing contract law, subject to later invention by an interested sovereign owner.

II. Summary of the Opinion

The Seventh Circuit affirmed denial of the motion to compel arbitration. Although the agreements purported to delegate arbitrability to an arbitrator, the court held that neither the delegation provision nor the arbitration agreement was formed with mutual assent. At the time of contracting, the chosen “Tribal Law” governing arbitrability did not exist, and “applicable federal law” did not provide contract-formation rules. Because the governing law for gateway issues was indefinite and unknowable, there was no “meeting of the minds” as to an essential term of the parties’ arbitral bargain.

The court addressed, but did not decide, whether the prospective waiver doctrine applies to state-law rights after Viking River Cruises, Inc. v. Moriana, leaving that question for another day.

III. Analysis

A. Precedents Cited (and How They Shaped the Holding)

  • Rent-A-Center, West, Inc. v. Jackson: The opinion relies on Rent-A-Center for two foundational points: (1) “arbitration is a matter of contract,” and (2) delegation provisions are severable “additional, antecedent” arbitration agreements that must themselves be formed and enforceable. This framework allowed the Seventh Circuit to treat the delegation clause as its own contract and test it for mutual assent.
  • Coinbase, Inc. v. Suski and AT&T Techs., Inc. v. Commc'ns Workers: These cases supply the “clear and unmistakable evidence” requirement for delegation. The court accepted that the contract text attempted sweeping delegation but emphasized that even a clear delegation cannot bypass the threshold question of whether the delegation contract was formed by consent.
  • Granite Rock Co. v. Int'l Bhd. of Teamsters and K.F.C. v. Snap Inc.: Cited for the court’s duty to decide whether an agreement to arbitrate exists in the first place. K.F.C. is used to underscore that “Even the most sweeping delegation cannot send the contract-formation issue to the arbitrator.”
  • First Options of Chicago, Inc. v. Kaplan: Provides the rule that courts apply “ordinary state-law principles” of contract formation to determine whether parties agreed to arbitrate (including arbitrability). This anchored the court’s formation analysis in basic contract doctrine rather than arbitration-specific policy.
  • New Prime Inc. v. Oliveira and GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC: These cases are invoked to acknowledge the FAA’s pro-arbitration policy while stressing that arbitration agreements must be treated like any other contract—enforced when formed, invalidated when standard contract defenses apply.
  • Buckeye Check Cashing, Inc. v. Cardegna: Supplies the severability principle: challenges to the container contract do not necessarily defeat arbitration; but challenges directed to the arbitration agreement (or delegation clause) are for courts to decide. The Seventh Circuit uses this to reject defendants’ argument that plaintiffs’ loan-based statutory claims somehow concede formation of arbitration/delegation.
  • United Natural Foods, Inc. v. Teamsters Local 414 and Rock Hemp Corp. v. Dunn: Provide the procedural posture and the familiar three-part test for compelling arbitration, plus the standard of review (de novo). They frame the inquiry as turning first on whether a valid arbitration agreement exists.
  • Rodgers-Rouzier v. Am. Queen Steamboat Operating Co., LLC and Druco Rests., Inc. v. Steak N Shake Enters.: Used to establish that the FAA does not supply substantive rules for contract formation and interpretation. This proposition is central: if “applicable federal law” supplies no formation rules, then the contract’s governing-law instruction failed to specify any usable body of law.
  • Faulkenberg v. CB Tax Franchise Sys., LP and Stawski Distrib. Co. v. Browary Zywiec S.A.: Defendants cited these to argue that arbitration can be enforced even if a choice-of-law clause fails. The court distinguishes them: here the issue is not merely an unenforceable choice-of-law clause; rather, the clause evidences lack of mutual assent to arbitration/delegation because it required application of nonexistent law.
  • Kass v. PayPal Inc. and Arbogast v. Chicago Cubs Baseball Club, LLC: Provide Illinois mutual-assent principles. The court uses Kass (and Arbogast via Kass) to equate the required formation elements under Illinois law with the Tribe’s “mutual consent” requirement, supporting the court’s decision to avoid a dispositive choice-of-law fight.
  • Sosa v. Onfido, Inc.: Supports the choice-of-law shortcut: a choice-of-law determination is needed only if differences in law affect the outcome. Because both Illinois law and the Tribal Contract Code require mutual assent/consent, the court proceeds without deciding which governs.
  • Bus. Sys. Eng'g, Inc. v. Int'l Bus. Machs. Corp. and Acad. Chicago Publishers v. Cheever: Supply the definiteness doctrine: essential terms must be reasonably certain so a court can “ascertain what the parties have agreed to do.” The court treats the governing law for arbitrability as an essential term of the arbitral bargain; because it was unknowable at contracting, assent failed.
  • In re Broiler Chicken Antitrust Litig. and Abbott Laboratories v. Alpha Therapeutic Corp.: Establish that mutual assent is assessed at the time of contracting, not “in its aftermath.” This forecloses defendants’ attempt to rely on the later-enacted Tribal Contract Code (even if labeled “retroactive”) to supply missing assent ex post.
  • Jackson v. Payday Financial, LLC: Provides the closest analogy. There, arbitration was tied to a tribal forum that did not actually exist in practice, raising doubts about mutuality of intent. Here, the “forum” problem manifests as nonexistent governing law for arbitrability at the time of agreement. Jackson supports the court’s view that consumers may consent only to arbitration under specified circumstances—and if those circumstances never existed, assent is lacking.
  • MZM Constr. Co., Inc. v. N.J. Bldg. Laborers Statewide Benefit Funds and Sauer-Getriebe KG v. White Hydraulics, Inc.: Cited to reinforce the conceptual separation between the “container contract” (the loan) and the nested arbitration/delegation agreements. Plaintiffs could concede a loan contract existed while still contesting formation of arbitration/delegation.
  • Flores v. New York Football Giants, Inc.: Supports the court’s concern that unilateral control over arbitral substance and procedure can undermine whether the process is “arbitration” in any meaningful sense. The Seventh Circuit uses Flores to highlight the structural problem where a party (or aligned actor) can later shape the rules governing the arbitral process and defenses.
  • Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, Gilmer v. Interstate/Johnson Lane Corp., and Preston v. Ferrer: These cases frame the “effective vindication/prospective waiver” doctrine. The district court relied on this doctrine, but the Seventh Circuit declined to reach it because formation provided a narrower ground for decision.
  • American Express Co. v. Italian Colors Restaurant, Dr.'s Assocs., LLC v. Tripathi, and Ferguson v. Corinthian Colls., Inc.: Cited for the argument that effective-vindication is traditionally tied to conflicts between the FAA and other federal laws, not state-law rights—an issue the Seventh Circuit notes is unsettled in light of later Supreme Court language.
  • Viking River Cruises, Inc. v. Moriana: The opinion highlights Viking River Cruises’ footnote suggesting prospective waiver is “not … unique [to] federal statutes,” signaling that state-law prospective waiver may be viable. The court, however, leaves the post-Viking River Cruises scope question open.

B. The Court’s Legal Reasoning

  1. Start with contract formation, not arbitration policy. Although the FAA favors arbitration, the court reiterates that arbitration remains “strictly a matter of consent” and must rest on an actually formed agreement.
  2. Choice-of-law did not change the outcome. The agreement chose “Tribal Law and applicable federal law.” But at contracting, the Tribe had no contract code, and federal law (including the FAA) does not provide a general body of contract-formation rules. The court avoided deciding whether tribal law may displace “ordinary state-law principles” because both Illinois law and the later-enacted Tribal Contract Code share the same baseline requirement: mutual assent/consent.
  3. The governing-law instruction made an essential term indefinite. The delegation clause required the arbitrator to decide formation/enforceability of arbitration under “Applicable Law,” yet no such operative body of tribal contract law existed, and “applicable federal law” supplied none. This made it impossible to determine what legal standards would govern gateway disputes—an essential component of the parties’ arbitration/delegation bargain—defeating mutual assent.
  4. Nonexistent law is different from evolving law. The court distinguishes ordinary choice-of-law clauses (where parties accept that a settled body of law may later change) from selecting a body of law that was wholly nonexistent at contracting and thus subject to later invention.
  5. Unilateral inventability and conflicted interests sharpened the assent problem. The Tribe had (i) a proprietary interest in the defendant entities and (ii) unilateral ability to create the “Tribal law” the arbitrator must apply. The later-adopted Tribal Contract Code’s omission of unconscionability illustrates the stakes. With no indication plaintiffs understood or intended to accept that asymmetry, mutual assent could not be inferred.
  6. Severability meant plaintiffs could challenge arbitration/delegation formation specifically. Defendants argued plaintiffs’ statutory loan claims assumed an agreement existed. The court rejected that as conflating the loan contract with the separate arbitration and delegation agreements, which are severable and must be formed on their own terms.
  7. Prospective waiver was acknowledged but avoided. The court noted the unsettled question whether prospective waiver applies to state-law rights after Viking River Cruises, and affirmed on the narrower, cleaner formation ground.

C. Impact

1. Drafting constraint on “tribal-law-only” consumer arbitration schemes.
The decision signals that arbitration and delegation clauses can fail at the formation stage if they require application of a governing-law regime that did not exist when consumers contracted—especially where one side (or an aligned sovereign) can later author that regime. Drafters who rely on tribal law will likely need to ensure an identifiable, existing body of law (or fallback rules) is in place at contracting.

2. Formation-based challenges may sidestep contested “prospective waiver” doctrine.
By resolving the case on mutual assent, the court provides plaintiffs a pathway to defeat arbitration without litigating the evolving scope of effective-vindication for state rights post-Viking River Cruises, Inc. v. Moriana. Future litigants may similarly reframe disputes as formation/assent/definiteness challenges where arbitration clauses embed legally indeterminate or manipulable rule-sets.

3. Reinforcement that delegation is not self-validating.
Even when delegation language is broad and facially “clear,” courts must first confirm that the delegation agreement itself was formed. This will matter in consumer contracts that attempt to route all enforceability questions to arbitrators while simultaneously depriving the court of any stable yardstick to determine what the parties agreed to.

4. Heightened scrutiny of asymmetrical control over arbitral “rules of decision.”
The opinion’s discussion of unilateral ability to “invent” governing law (paired with financial interest) foreshadows closer review of arbitration regimes where one side controls not just procedures but the substantive standards the decisionmaker must apply.

IV. Complex Concepts Simplified

Arbitrability
The threshold question of who decides disputes about arbitration—e.g., whether an arbitration agreement exists, is enforceable, or covers the dispute.
Delegation provision
A clause saying the arbitrator (not a court) decides arbitrability. It is treated as its own contract that must be formed and enforceable.
Mutual assent / “meeting of the minds”
Both sides must actually agree to the same essential terms at the time of contracting. If essential terms are too indefinite—so no one can tell what was agreed—there is no contract.
Definiteness of essential terms
Contract terms must be reasonably certain so a court can “ascertain what the parties have agreed to do.” Here, the “law that will govern gateway disputes” was treated as essential to the arbitration/delegation bargain.
Severability (of arbitration and delegation clauses)
The arbitration clause can be treated as separate from the rest of the contract, and a delegation clause can be separate from the arbitration clause. A party can accept the main contract exists (the loan) but still contest whether the arbitration/delegation agreements were formed.
Prospective waiver / effective vindication
A doctrine suggesting arbitration cannot be used to force a party to give up substantive statutory rights. The Seventh Circuit noted ongoing uncertainty about how it applies to state-law rights, especially after Viking River Cruises, Inc. v. Moriana.

V. Conclusion

Joshua Harris v. W6LS, Inc. establishes a formation-centered limit on arbitration enforcement: an arbitration clause and a delegation provision may be unenforceable for lack of mutual assent when they require arbitrability and contract disputes to be resolved under a body of tribal contract law that did not exist at contracting (and that could later be unilaterally created by an interested sovereign).

The opinion’s significance lies in its method as much as its result. Rather than expanding the contested prospective-waiver doctrine, the Seventh Circuit grounded its decision in first principles of contract formation—mutual assent and definiteness—thereby offering a narrower, highly portable analytic tool for courts confronting arbitration systems built on legally indeterminate or later-invented rule sets.