In TCPAWorld, as elsewhere, courts are reluctant to second guess and discard arbitrator decisions, particularly where the parties stipulate to using the arbitral forum. That is unless the resulting arbitrated decision may be “in manifest disregard of the law.” Late last week, the United States Court of Appeals for the Second Circuit, in Robin Weiss v Sallie Mae, Incorporated, 2019 U.S. App. LEXIS 27476, Docket No. 18-2362, September 12, 2019, assessed a Telephone Consumer Protection Act (TCPA) arbitration award in light of that standard.
The plaintiff had taken out a student loan in 2008 but thereafter defaulted. Sometime in September of 2011, Sallie Mae – now Navient Solutions, LLC (NSL) – began calling her cell phone 7-8 times a day to collect. Finally, in 2013, Ms. Weiss sued under the TCPA. The parties agreed to arbitrate the dispute pursuant to a provision in her student loan promissory note. A hearing ensued in April of 2016, at which the parties stipulated that Ms. Weiss received 774 automated calls, at a cell phone number she had not previously provided to NSL, between September 2011 and July 2013.
However, the arbitrator also found that Ms. Weiss was a member of a settlement class in a TCPA class action case brought against then Sallie Mae in Federal District Court in Washington State – the Arthur Settlement. Under the terms of that settlement, because Ms. Weiss had not filed a “consent revocation” by September 15, 2012, the arbitrator held that she was precluded from recovering for NSL calls made after that date. However, he interpreted the settlement agreement to allow her to recover for 217 calls from NSL before that date. Thus, he awarded her TCPA statutory damages in the amount of US $108,500.
One significant problem: the Arthur Settlement contained a “general release” provision, the effect of which was that Ms. Weiss “was deemed to have waived ‘any and all’ TCPA claims effective the date of the final judgment” in that case. Yet, the arbitrator “did not even acknowledge this release provision” in his ruling in favor of Ms. Weiss. Oops!!
When NSL point out this “oversight,” the Federal District Court for the Western District of New York vacated the arbitration award because, “by neglecting to ‘apply – or even address – an explicit unambiguous term of the settlement agreement,’ which ‘clearly and unambiguously bars recovery for claims until and including the date of the agreement,’ the arbitrator manifestly disregarded the law.”
The Second Circuit agreed with the standard applied, although noting that vacation of arbitration awards on such grounds was only appropriate “in those exceedingly rare instances where some egregious impropriety on the part of the arbitrator is apparent.” Even under the manifest disregard standard, an award will be upheld if the “arbitrator has provided even a barely colorable justification for his or her interpretation of the contract.” By contrast, vacation of the award is “only warranted… ‘when an arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice.’” So there.
Despite Ms. Weiss’s protestations, the Second Circuit agreed that it was “impossible to square” the award for TCPA violations with “the general release provision barring Weiss’s recovery for ‘any and all’ TCPA claims.” The Court rejected Ms. Weiss’s attack on the adequacy of the class notice, noting the arbitrator “expressly found that … ‘the proof was conclusive’ that Ms. Weiss ‘received the required notice of the settlement and of her rights and obligations under the terms of the settlement.’”
After all this, one would think that the Court of Appeals would affirm the District Court. But no, presumably in the interest of giving the arbitrator the chance to come up with “even a barely colorable justification” to rectify the “incoherence” of his decision, the Second Circuit vacated the District Court ruling and remanded the case, to be further remanded to the arbitrator. In doing so, the Second Circuit provided specific “instructions” to be conveyed to the arbitrator regarding assessing the sufficiency of the class notice and the import of the general release. Specifically, the “arbitrator shall be instructed either to interpret and apply the terms of the….[s]ettlement agreement’s general release provision or to explain why that provision does not bar Weiss’s claims.”
So Ms. Weiss’s arbitral award may still survive in TCPAWorld if the arbitrator can rationalize his original conclusions. But the Second Circuit made clear that it stands ready to listen again to his further explanation. So the story may continue.