Laverne Jones v. Bernaldo Dancel
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 1:14-cv-02375-JFM. [999614649]. [14-2160]
Appeal: 14-2160
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2160
LAVERNE JONES; STACEY JONES, f/k/a Stacey Ness; KERRY NESS,
Individually and on behalf of the Certified Class,
Plaintiffs - Appellants,
v.
BERNALDO
DANCEL;
AMERIX
CORPORATION;
3C
INCORPORATED;
CAREONE SERVICES, INCORPORATED; ASCEND ONE CORPORATION,
Defendants – Appellees.
------------------------CIVIL JUSTICE, INC.; PUBLIC JUSTICE CENTER, INC.; MARYLAND
CONSUMER RIGHTS COALITION, INC.,
Amici Supporting Appellants.
Appeal from the United States District Court for the District of
Maryland, at Baltimore.
J. Frederick Motz, Senior District
Judge. (1:14-cv-02375-JFM)
Argued:
May 12, 2015
Decided:
July 6, 2015
Before TRAXLER, Chief Judge, and GREGORY and KEENAN, Circuit
Judges.
Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Chief Judge Traxler and Judge Gregory joined.
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ARGUED: G. Oliver Koppell, LAW OFFICES OF G. OLIVER KOPPELL &
ASSOCIATES, New York, New York, for Appellants.
Lawrence S.
Greenwald, GORDON FEINBLATT LLC, Baltimore, Maryland, for
Appellees.
ON BRIEF: Peter A. Holland, THE HOLLAND LAW FIRM,
P.C., Annapolis, Maryland; Gregory S. Duncan, LAW OFFICE OF
GREGORY S. DUNCAN, Charlottesville, Virginia; Joseph S. Tusa,
TUSA P.C., Southold, New York, for Appellants.
Catherine A.
Bledsoe, Brian L. Moffet, GORDON FEINBLATT LLC, Baltimore,
Maryland, for Appellees.
Joseph S. Mack, CIVIL JUSTICE, INC.,
Baltimore, Maryland, for Amici Curiae.
2
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BARBARA MILANO KEENAN, Circuit Judge:
In
erred
this
in
appeal,
denying
a
arbitration award.
various
“credit
we
consider
motion
to
whether
vacate
the
district
certain
aspects
court
of
an
The subject of the parties’ dispute involved
repair”
services
provided
to
plaintiff
consumers, for which some of the disclosure requirements of the
Credit Repair Organizations Act (CROA, or the Act), 15 U.S.C.
§ 1679
et
seq.,
were
not
met.
The
arbitrator
awarded
the
plaintiffs only punitive damages for those violations, finding
that the plaintiffs had failed to prove actual damages under the
Act.
The
arbitrator
also
determined
that
the
amounts
of
attorneys’ fees and costs requested by the plaintiffs under CROA
were unreasonable.
The plaintiffs argue that in reaching these
conclusions, the arbitrator manifestly disregarded the law and
exceeded
the
scope
of
his
authority
under
the
Federal
Arbitration Act (FAA), 9 U.S.C. § 1 et seq.
We hold that the district court did not err in declining to
vacate
the
challenged
portions
of
the
arbitration
award.
Accordingly, we affirm the district court’s judgment.
I.
Between
1998
and
2003,
plaintiffs
Laverne
Jones,
Stacey
Jones, and Kerry Ness entered contracts to participate in debt
management
programs
with
a
credit
3
counseling
agency,
Genus
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Credit Management Corporation (Genus).
among
other
things,
the
plaintiffs
Under those contracts,
authorized
Genus
to
seek
reductions in the plaintiffs’ debt owed to their creditors, and
to withdraw various amounts from the plaintiffs’ bank accounts
for monthly payments to those creditors.
The contracts each
contained the following arbitration provision:
Any dispute between us that cannot be
amicably
resolved,
and
all
claims
or
controversies arising out of this Agreement,
shall be settled solely and exclusively by
binding arbitration in the City of Columbia,
Maryland, administered by, and under the
Commercial Arbitration Rules then prevailing
of, the American Arbitration Association (it
being expressly acknowledged that you will
not participate in any class action lawsuit
in connection with any such dispute, claim,
or controversy, either as a representative
plaintiff or as a member of a putative
class), and judgment upon the award rendered
by the arbitrator(s) may be entered and
enforced
in
any
court
of
competent
jurisdiction.
Although
Genus
represented
itself
as
a
non-profit
organization providing debt management services free of charge,
Genus
accepted
(voluntary
“voluntary”
contributions)
as
contributions
well
as
from
the
“voluntary
plaintiffs
contributions
from [participating] creditors” (fair share payments).
Genus
contracted with other corporations, including Amerix Corporation
(Amerix) and its affiliates, to perform critical functions such
as marketing, enrollment, and payment processing services, and
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paid those corporations significant portions of the voluntary
contributions and fair share payments that Genus received.
In
2004,
the
plaintiffs
jointly
filed
a
class
action
complaint against Genus, Amerix, and several other defendants
(collectively,
District
the
Court
original
for
the
defendants)
District
of
in
the
United
Maryland,
States
alleging
a
conspiracy to commit violations of federal and state law.
The
district
the
court
arbitration
dismissed
provisions
in
the
the
action,
plaintiffs’
holding
that the plaintiffs arbitrate their claims.
that
contracts
required
See Jones v. Genus
Credit Mgmt. Corp., 353 F. Supp. 2d 598, 602-03 (D. Md. 2005).
The court later supplemented its decision, directing that an
arbitrator
first
should
decide
whether
any
arbitration
would
involve class-wide claims or only individual claims asserted by
the plaintiffs.
See Genus Credit Mgmt. Corp. v. Jones, 2006 WL
905936, at *1 (D. Md. Apr. 6, 2006) (unpublished).
The plaintiffs accordingly initiated an arbitration action
alleging
individual
and
class
claims
against
the
original
defendants, seeking damages in excess of $270 million on behalf
of themselves and a nation-wide class of consumers. 1
1
By the time
In the district court, the original defendants filed a
civil action in which they unsuccessfully challenged the
arbitrator’s
determination
“that,
in
the
abstract,
the
arbitration between the Underlying Plaintiffs and the Underlying
Defendants could proceed as a class arbitration.” Amerix Corp.
(Continued)
5
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the arbitration had proceeded to a hearing on the merits of the
plaintiffs’ claims, the claims included alleged violations of:
(1) CROA; (2) the Racketeer Influenced and Corrupt Organizations
Act (RICO), 18 U.S.C. § 1961 et seq.; (3) the Maryland Consumer
Protection Act (MCPA), Md. Code, Com. Law § 13-101 et seq.; (4)
the Maryland Debt Management Services Act (MDMSA), Md. Code,
Fin. Inst. § 12-901 et seq.; and (5) Maryland common law on
matters of fraud and breach of fiduciary duty.
After discovery was completed, the arbitrator certified a
nation-wide
class
of
consumers
plaintiffs’ CROA and MCPA claims. 2
the
arbitrator’s
class
only
with
regard
to
the
The district court confirmed
certification,
district court’s judgment on appeal.
and
we
affirmed
the
See Genus Credit Mgmt.
Corp. v. Jones, No. 1:09-cv-01498-JFM (D. Md. Sept. 8, 2009),
aff’d, Amerix Corp. v. Jones, 457 F. App’x 287 (4th Cir. Dec. 9,
2011) (unpublished per curiam).
However, by the time of our
v. Jones, 457 F. App’x 287, 290 (4th Cir. Dec. 9, 2011); see
Genus Credit Mgmt. Corp. v. Jones, No. 1:05-cv-03028-JFM (D. Md.
Apr. 6, 2006).
The defendants did not appeal the district
court’s dismissal of this civil action.
See Amerix, 457 F.
App’x at 290.
2
Initially, the arbitrator also certified a class with
respect to the plaintiffs’ RICO and unjust enrichment claims.
However, the arbitrator later decertified the class with respect
to the RICO claims, and noted in his final award that the
plaintiffs’ unjust enrichment claims had been removed from the
arbitration by the time of the final merits hearing.
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decision in that appeal, some of the original defendants had
entered into class-wide settlements with the plaintiffs.
arbitrator
the
defendants
original
approved
and
plaintiffs’
awarded
settlements
more
than
with
$2.6
The
these
million
in
attorneys’ fees, noting that the proceedings had been pending
for over five years and that the work of plaintiffs’ counsel had
been
“exemplary.”
Following
the
settlements,
the
defendants
remaining in the case included Amerix, Amerix’s founder Bernaldo
Dancel (Dancel), and several of Amerix’s affiliates.
After extensive hearings, the arbitrator issued an 80-page
final
arbitration
award
relief on their claims.
granting
the
plaintiffs
only
partial
The arbitrator rejected the plaintiffs’
RICO and MCPA claims as well as the plaintiffs’ other state law
claims,
including
the
alleged
MDMSA
violations,
breaches
of
fiduciary duty, and common law fraud claims.
With
respect
to
a
subset
of
the
plaintiffs’
class
and
individual claims brought under CROA, the arbitrator found that
the defendants were liable for certain statutory violations.
In
particular, the arbitrator concluded that the defendants were
“credit repair organizations” within the meaning of CROA, 3 and
3
The arbitrator found that defendants Amerix, Dancel, 3C
Incorporated, and CareOne Services, Incorporated, constituted
credit repair organizations because their “business of improving
creditworthiness is an activity sufficiently close to the
literal reading of CROA as to bring that business within its
(Continued)
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that although the plaintiffs had not proved that the defendants
violated the Act by making untrue or misleading statements 4 or by
unlawfully billing consumers for debt management services, 5 the
evidence nonetheless showed that the defendants had failed to
make certain disclosures to consumers mandated under the Act.
Those
disclosure
provisions
required
that
the
defendants
take particular action to inform consumers of their rights under
federal and state law.
repair
organizations
summarizing
their
See 15 U.S.C. § 1679c (requiring credit
to
right
provide
to
consumers
accurate
with
information
a
in
document
certain
credit reports); § 1679d (requiring that any contract between a
regulatory ambit.” The arbitrator did not make any such finding
regarding defendant Ascend One Corporation (Ascend One), given
the arbitrator’s earlier conclusion that Ascend One was not a
successor to Amerix for liability purposes. Although we observe
that this finding was not challenged on appeal, we continue to
refer to the defendants in the collective sense for the purposes
of this opinion.
4
See 15 U.S.C. § 1679b(a)(3) (prohibiting the making or
usage of “any untrue or misleading representation of the
services of the credit repair organization”).
5
See 15 U.S.C. § 1679b(b) (“No credit repair organization
may charge or receive any money or other valuable consideration
for the performance of any service which the credit repair
organization has agreed to perform for any consumer before such
service is fully performed.”).
The plaintiffs urge that the
arbitrator held that the defendants violated this subsection of
the statute, but there is no support in the record for this
assertion.
Indeed, the arbitrator concluded that voluntary
contributions were not amounts required for the exchange of
credit repair services.
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credit repair organization and a consumer contain specific terms
and
conditions
services
to
of
be
payment,
performed,
a
detailed
information
description
identifying
of
the
the
credit
repair organization, and a conspicuous statement regarding the
consumer’s right to cancel the contract); § 1679e(b) (requiring
credit
repair
organizations
to
supply
consumers
with
cancellation forms, as well as copies of completed contracts and
any other signed documents).
that
the
either
defendants
met
reasonably
concluded
some
close
that
defendants’
consumers
“did
of
to
make
the
“[a]lmost
a
so,”
is
not
“denied
information
number
[statutory]
doing
violations
the
Although the arbitrator recognized
and
of
disclosures
requirements
the
arbitrator
good
enough,”
hundreds
options
of
that
or
that
came
nevertheless
and
that
the
thousands
of
should
have
been
given to them under the disclosure requirements of CROA.”
In determining the amount of compensatory damages to award
the
plaintiffs
for
the
defendants’
statutory
violations,
the
arbitrator observed that the plaintiffs sought compensation only
for
the
damages
voluntary
under
CROA’s
§ 1679g(a)(1)(B).
“any
amount
organization.”
contributions
paid
actual
of
certain
damages
class
provision,
members
15
as
U.S.C.
Under that statute, actual damages include
by
the
person
to
15 U.S.C. § 1679g(a)(1)(B).
9
the
credit
repair
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The arbitrator interpreted this actual damages provision as
contemplating payment from a consumer on a quid pro quo basis in
return
for
a
defined
credit
repair
service.
The
arbitrator
reasoned that this interpretation was consistent with use of the
term “payment” elsewhere in the statute, as well as with general
legal definitions of that term.
the
arbitrator
contributions
1679g(a)(1)(B),
class
members
exchange
for
concluded
were
did
that
not
primarily
not
credit
Applying this interpretation,
the
“amount[s]
plaintiffs’
because
make
any
repair
a
paid”
under
significant
Section
percentage
of
contributions
in
voluntary
services.
voluntary
Accordingly,
the
arbitrator declined to award any actual damages under CROA.
The
could
arbitrator
damages
recover
for
concluded,
certain
provision,
15
however,
violations
U.S.C.
§
that
under
1679g(a)(2).
the
CROA’s
plaintiffs
punitive
Noting
that
defendants Amerix and Dancel did not observe CROA’s disclosure
requirements when they “should have perceived that CROA applied
to their business,” the arbitrator analyzed those defendants’
financial data, their ability to pay a judgment, and the nature
of their misconduct.
Based on those factors, the arbitrator
awarded the plaintiffs $1,948,264 in punitive damages, jointly
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and
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severally
against
explained
that
in
his
powerful
deterrent,”
Amerix
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and
view,
this
was
Dancel. 6
amount
“well
The
would
within”
arbitrator
“serve
the
as
a
financial
capabilities of Amerix and Dancel, and would not “put [them] out
of business []or into bankruptcy.”
Finally, the arbitrator considered the plaintiffs’ request
for several million dollars in attorneys’ fees and costs.
request
was
in
addition
to
the
fees
of
about
$2.6
This
million
already awarded in the case.
Although the arbitrator recognized
that
“shall
under
CROA,
defendants
plaintiffs
for
“the
reasonable
attorneys’
costs
fees,”
of
15
be
the
liable”
action,
U.S.C.
to
successful
together
§ 1679g(a)(3),
with
the
arbitrator found that the additional fee and cost requests were
unreasonable.
The arbitrator explained that plaintiffs’ counsel
had failed to account separately for time spent on successful
claims and time spent on unsuccessful claims.
The arbitrator
also found that plaintiffs’ counsel had failed to substantiate
proposed
lodestar
billing
rates,
and
had
submitted
time
and
expense entries that otherwise were “defective.”
6
After finding that it would be “neither practical nor
required to distribute de minimis amounts” of the award of
punitive damages to the 487,066 class members, the arbitrator
ruled that those damages should be distributed in equal portions
to two cy pres recipients, namely, the National Consumer Law
Center and the National Association of Consumer Advocates.
In
addition, the arbitrator granted incentive awards to the three
class representatives.
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Treating
plaintiffs’
the
Pg: 12 of 25
attorneys’
counsel
from
the
fees
prior
already
received
settlements
as
by
“set-offs”
against the amounts sought, the arbitrator concluded that any
amounts
payable
exceeded
by
received.
for
the
the
greater
Accordingly,
items
that
amounts
the
were
the
substantiated
attorneys
arbitrator
were
already
declined
to
had
award
additional attorneys’ fees or costs.
The
plaintiffs
filed
the
present
civil
action
in
the
district court, challenging the arbitrator’s refusal to award
actual damages and additional attorneys’ fees and costs, and
seeking to confirm the arbitrator’s award of punitive damages.
The district court held that based on the “limited” standard of
review
applicable
“thoughtful
and
to
arbitration
well-considered”
awards,
nature
as
of
the
well
as
the
arbitrator’s
conclusions, “there is absolutely no basis for overturning the
arbitrator’s
decision.”
Accordingly,
the
court
granted
the
plaintiffs’ motion to confirm in part the arbitrator’s final
award, and denied the plaintiffs’ motion to vacate in part the
final
award.
The
plaintiffs
timely
appealed
the
district
court’s denial of their motion to vacate.
II.
The
plaintiffs
argue
that
the
district
court
committed
reversible error by refusing to vacate the arbitrator’s finding
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that the plaintiffs failed to establish under CROA: (1) actual
damages;
costs.
or
(2)
a
basis
for
additional
attorneys’
fees
and
The plaintiffs assert that the arbitrator ignored or
fundamentally misinterpreted the relevant provisions of the Act,
thereby manifestly disregarding the law and exceeding his powers
under
Section
10(a)(4)
of
the
FAA.
We
review
de
novo
the
district court’s denial of a motion to vacate an arbitration
award.
Wachovia Sec., LLC v. Brand, 671 F.3d 472, 478 (4th Cir.
2012).
A.
We first examine the standard of review that applies to a
district
court’s
review
of
an
arbitration
award.
In
articulating this standard, we focus on the plaintiffs’ argument
that although judicial review of an arbitration award in federal
court
ordinarily
inappropriate
the
here
resolution
of
is
very
because
limited,
the
statutory
such
a
arbitrator’s
claims.
We
narrow
focus
decision
disagree
is
involved
with
the
plaintiffs’ contention.
The FAA provides four grounds on which an arbitration award
may be vacated.
Those grounds are: (1) when the award was
procured by corruption, fraud, or undue means; (2) when there
was
evident
partiality
or
corruption
on
the
part
of
an
arbitrator; (3) when an arbitrator was guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause shown,
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or in refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior causing prejudice to
the rights of any party; or (4) when an arbitrator exceeded his
or her powers, or so imperfectly executed them that a mutual,
final, and definite award upon the subject matter submitted was
not made.
9 U.S.C. § 10.
The Supreme Court explained in Hall Street Associates, LLC
v. Mattel, Inc., 552 U.S. 576 (2008), that under the FAA, a
court “must” confirm an arbitration award “unless” a party to
the arbitration demonstrates that the award should be vacated
under one of the above four enumerated grounds.
Id. at 582.
After the decision in Hall Street, we further have clarified
that an arbitration award may be vacated when the arbitrator
“manifestly disregards” the law.
Wachovia Sec., 671 F.3d at
483.
As
a
general
matter,
however,
judicial
review
of
an
arbitration award in federal court is “severely circumscribed”
and “among the narrowest known at law.”
Id. at 478 (quotation
omitted); Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142
F.3d
188,
193
(4th
Cir.
1998).
Such
limited
review
is
appropriate given the fact that the arbitral forum is designed
to assist parties in avoiding much of the expense and delay that
often is associated with litigation.
142 F.3d at 193.
See Apex Plumbing Supply,
Thus, we have emphasized that a district court
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may not overturn an arbitration award “just because it believes,
however
strongly,
applicable law.”
that
the
arbitrators
misinterpreted
the
Wachovia Sec., 671 F.3d at 478 n.5 (citation
omitted).
The plaintiffs argue, nevertheless, that these principles
do not govern the present case because the arbitrator considered
remedies created by statute, rather than rights established by
contract.
two
In support of their position, the plaintiffs rely on
Supreme
Court
decisions
addressing
the
arbitration
of
federal statutory claims.
In
the
first
Interstate/Johnson
plaintiffs
focus
of
Lane
these
decisions,
Corp.,
on
solely
500
Court’s
the
U.S.
Gilmer
(1991),
20
v.
the
statement
that
“by
agreeing to arbitrate a statutory claim, a party does not forgo
the substantive rights afforded by the statute; it only submits
to
their
forum.”
marks
resolution
in
an
arbitral,
rather
than
a
judicial,
Id. at 26 (brackets, citation, and internal quotation
omitted).
Contrary
to
the
plaintiffs’
contention,
however, this statement does not alter the standard for judicial
review of an arbitration award involving statutory remedies, but
simply
emphasizes
that
such
remedies
are
available
arbitration proceedings as well as in our courts.
in
Thus, in
Gilmer, the Court held that a claim under the Age Discrimination
in
Employment
Act
(ADEA)
was
subject
15
to
the
parties’
prior
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to
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arbitrate
disputes
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arising
out
of
a
worker’s
employment, because arbitration was not precluded by the text,
legislative history, or underlying purposes of the ADEA, and did
not deprive the plaintiff of a fair opportunity to present his
claim.
Id. at 26-33.
The second decision cited by the plaintiffs, CompuCredit
Corp. v. Greenwood, 132 S. Ct. 665 (2012), likewise fails to
support the plaintiffs’ argument for heightened judicial review
of
arbitration
CompuCredit,
the
decisions
Court
involving
upheld
an
statutory
agreement
claims.
In
compelling
the
arbitration of CROA claims, holding that although CROA prohibits
the waiver of any right granted under the Act, CROA does not
prevent parties from agreeing to arbitrate claims arising under
its provisions. 7
Id. at 669-73.
In contrast to the claimants in Gilmer and CompuCredit, the
plaintiffs
here
do
not
dispute
7
the
enforceability
of
the
We have reached similar conclusions with respect to the
enforceability
of
arbitration
agreements
requiring
the
arbitration of federal statutory claims.
See, e.g., In re
Cotton Yarn Antitrust Litig., 505 F.3d 274 (4th Cir. 2007)
(concluding that plaintiffs failed to meet their burden of
showing that the no-joinder terms and one-year limitations
periods of their arbitration agreements prevented them from
vindicating their rights under antitrust laws); Bradford v.
Rockwell Semiconductor Sys., Inc., 238 F.3d 549 (4th Cir. 2001)
(rejecting challenge to a fee-splitting provision in an
agreement compelling arbitration of discrimination claims,
reasoning that such a provision does not necessarily deprive
claimants of an adequate forum in which to resolve their
statutory rights).
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arbitration provisions in their contracts, but seek heightened
scrutiny of the arbitrator’s decision.
Thus, the plaintiffs’
argument fails because it is nothing more than an attempt to
revive an argument squarely rejected in Gilmer, in which the
Court
explained
applies
to
that
although
arbitrators’
a
decisions
narrow
standard
regarding
of
statutory
review
claims,
“such review is sufficient to ensure that arbitrators comply
with the requirements of the statute at issue.”
Id. at 32 n.4
(citation and internal quotation marks omitted).
Accordingly,
in view of the Court’s clear language rejecting the plaintiffs’
position,
we
proceed
to
consider
the
merits
of
their
appeal
under the “extremely limited” standard of review that governs
our analysis.
See Wachovia Sec., 671 F.3d at 478 n.5.
B.
The
plaintiffs
argue
that
the
district
court
erred
by
refusing to vacate the arbitration award on the ground that the
arbitrator manifestly disregarded the law.
A court may vacate
an arbitration award under the manifest disregard standard only
when
a
plaintiff
has
shown
that:
(1)
the
disputed
legal
principle is clearly defined and is not subject to reasonable
debate;
and
principle.
(2)
the
arbitrator
Id. at 483.
refused
to
apply
that
legal
Moreover, as we have observed, the
manifest disregard standard is not an “invitation to review the
merits of the underlying arbitration,” id., or to establish that
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the arbitrator “misconstrued” or “misinterpreted the applicable
law.” 8
We
their
Id. at 478 n.5 & 481.
conclude
burden
that
of
the
showing
disregarded the law.
plaintiffs
that
have
the
failed
arbitrator
to
satisfy
manifestly
The plaintiffs fall far short of meeting
this burden because their argument, reduced to its essence, does
nothing more than challenge the arbitrator’s interpretation of
applicable law.
In
particular,
the
plaintiffs
argue
that
the
arbitrator
manifestly disregarded the plain text of CROA’s actual damages
provision.
Under that provision, a person who has established
that a credit repair organization is liable under the Act may
recover “any amount paid by the person to the credit repair
organization.”
contend
that
15
U.S.C.
Section
§ 1679g(a)(1)(B).
1679g(a)(1)(B)
clearly
The
plaintiffs
includes
certain
forms of damages that the arbitrator concluded were beyond the
8
We are not persuaded by amici curiae that we should
revisit our standard for manifest disregard. Amici cite Cole v.
Burns International Security Services, 105 F.3d 1465 (D.C. Cir.
1997), in which the D.C. Circuit held that an arbitration
agreement was enforceable, and stated that in cases involving
“novel or difficult legal issues,” courts may “review an
arbitrator’s award to ensure that its resolution of public law
issues is correct.” Id. at 1487. We have not adopted Cole, and
discern no reason to do so here. See Wachovia Sec., 671 F.3d at
483 (observing that our two-part test “has for decades
guaranteed that review for manifest disregard not grow into the
kind of probing merits review that would undermine the
efficiency of arbitration”).
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scope of the statute, including the fair share payments remitted
by participating creditors and the voluntary contributions made
by certain plaintiffs.
We disagree.
At the outset, we observe that at the final arbitration
hearing, the plaintiffs abandoned the argument that they were
entitled
to
receive
fair
share
payments
as
actual
damages. 9
Therefore, we consider only the arbitrator’s determination that
voluntary
contributions
did
not
constitute
“amount[s]
paid”
under Section 1679g(a)(1)(B).
With respect to that determination, we cannot say that the
arbitrator’s interpretation fell beyond the scope of reasonable
debate.
The arbitrator construed the actual damages provision
in the context of the statute as a whole, observing that another
section of the Act defined a “credit repair organization” by
referencing the sale, provision, or performance of credit repair
9
We note, however, that even if the plaintiffs had
preserved the argument, the arbitrator considered the competing
arguments regarding whether the fair share payments qualified as
actual damages under the Act.
On the one hand, the arbitrator
observed, those amounts were remitted by third-party creditors,
and
therefore
may
not
qualify
as
amounts
paid
“by the person” under Section 1679g(a)(1)(B).
On the other
hand, the arbitrator noted that the amounts could be considered
“indirect payments” by the consumer.
The existence of
reasonable debate on the subject undermines the plaintiffs’
position that the applicability of CROA’s actual damages
provision was clearly defined.
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services “in return for the payment of money or other valuable
consideration.” 10
15 U.S.C. § 1679a(3).
Given the absence of binding precedent requiring a contrary
result, we conclude that the arbitrator’s determination, that
“amount[s] paid” under the Act were limited to sums paid by the
plaintiffs
in
return
for
the
defendants’
services,
did
not
constitute a refusal to heed a clearly defined legal principle.
Wachovia Sec., 671 F.3d at 483.
Although another arbitrator
might have reached a different conclusion and found that the
Act’s
actual
irrespective
damages
whether
provision
the
covered
payments
were
all
amounts
“required”
for
paid,
the
exchange of credit repair services, it is not for us to pass
judgment on the strength of the arbitrator’s chosen rationale.
See id. at 481.
Thus, we hold that the arbitrator did not
10
The plaintiffs assert that the arbitrator’s conclusion
that the voluntary contributions did not constitute “amount[s]
paid by the person” under 15 U.S.C. § 1679g(a)(1)(B) is
“irrevocably inconsistent” with his earlier conclusion that the
some of the defendants constituted credit repair organizations
under 15 U.S.C. § 1679a(3), because those defendants rendered
credit repair services “in return for the payment of money or
other valuable consideration.”
As the defendants point out,
however, the plaintiffs’ argument fails to appreciate that
Section 1679g(a)(1)(B) operates only with respect to amounts
paid “by the person,” whereas Section 1679a(3) broadly defines a
“credit repair organization” in terms of amounts paid by any
person in exchange for credit repair services.
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manifestly disregard the law by determining that the plaintiffs
failed to prove actual damages under the Act. 11
We next consider the plaintiffs’ argument regarding their
request for additional attorneys’ fees and costs.
According to
the plaintiffs, the arbitrator’s refusal to award the additional
amounts requested violated CROA, which directs that a plaintiff
recover “[i]n the case of any successful action to enforce any
liability
under
[the
actual
damages
or
punitive
damages
provisions], the costs of the action, together with reasonable
11
We also find no merit in the plaintiffs’ other challenges
to the arbitrator’s refusal to award actual damages. First, the
plaintiffs argue that the arbitrator ignored CROA and imposed
his own “personal notions of right and wrong” by expressing
concern for whether a damages award would “put [the defendants]
out
of business
[]or
into
bankruptcy.”
This
argument
misrepresents
the
arbitrator’s
statements
regarding
the
financial status of two defendants, which statements were made
exclusively in the context of measuring the extent of punitive
damages.
In considering the deterrent or punitive effect of
punitive damages, it is well accepted that a court may consider
a defendant’s “ability to pay.”
See, e.g., Saunders v. B.B. &
T. Co. of Va., 526 F.3d 142, 154-55 (4th Cir. 2008) (citing TXO
Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 462 n.28
(1993) (plurality opinion)).
Second, the plaintiffs argue that in refusing to award
actual damages under CROA, the arbitrator disregarded a Maryland
statute providing that no person may require a voluntary
contribution from consumers for debt management services.
We
observe, however, that the arbitrator found that the defendants
did not require voluntary contributions from the plaintiffs.
Moreover, we fail to see how an alleged violation of a state
statute bears on the question whether the arbitrator manifestly
disregarded the law when he refused to award actual damages
under CROA, a federal statute.
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attorneys’ fees.”
Pg: 22 of 25
15 U.S.C. § 1679g(a)(3).
We disagree with
the plaintiffs’ argument.
As the arbitrator correctly observed, a plaintiff seeking
to recover attorneys’ fees under a fee-shifting statute bears
the
burden
of
reasonable.
demonstrating
that
the
requested
fees
are
See Fair Hous. Council of Greater Washington v.
Landow, 999 F.2d 92, 97-98 (4th Cir. 1993).
We similarly have
observed that a plaintiff seeking to recover costs is entitled
to compensation only for “reasonable litigation expenses.”
See
Daly v. Hill, 790 F.2d 1071, 1084 (4th Cir. 1986).
In
the
present
case,
the
arbitrator
found
that
the
additional amounts of attorneys’ fees and costs requested were
unreasonable.
deficiencies
counsel’s
The
with
use
arbitrator
the
of
identified
plaintiffs’
“block
fee
billing”
several
request,
practices,
serious
including
quotation
of
unjustified billing rates, and submission of time entries that
failed to segregate successful claims from unsuccessful claims.
The
arbitrator
improper
also
requests
noted
for
that
plaintiffs’
questionable
counsel
litigation
submitted
expenses,
including “bills from costly restaurants” and excessive travel
and lodging costs.
In
view
arbitrator
principles.
of
did
these
not
circumstances,
refuse
Instead,
the
to
heed
any
arbitrator
22
we
conclude
clearly
correctly
that
defined
observed
the
legal
that
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given the existence of such serious deficiencies, he had the
authority to disallow the fee request in its entirety.
Hous.
Council,
999
F.2d
at
97
(forbidding
See Fair
plaintiffs
from
submitting “a fee request which is merely an opening bid in the
quest for an award”).
Although he elected not to dismiss all
the requested fees and costs in summary fashion, the arbitrator
nevertheless
effectively
disallowed
what
unreasonable
attorneys’
fees
costs,
reducing
the
requested
and
amounts
and
by
he
concluded
by
were
significantly
“setting
off”
the
attorneys’ fees and costs that plaintiffs’ counsel already had
received from prior settlements. 12
While it may be debatable
whether the arbitrator performed this task “well,” the record in
this case shows that the arbitrator undertook a careful analysis
of
the
applicable
supported
Sec.,
671
by
his
F.3d
legal
principles
interpretation
at
478
n.5.
of
and
our
reached
precedent.
Accordingly,
12
we
a
decision
Wachovia
reject
the
The plaintiffs challenge the method by which the
arbitrator performed the lodestar analysis under the Supreme
Court’s decision in Perdue v. Kenny A. ex rel. Winn, 559 U.S.
542, 552-53 (2010), as well as the extent to which the
arbitrator explicitly considered the twelve factors adopted by
this Court to determine the adequacy of awards of attorneys’
fees in Barber v. Kimbrell’s, Inc., 577 F.2d 216, 226 n.28 (4th
Cir. 1978).
We find no basis to vacate the arbitration award,
given that the arbitrator explicitly considered Perdue and
appears to have incorporated the factors set forth in Barber in
his analysis of the reasonableness of attorneys’ billing rates
and time expended on successful claims.
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plaintiffs’
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various
Pg: 24 of 25
arguments
regarding
their
request
for
additional attorneys’ fees and costs.
C.
Finally,
the
plaintiffs
advance
an
alternative
argument
that the arbitrator exceeded his powers under Section 10(a)(4)
in his rulings on actual damages, attorneys’ fees, and costs.
We disagree.
By
its
terms,
Section
10(a)(4)
allows
courts
to
vacate
arbitration awards only when arbitrators “exceeded their powers,
or
so
imperfectly
executed
them
that
a
mutual,
final,
and
definite award upon the subject matter submitted was not made.”
9 U.S.C. § 10(a)(4).
As the Supreme Court recently observed in
Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013), a
plaintiff seeking relief under this provision bears the “heavy
burden” of showing that the arbitrator acted outside the scope
of the authority granted by the parties in their contract, by
“issuing
an
award
economic
justice.”
that
simply
Id.
at
reflects
2068
his
(citations,
own
notions
brackets,
of
and
internal quotation marks omitted).
Here,
the
plaintiffs
do
not
argue
that
the
arbitrator
failed to observe any limitations on his authority imposed by
the relevant arbitration provisions in the parties’ contracts.
Instead, the plaintiffs merely restate a theory that we already
have
rejected,
namely,
that
the
24
arbitrator
misinterpreted
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various
legal
discussed,
the
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principles.
plaintiffs
Pg: 25 of 25
Moreover,
have
as
we
misrepresented
already
the
have
record
by
characterizing the arbitrator’s analysis of appropriate punitive
damages
as
justice.”
11.
reflecting
the
arbitrator’s
“notions
of
economic
Id. (citation and brackets omitted); see supra note
Because the arbitrator interpreted the parties’ arbitration
provision and the applicable legal authorities in rendering the
award in the present case, we hold that the arbitrator did not
exceed the scope of his contractually delegated authority under
Section 10(a)(4) of the FAA. 13
III.
For these reasons, we affirm the district court’s judgment.
AFFIRMED
13
We find no merit in the plaintiffs’ separate assertion
that the length and form of the district court’s written order
shows that the court failed to perform sufficient judicial
review of the arbitrator’s final award.
Indeed, we conclude
that the district court’s order properly observed that judicial
review of arbitration decisions was “limited,” that the
arbitrator’s decision in this case was “thoughtful and wellconsidered,” and that there was “no basis for overturning that
decision.”
25
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