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What a Disaster: Defendant’s Effort to Set Aside $233k Arbitrator Award Leads to Worst ATDS Decision in Over a Year

You know, sometimes TCPAWorld dwellers just have to take their lumps and move on from a bad ruling rather than risk creating bad law for all.

Example: a Defendant in New York just appealed to a district court after twice losing an individual TCPA suit in arbitration. In applying  a ”manifest disregard” standard, the Court in  Salerno v. Credit One Bank, N.A., 15-CV-516V(F), 2020 U.S. Dist. LEXIS 57134 (W.D.N.Y. March 31, 2020) not only upheld the ruling against the Defendant—and awarded pre-judgment interests and costs—but set forth some remarkably bad law to boot. Talk about bad facts making bad law.

So here’s what happened. The Defendant allegedly made a bunch of illegal calls to a debtor who stopped paying on the account. The Defendant argued to the original arbitrator—without success—that the Plaintiff had provided contractual consent to be called, which is irrevocable under Second Circuit law. The Defendant also argued it had not used an ATDS because its dialing equipment does not call randomly or sequentially. The arbitrator had rejected both arguments, concluding that there was no bilateral agreement to provide consent in the consumer contract between Plaintiff and Defendant but, instead, the Defendant had simply imposed consent on the Plaintiff as a condition of using a credit card. The arbitrator also found—contrary to the weight of recent authority-0that the Defendant’s predictive dialer was an ATDS.

Award for $233k entered against the Defendant.

Unsatisfied with the ruling, the Defendant took the issue up, de novo, to a three judge arbitrator panel. Defendant lost again, although the award was reduced by $500.00 to $232,500 (but with $12k in arbitral expense tacked on.)

Still undeterred by the findings against it—and perhaps motivated by recent positive rulings—the Defendant challenged the arbitral panel’s award to the district court. It did not go well. The Court recommended upholding every aspect of the panel’s award—and boy does this hurt.

First, on revocation, the Court found that Reyes was inapplicable because Plaintiff never actually provided express consent to begin with. “Plaintiff’s consent upon which Defendant relies for calling the 0301 number regarding Kroll’s account was not specifically provided in a bargained-for-bilateral agreement. Rather, it was provided unilaterally through Plaintiff’s acceptance, manifested by implication through Plaintiff’s use of her assigned credit card, of the Cardholder and Arbitration Agreement as Judge Curtin determined.” Get it? There was no bilateral agreement to provide consent in the place, so revocation was never even an issue.

Second, and even more damaging for TCPAWorld, the Court reached all the way back to the 2003 and 2008 FCC predictive dialer rulings to uphold the arbitrator panel’s findings on the ATDS issue. As TCPAWorld.com has written repeatedly, these rulings have not been relied upon in over a year. Indeed, every court to address the issue in the meantime has found that those rulings were set aside by ACA Int’l . Nonetheless, the court in Salerno holds that the arbitrator’s panel properly relied on the FCC’s rulings and, as a result, upheld the finding that Defendant’s predictive dialer was, per se, an ATDS. (Gees, now I have to update the rolling ATDS review.)

What a disaster. It is a little shocking that a court in the post-Glasser and post-Gadelhak (TCPA)world would continue to apply the old predictive dialer rulings. (Indeed, I predicted this would never happen again after a Magistrate Judge in Florida saw recommendations on that issue set aside by the district court last year.) Nonetheless, arbitrator rulings carry a strong presumption of validity and appeals to district courts from such rulings are heavily frowned upon. It is perhaps less surprising, then, that the magistrate judge in Salerno bent over backward to uphold the award. Unfortunately, however, all of us in TCPAWorld now must live with the consequences: a bad ATDS argument appears to have been resurrected.

So what comes next? Will the Defendant challenge the magistrate judge’s ruling to the district court–challenging that the magistrate judge manifestly disregarded the law when he concluded the arbitrator’s panel did not manifestly disregard the law? (good luck)–or will it simply write a check and stop the bleeding? We’ll keep an eye on this.

© Copyright 2020 Squire Patton Boggs (US) LLP

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About this Author

Eric Troutman Class Action Attorney
Of Counsel

Eric Troutman is one of the country’s prominent class action defense lawyers and is nationally recognized in Telephone Consumer Protection Act (TCPA) litigation and compliance. He has served as lead defense counsel in more than 70 national TCPA class actions and has litigated nearly a thousand individual TCPA cases in his role as national strategic litigation counsel for major banks and finance companies. He also helps industry participants build TCPA-compliant processes, policies, and systems.

Eric has built a national litigation practice based upon deep experience, rigorous...

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