SDNY Gives Same Deference to AAA Appellate Arbitral Panel Decision as Arbitral Awards Under the FAA

Category: Commercial Litigation and Arbitration

Last month, the United States District Court of the Southern District of New York granted the same deference to an appellate arbitration panel that is given to an arbitral award under the Federal Arbitration Act.

The case, Hamilton v. Navient Solutions, LLC, was a suit brought by student loan borrower against loan servicer, Navient Solutions for harassment in violation of the Telephone Consumer Protection Act (“TCPA”). Hamilton had given consent to receive calls from collection companies in her student loan application. After her loan payments were declared in default as of November 2016, she started receiving phone calls from Navient. In April of 2016, Hamilton had affirmatively asked Navient to add her to the Do Not Call List and Navient confirmed that she was added to the list. She was subsequently called 237 times over a 6 month period.

Hamilton’s student loan agreement contained an arbitration clause, including a reference to the application of the AAA’s Optional Appellate Arbitration Rules which provides:

Any court with jurisdiction may enter judgment upon the arbitrator’s award. The arbitrator’s award will be final and binding, except for: (1) any appeal right under the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (the “FAA”); and (2) 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…

In 2017 prior to the issuance of the award but after the close of the arbitration the Second Circuit in Reyes v. Lincoln Automotive Financial Services held that the TCPA does not permit parties to unilaterally revoke bargained-for consent to use an ATDS to contact them. Navient requested the arbitration record be reconsidered in light of this decision. The arbitrator denied and issued an award in favor of Hamilton. Navient appealed the decision to a three-judge arbitration panel which issued a final award in favor of Navient. Hamilton sought to vacate the decision of the appellate arbitration panel on the grounds of excess power in violation of the FAA because it was not allowed to make factual determinations.

S.D.N.Y. found in favor of Navient, finding that the appellate arbitration panel did not exceed its powers, show manifest disregard, or otherwise violate FAA demonstrating that judicial review of a decision of the appellate arbitration panel’s decision is afforded the same deference as reviewing an arbitral provided for in the FAA.

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