DEMUTH v. NAVIENT SOLUTIONS, LLC

Filing 15

ORDER indicating that, for the reasons stated within, Defendant's Motion to Dismiss 8 is granted, without prejudice to Plaintiffs right to challenge a final award; that the Clerk of Court shall make this matter closed. Signed by Judge Nora Barry Fischer on 8/15/17. (jg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
PAUL DEMUTH,
Plaintiff,
v.
NAVIENT SOLUTIONS, LLC f/k/a
NAVIENT SOLUTIONS, INC.,
Defendant.

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Civil Action No. 17-675
Hon. Nora Barry Fischer

MEMORANDUM ORDER
Presently before the Court is Defendant’s Motion to Dismiss Plaintiff’s Amended
Complaint to Confirm Arbitration Award and supporting briefing, (Docket No. [8]); Plaintiff’s
response in opposition, (Docket No. [11]); and Defendant’s reply, (Docket No. [14]). After
careful consideration of the parties’ submissions; the contractual agreement between the parties;
the arbitrator’s opinion and award; the Federal Arbitration Act (“FAA”); the American
Arbitration Association’s (“AAA”) Optional Appellate Arbitration Rules; the Consumer
Arbitration Rules; Defendant’s pending appeal of the arbitration award before the AAA; the
standards governing motions to dismiss set forth by the Supreme Court in Bell Atl. Corp. v.
Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and as
articulated in Third Circuit precedent, see, e.g., Connelly v. Lane Const. Corp., 809 F.3d 780,
790 (3d Cir. 2016); and for the following reasons, Defendant’s Motion to Dismiss (Docket No.
[8]), is GRANTED, without prejudice to Plaintiff’s right to challenge a final award.
By way of background, Plaintiff signed a Signature Student Loan Application and
Promissory Note (“the Note”) on February 23, 2007. (Docket No. 6-3). Section Q of the Note
provides:

ARBITRATION AGREEMENT — READ CAREFULLY
You and I agree that either party may elect to arbitrate — and require the other
party to arbitrate — any Claim under the following terms and conditions. This
Arbitration Agreement is part of the Signature Student Loan Promissory Note
(“Note”).
(Id. at 5) (emphasis in original). On May 27, 2016, Plaintiff filed an action against Defendant
before the AAA, alleging violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227,
et seq. (“TCPA”). (Docket No. 6-2). On May 11, 2017, the arbitrator concluded that Defendant
had violated the TCPA and awarded Plaintiff $309,000.00, to be reduced by $15,702.95 as an
offset of the amount due on the loan, for a total award of $293,297.05. (Docket No. 6-4 at 9).
After Defendant filed an application for a modification of the award, the arbitrator corrected his
mathematical errors on June 21, 2017, and awarded Plaintiff $300,000.00, to be reduced by
$15,702.95, for a total award of $284,297.05. (Docket No. 6-6).
Section Q.7 of the Note states:
EFFECT OF ARBITRATION AWARD — Any court with jurisdiction may enter
judgment upon the arbitrator’s award. The arbitrator’s award will be final and
binding, except for: (A) any appeal right under the Federal Arbitration Act, 9
U.S.C. §§ 1 et seq. (the “FAA”); and (B) Claims involving more than $50,000.
For Claims involving more than $50,000, any party may appeal the award to a
three-arbitrator panel appointed by the Administrator, which will reconsider de
novo any aspect of the initial award that is appealed. The panel’s decision will be
final and binding, except for any appeal right under the FAA.
(Docket No. 6-3 at 6). On May 16, 2017, Defendant’s counsel sent an e-mail to Plaintiff’s
counsel stating that Defendant intended to appeal the award to a three-arbitrator panel. (Docket
No. 8-1). On June 5, 2017, Defendant filed its AAA appeal under Case No. 01-16-0002-059002. (Docket No. 8-3). On June 29, 2017, the AAA sent a letter to Plaintiff and Defendant,
wherein it acknowledged that the filing requirements had been met and stated that the Consumer
Arbitration Rules are applicable. (Docket No. 8-4).

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In support of its Motion to Dismiss, Defendant argues that Plaintiff’s action before this
Court is premature because its appeal is pending before the AAA. (Docket No. 8 at 8-11).
Citing Rule A-1 of the AAA Optional Appellate Rules, Plaintiff contends that Defendant’s
appeal is barred because the arbitration agreement between the parties was a standardized form
contract that is non-negotiable or substantially non-negotiable. (Docket No. 11 at 6-7). In reply,
Defendant asserts that Rule A-1 does not prohibit the filing of AAA appeals and that the AAA’s
Consumer Arbitration Rules apply to its appeal. (Docket No. 14 at 1-5).
Current federal law and the law in effect when the Note was signed strongly favor
arbitration and the enforcement of arbitration agreements. “In enacting the FAA and providing
for the enforcement of arbitration agreements through the federal courts, Congress intended to
‘reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration
agreements upon the same footing as other contracts.’” Berkery v. Cross Country Bank, 256 F.
Supp. 2d 359, 364 (E.D. Pa. Apr. 11, 2003) (quoting Green Tree Fin. Corp.-Ala. v. Randolph,
531 U.S. 79, 89 (2000)). Section 9 of the FAA provides:
If the parties in their agreement have agreed that a judgment of the court shall be
entered upon the award made pursuant to the arbitration, and shall specify the
court, then at any time within one year after the award is made any party to the
arbitration may apply to the court so specified for an order confirming the award,
and thereupon the court must grant such an order unless the award is vacated,
modified, or corrected as prescribed in sections 10 and 11 of this title.
9 U.S.C. § 9. The United States Court of Appeals for the Third Circuit follows the “complete
arbitration rule.” Union Switch & Signal Div. Am. Standard, Inc. v. United Elec., Radio &
Mach. Workers, Local 610, 900 F.2d 608, 611 (3d Cir. 1990).

Pursuant to the complete

arbitration rule, “a district court should not entertain such a lawsuit challenging [an] arbitration
award until the arbitration is complete and the award is final.” Verizon Pa. LLC v. Communs.
Workers of Am., Local 1300, 216 F. Supp. 3d 530, 538 (E.D. Pa. Oct. 20, 2016) (citing Union
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Switch & Signal Div. Am. Standard, Inc., 900 F.2d at 610). “‘Generally, an arbitrator’s decision
is considered final when the arbitrator has completed his determination of every issue submitted
by the parties.’” Id. (quoting Millmen’s Local 550, United Bhd. of Carpenters & Joiners v.
Well’s Exterior Trim, 828 F.2d 1373, 1376 (9th Cir. 1987)).
Pursuant to this well-settled law, the Court finds that Plaintiff’s action is premature.
Plaintiff opposes Defendant’s motion on the basis that Rule A-1 of the AAA Optional Appellate
Rules prohibits an appeal. As Defendant has pointed out, however, after Defendant filed its
appeal, the AAA sent a notice to the parties wherein it “acknowledge[d] that the filing
requirements have been met” and stated that “[t]he Consumer Arbitration Rules have been
applied to this matter.” (Docket No. 8-4 at 1). More significantly, it is not for this Court to
determine which rules apply to Defendant’s appeal and whether the same is permissible. See
AAA Optional Appellate Arbitration Rules, Rule A-13, Docket No. 11-6 at 9 (effective Nov. 1,
2013) (stating that “[t]he appeal tribunal shall interpret and apply these rules insofar as they
relate to the appeal tribunal’s powers and duties”); AAA Consumer Arbitration Rules, Rule 53,
Docket No. 11-4 at 32 (effective Sept. 1, 2014) (stating that “[t]he arbitrator shall interpret and
apply these Rules as they relate to the arbitrator’s powers and duties”). Thus, the Court will
grant Defendant’s motion. See, e.g., Verizon Pa. LLC, 216 F. Supp. 3d at 531 (granting motion
to dismiss and finding that arbitration was not final because the defendant had filed suit seeking
to vacate the award); see also Hulley Enters. v. Russian Fed’n, 211 F. Supp. 3d 269, 288 (D.D.C.
2016) (holding that arbitration award could not be confirmed until appeal proceedings in the
Court of Appeal of The Hague were completed); EDF Int’l S.A. v. YPF S.A., 676 F. Supp. 2d
317, 320 (D. Del. 2009) (holding that confirmation of an award would occur after the arbitral
tribunal’s court of appeals resolved the parties’ respective appeals).

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For these reasons,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss (Docket No. [8]), is
GRANTED, without prejudice to Plaintiff’s right to challenge a final award.
IT IS FURTHER ORDERED that the Clerk of Court shall make this matter closed.
s/Nora Barry Fischer
Nora Barry Fischer
United States District Judge
Dated: August 15, 2017
cc/ecf: All counsel of record

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