Hamilton v. Navient Solutions, LLC, No. 18-cv-5432 (S.D.N.Y. Feb. 14, 2019) [click for opinion]
Lucin Hamilton obtained a student loan from Navient Solutions, LLC in 2007. When she fell behind on her payments, Navient called her repeatedly. Hamilton believed that Navient was utilizing an Automatic Telephone Dialling System (“ATDS”) to contact her. Hamilton had agreed to Navient’s use of ATDS in the 2007 loan agreement, but then advised Navient in April 2016 that she no longer consented. Nonetheless, Navient continued to contact her in the same manner. Hamilton initiated an arbitration with the American Arbitration Association against Navient in October 2016, alleging violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. Shortly thereafter, Hamilton defaulted on the 2007 loan agreement.
In the original arbitration, the parties stipulated that Hamilton had revoked her consent to be contacted via ATDS. The key fact at issue was therefore whether the technology Navient used to contact Hamilton constituted an ATDS as defined in the TCPA. Shortly before the arbitrator issued his award, the Second Circuit ruled in the Reyes case that, under the TCPA, bargained-for consent to be contacted via ATDS could not be unilaterally revoked. Navient asked the arbitrator to reopen the record to consider the effect of Reyes, but the arbitrator declined, reasoning that the parties had stipulated that Navient no longer possessed Hamilton’s consent and that revocation of consent was not an issue presented for decision in the arbitration. The arbitrator ultimately ruled in favor of Hamilton for $103,487.28, consisting of $116,000 in TCPA damages, less the $12,512.72 outstanding balance on the defaulted loan.
Navient appealed the award to a three-arbitrator panel, as provided for in the 2007 loan agreement. Specifically, the 2007 loan agreement provided that any “[c]laim involving more than $50,000” could be appealed to a three-arbitrator panel for de novo review of any aspect of the award. The appellate panel reversed the original award, holding that, in light of Reyes, Hamilton could not revoke her consent and, as such, Navient had not violated the TCPA. On March 19, 2018, the appellate panel issued a final award to Navient for $12,512.72, the balance on the defaulted loan.
Hamilton sought to vacate the final award under the Federal Arbitration Act (the “FAA“), alleging that the appellate panel exceeded its powers by: (i) making a new factual determination contrary to the parties’ stipulation; and (ii) applying New York law rather than Utah law. Navient cross-moved to confirm the final award. The court denied Hamilton’s motion to vacate and granted Navient’s motion to confirm.
The court held that the final appellate award should be given “great deference.” In its “narrowly limited” review of the final award, the court found that the question of whether Hamilton could unilaterally revoke her bargained-for consent was an issue of law. As such, the appellate panel did not exceed its powers by ruling contrary to the parties’ original stipulation because arbitrators are not required to defer to stipulations on issues of law. As to the choice of law issue, the court found that Hamilton had not asked the appellate panel to consider choice of law issues, and, therefore, the application of New York law (i.e., the Reyes decision) was not in excess of their authority.
The court also held that the motion to vacate should be denied on procedural grounds—specifically, that the motion was not timely served. Hamilton initiated the vacatur process by filing a complaint on June 15, 2018, which was rejected by the court clerk. Hamilton then refiled the complaint on June 18 as a “Petition to Vacate Arbitration.” The court clerk issued a summons based on the petition on June 19, and Hamilton served Navient on June 20. Hamilton filed a motion to vacate on July 17. The court held that a request for vacatur under the FAA must be brought as “a motion” and served within three months of the final award. The court opined that, while it had some freedom to consider the petition of June 18 as the equivalent of a motion, it could not extend the three-month period for service, which it calculated to have ended on June 19. As such, the court held that the petition and motion to vacate was not timely and should be denied on that basis in addition to the substantive grounds.