Filed: Dec. 09, 2011
Latest Update: Feb. 22, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-2174 AMERIX CORPORATION; 3C INCORPORATED; CAREONE SERVICES, INCORPORATED, f/k/a Freedompoint Corporation; FREEDOMPOINT FINANCIAL CORPORATION; ASCEND ONE CORPORATION; BERNALDO DANCEL, Plaintiffs – Appellants, and GENUS CREDIT MANAGEMENT CORPORATION, now known as National Credit Counseling Services, Incorporated; INCHARGE INSTITUTE OF AMERICA, INCORPORATED, Plaintiffs, v. LAVERNE JONES; STACEY NESS; KERRY NESS, Defendants – A
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-2174 AMERIX CORPORATION; 3C INCORPORATED; CAREONE SERVICES, INCORPORATED, f/k/a Freedompoint Corporation; FREEDOMPOINT FINANCIAL CORPORATION; ASCEND ONE CORPORATION; BERNALDO DANCEL, Plaintiffs – Appellants, and GENUS CREDIT MANAGEMENT CORPORATION, now known as National Credit Counseling Services, Incorporated; INCHARGE INSTITUTE OF AMERICA, INCORPORATED, Plaintiffs, v. LAVERNE JONES; STACEY NESS; KERRY NESS, Defendants – Ap..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-2174
AMERIX CORPORATION; 3C INCORPORATED; CAREONE SERVICES,
INCORPORATED, f/k/a Freedompoint Corporation; FREEDOMPOINT
FINANCIAL CORPORATION; ASCEND ONE CORPORATION; BERNALDO
DANCEL,
Plaintiffs – Appellants,
and
GENUS CREDIT MANAGEMENT CORPORATION, now known as National
Credit Counseling Services, Incorporated; INCHARGE
INSTITUTE OF AMERICA, INCORPORATED,
Plaintiffs,
v.
LAVERNE JONES; STACEY NESS; KERRY NESS,
Defendants – Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, District Judge.
(1:09-cv-01498-JFM)
Argued: September 22, 2011 Decided: December 9, 2011
Before TRAXLER, Chief Judge, KEENAN, Circuit Judge, and
HAMILTON, Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
ARGUED: Lawrence S. Greenwald, GORDON, FEINBLATT, ROTHMAN,
HOFFBERGER & HOLLANDER, Baltimore, Maryland, for Appellants.
Joseph Seth Tusa, TUSA, PC, Lake Success, New York, for
Appellees. ON BRIEF: Catherine A. Bledsoe, Brian L. Moffet,
GORDON, FEINBLATT, ROTHMAN, HOFFBERGER & HOLLANDER, Baltimore,
Maryland, for Appellants Amerix Corporation, 3C Incorporated,
CareOne Services, Incorporated, FreedomPoint Financial
Corporation, Ascend One Corporation, and Bernaldo Dancel; Dwight
W. Stone, II, Dennis M. Robinson, Jr., WHITEFORD TAYLOR AND
PRESTON, LLP, Baltimore, Maryland, for Appellants Genus Credit
Management Corporation and InCharge Institute of America,
Incorporated. G. Oliver Koppell, John F. Duane, Daniel Schreck,
G. OLIVER KOPPELL & ASSOCIATES, New York, New York; Paul C.
Whalen, WHALEN & TUSA, PC, New York, New York; Jack Sando, LAW
OFFICE OF JACK C. SANDO, Bethesda, Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
This is an appeal under the Federal Arbitration Act, 9
U.S.C. §§ 1–16, from the district court’s order confirming an
arbitration award in which the arbitrator certified, inter alia,
a nationwide class arbitration of claims alleging unfair and
deceptive acts and practices in violation of the Maryland
Consumer Protection Act, Md. Code Ann., Commercial Law
§§ 13-301, 408 (West 2011). For reasons that follow, we affirm.
I.
We begin by setting forth the facts and procedural history
relevant to the issues on appeal. Laverne Jones, Stacey Ness,
and Kerry Ness each enrolled in a debt management program with
Genus Credit Management Corporation (Genus), pursuant to a
document styled “EasyPay Client Agreement[],” which in turn
incorporated by reference a document styled “Terms of Debt
Management-EasyPay.” Jones v. Genus Credit Mgmt. Corp. (Genus
I), 353 F. Supp. 2d 598, 600 (D. Md. Jan. 31, 2005) (internal
quotation marks omitted). We will refer to this latter document
as “the EasyPay Contract” and to the two documents together as
“the Debt Management Plan.” Genus drafted the Debt Management
Plan.
The EasyPay Contract contained the following arbitration
clause (the Arbitration Clause):
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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.
(J.A. 69). The EasyPay Contract also contained the following
choice-of-law provision (the Choice-of-Law Provision):
The forms and schedules in this packet contain the
complete agreement between you and [Genus] regarding
the [Debt Management Program]. All questions
concerning the construction, validity, and the
interpretation of this Agreement will be governed by
the laws of the State of Maryland without reference to
any conflict of laws rules.
Id.
Of relevance on appeal, Laverne Jones, Stacey Ness, and
Kerry Ness (collectively the Underlying Plaintiffs) jointly
filed a class action complaint in the United States District
Court for the District of Maryland against Genus; InCharge
Institute of America, Incorporated; Amerix Corporation; 3C
Incorporated; CareOne Services, Incorporated 1; Freedompoint
Financial Corporation; Ascend One Corporation; and Bernaldo
Dancel (collectively the Underlying Defendants). The First
1
Formerly known as Freedompoint Corporation.
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Amended Complaint alleged various causes of action under federal
and state law, including violation of the Credit Repair
Organizations Act, 15 U.S.C. §§ 1679 to 1679j, and unfair and
deceptive acts and practices in violation of the Maryland
Consumer Protection Act, Md. Code Ann., Commercial Law §§ 13-
301, 408 (West 2011). 2
The Underlying Defendants moved to dismiss the First
Amended Complaint on the ground that the Arbitration Clause
required the Underlying Plaintiffs to arbitrate all of their
claims alleged in such complaint. Alternatively, the Underlying
Defendants contended that if the district court permitted the
action to proceed at all, the class action allegations should be
stricken because the Arbitration Clause also contained a waiver
by the Underlying Plaintiffs of their respective rights to
participate in any class action lawsuit. The district court
agreed with the Underlying Defendants that the Arbitration
Clause required the Underlying Plaintiffs to arbitrate their
claims alleged in the First Amended Complaint. Genus I, 353 F.
Supp. 2d at 603. The district court alternatively held that,
assuming arguendo the Underlying Plaintiffs are not required to
submit their claims to arbitration, their class action
2
None of the Underlying Plaintiffs were residents of
Maryland during the time relevant to their allegations of
wrongdoing on the part of the Underlying Defendants.
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allegations must be stricken in light of the
class-action-lawsuit waiver contained in the Arbitration Clause.
Id. In a separate order, the district court granted the
Underlying Defendants’ motion to dismiss, dismissed the entire
action, and “directed” the Underlying Plaintiffs “to arbitrate
their claims against [the Underlying] [D]efendants, (if they
choose to pursue them).”
Id. Notably, the district court’s
opinion in Genus I did not address whether the Underlying
Plaintiffs could proceed with class-wide claims in arbitration,
and the district court later wrote counsel for all parties to
clarify its intention that the arbitrator should decide whether
arbitration should be of class-wide claims or only the
individual claims asserted by the Underlying Plaintiffs. Genus
Credit Mgmt. Corp. v. Jones (Genus II),
2006 WL 905936 at *1 (D.
Md. April 6, 2006).
In February 2005, the Underlying Plaintiffs commenced an
arbitration action against the Underlying Defendants before the
American Arbitration Association (AAA), asserting various
federal and state law claims. Pursuant to AAA rules, the
parties jointly chose Donald H. Green as the sole arbitrator
(the Arbitrator). Thereafter, the Arbitrator issued a decision
entitled the “Partial Final Clause Construction Award,” in which
the Arbitrator determined that, in the abstract, the arbitration
between the Underlying Plaintiffs and the Underlying Defendants
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could proceed as a class arbitration. Id. Dissatisfied with
this decision, on November 7, 2005, the Underlying Defendants
brought an action in the district court, seeking to have the
Partial Final Clause Construction Award vacated. The Underlying
Plaintiffs moved to dismiss the action. The Underlying
Defendants opposed the motion and moved for summary judgment.
The district court granted the Underlying Plaintiffs’ motion and
dismissed the action.
Id. at *3. The Underlying Defendants did
not appeal this dismissal.
After the parties engaged in discovery in the arbitration
proceeding, the Underlying Plaintiffs moved for class
certification of all claims asserted in their arbitration
complaint. On May 7, 2009, the Arbitrator issued a decision
entitled “Class Determination Award,” in which he determined
that several of the claims, including claims under the Credit
Repair Organizations Act and the Maryland Consumer Protection
Act, could proceed in arbitration as nationwide class claims.
The Arbitrator also named the Underlying Plaintiffs as class
representatives.
Dissatisfied with the Class Determination Award, the
Underlying Defendants filed a second action in the district
court; this time seeking to vacate the Class Determination Award
in part. Specifically, they sought to vacate the Class
Determination Award to the extent the Arbitrator: (1) ruled
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that the Choice-of-Law Provision required the application of
Maryland substantive law to the state law tort claims alleged by
the Underlying Plaintiffs; and (2) certified a nationwide class
of plaintiffs with respect to their alleged violations of the
Maryland Consumer Protection Act.
The Underlying Plaintiffs moved for confirmation of the
Class Determination Award. By order dated September 8, 2009,
the district court denied the Underlying Defendants’ request for
partial vacatur of the Class Determination Award, granted the
Underlying Plaintiffs’ motion for confirmation, and confirmed
the Class Determination Award. The Underlying Defendants noted
a timely appeal of such order, resulting in the appeal presently
before us. Following our hearing of oral argument in the
present appeal on September 22, 2011, Genus and InCharge
Institute of America, Incorporated on the one hand and the
Underlying Plaintiffs on the other hand jointly moved to dismiss
the present appeal as between themselves. See Fed. R. App.
Proc. 42(b) (providing for voluntary dismissal by agreement of
the parties). We granted their motion. Accordingly, the
remaining appellants in the present appeal are Amerix
Corporation, 3C Incorporated, CareOne Services Incorporated,
Freedompoint Financial Corporation, Ascend One Corporation, and
Bernaldo Dancel (the Remaining Underlying Defendants).
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II.
On appeal, the Remaining Underlying Defendants ask us to
vacate the portion of the Class Determination Award in which the
Arbitrator certified a nationwide class of consumers with
respect to the claims asserted under the Maryland Consumer
Protection Act on the ground that, in so certifying, the
Arbitrator exceeded his powers. See 9 U.S.C. § 10(a)(4)
(arbitration award may be vacated “where the arbitrators
exceeded their powers”). The Remaining Underlying Defendants
attribute the Arbitrator’s alleged exceeding of his powers to
the following two conclusions reached by the Arbitrator: (1)
that Maryland substantive law applies to the Underlying
Plaintiffs’ state law tort claims; and (2) that the Maryland
Consumer Protection Act applies to the Underlying Plaintiffs.
According to the Remaining Underlying Defendants, these two
conclusions are erroneous.
We begin our consideration of these contentions by
reiterating our extremely narrow scope of review in these types
of appeals. “[J]udicial review of arbitration awards is . . .
among the narrowest known to the law.” United States Postal
Serv. v. Am. Postal Workers Union, 204 F.3d 523, 527 (4th Cir.
2000) (internal quotation marks omitted). Vacatur of an
arbitration award must, therefore, be a “rare occurrence.”
Raymond James Fin. Servs., Inc. v. Bishop,
596 F.3d 183, 184
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(4th Cir.), cert. denied, 131 S. Ct. 224 (2010). In reviewing
the Class Determination Award under § 10(a)(4), we are limited
to determining whether the Arbitrator did the job he was told to
do, i.e., whether he acted within the scope of his powers; not
whether he did it well, correctly, or reasonably, but simply
whether he did it. Central West Virginia Energy, Inc. v. Bayer
Cropscience LP,
645 F.3d 267, 272 (4th Cir. 2011); Raymond James
Fin. Servs.,
Inc., 596 F.3d at 190. See also AT&T Mobility LLC
v. Concepcion,
131 S. Ct. 1740, 1752 (2011) (“review under § 10
[of the Federal Arbitration Act] focuses on misconduct rather
than mistake”).
Our consideration of the parties’ arguments and careful
review of the record on appeal convince us that the Arbitrator
did not exceed his powers in certifying a nationwide class of
consumers with respect to the claims under the Maryland Consumer
Protection Act as alleged in the arbitration complaint. There
is no dispute that the Arbitrator was charged with the duty of
determining which state’s substantive law applies to the
Underlying Plaintiffs’ state law claims. In discharging this
duty, the Arbitrator construed the first sentence of the
Arbitration Clause in conjunction with the Choice-of-Law
Provision. The first sentence of the Arbitration Clause, as
quoted in the Class Determination Award, provides: “‘Any
dispute between us that cannot be amicably resolved, and all
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claims or controversies arising out of this Agreement, shall be
settled solely and exclusively by binding arbitration in the
City of Columbia, Maryland.’” (J.A. 33). The Choice-of-Law
Provision, as quoted in the Class Determination Award, states:
“‘All questions concerning the construction, validity, and the
interpretation of this Agreement will be governed by the laws of
the State of Maryland without reference to any conflict of laws
rules.’” Id.
According to the Remaining Underlying Defendants, the
Choice-of-Law Provision limited the application of Maryland law
to matters of contract construction only. Particular tort
claims, they contend, are to be governed by Maryland’s
choice-of-law jurisprudence, which follows the rule of lex loci
delecti as the ordering principle in tort cases. See Kortobi v.
Kass,
957 A.2d 1128, 1139 (Md. Ct. Spec. App. 2008) (Maryland
adheres to lex loci delecti (the law of the place of injury) as
the ordering principle in tort cases).
The crux of the Arbitrator’s analysis of this issue, as set
forth in the Class Determination Award, is as follows:
[The Underlying Plaintiffs] contend these provisions
mandate the application of Maryland law to all state
law aspects of this arbitration. [The Arbitration
Clause] is, in the parlance, a “broad” arbitration
clause.
As noted, [the Underlying Defendants] assert [the
Choice-of-Law Provision] applies only to construction
of the [Debt Management Plan]. They further argue
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that [the Arbitration Clause] merely establishes a
situs and not the applicable law. It follows, they
say, the class should not be certified if it is
necessary to resort to the laws of 50 states to
resolve the individual claims of the putative class
members. [The Underlying Plaintiffs] disagree and
also note that, even if that were so, case law
demonstrates that such resort need not toll the death
knell to their class aspirations. Both the [Choice-
of-Law Provision] per se, and the introductory words
of [the Arbitration Clause] compel this Arbitrator to
accept [the Underlying Plaintiffs’] argument.
* * *
Finally, reading [the Arbitration Clause] and
[the Choice-of-Law Provision] together, as is
appropriate in contract construction, and employing
the doctrine of contra proferent[e]m, they support the
interpretation that Maryland law was intended to
apply.
(J.A. 34). 3
Based upon this excerpt from the Class Determination Award,
we are confident the Arbitrator did exactly the job the parties
asked him to do——construe and apply the Debt Management Plan in
determining the law applicable to the Underlying Plaintiffs’
state law tort claims. Accordingly, we have no trouble
concluding that the Arbitrator acted within the scope of his
arbitral authority in construing the EasyPay Contract to provide
3
The doctrine of contra proferentem provides that ambiguous
contractual provisions must be construed against the interests
of the drafter. Maersk Line, Ltd. v. United States, 513 F.3d
418, 423 (4th Cir. 2008) (“The basic contract law principle
contra proferentem counsels that we construe any ambiguities in
the contract against its draftsman.”).
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that Maryland substantive law applies to the Underlying
Plaintiffs’ state law tort claims.
There is also no dispute that the Arbitrator was charged
with determining the elements for class certification of the
claims under the Maryland Consumer Protection Act. Before the
Arbitrator, the Underlying Defendants argued that, because none
of the Underlying Plaintiffs were residents of Maryland, they
“cannot be certified as a class under the [Maryland Consumer
Protection Act] because that Act only prohibits communications
to Maryland residents of false or misleading statements or
inducements.” (J.A. 51) (internal quotation marks and emphasis
omitted).
The crux of the Arbitrator’s analysis on this issue, as set
forth in the Class Determination Award, is as follows:
The answer lies in our prior ruling that Maryland
law applies to the state law claims. As we have
already noted the [Arbitration Clause] and [the
Choice-of-Law Provision] fairly read require the
application of Maryland law to non-federal disputes
here. Thus the parties to the contract agreed to have
Maryland substantive rules of liability apply to their
disputes without reference to whether the particular
customer was or was not a Maryland resident. If the
effect of this agreement were to eliminate all
Maryland remedies defined to entitle only Maryland
residents to a remedy, this would be a perverse result
depriving the customer of the benefit of any consumer
protection law in Maryland so framed, as well as any
other state law remedy. This is contrary to the maxim
pacta sunt servanda, namely that agreements are
presumed to lead to enforceable obligations, not
nullities.
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Id. Based upon this excerpt from the Class Determination Award,
we are again confident that the Arbitrator did exactly the job
the parties requested him to do——interpret and enforce the Debt
Management Plan in order to determine the elements for class
certification of the claims asserted by the Underlying
Plaintiffs under the Maryland Consumer Protection Act.
Accordingly, we have no trouble concluding that the Arbitrator
acted within the scope of his arbitral authority in interpreting
the EasyPay Contract to provide that the Maryland Consumer
Protection Act applies to the Underlying Plaintiffs.
To summarize, in concluding that Maryland substantive law
applies to the Underlying Plaintiffs’ state law tort claims and
that the Maryland Consumer Protection Act applies to the
Underlying Plaintiffs, the Arbitrator was construing and/or
applying the EasyPay Contract and acting within the scope of his
authority. A fortiori, the Arbitrator did not exceed his
authority in certifying a nationwide class of consumers with
respect to the claims under the Maryland Consumer Protection
Act.
III.
As an alternative basis for obtaining vacatur of that
portion of the Class Determination Award certifying a nationwide
class of consumers with respect to claims under the Maryland
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Consumer Protection Act, the Remaining Underlying Defendants
contend the Arbitrator acted in manifest disregard of the law.
Specifically, the Remaining Underlying Defendants contend the
Arbitrator acted in manifest disregard of the law by ruling that
the Maryland Consumer Protection Act applies to their disputes
with the Underlying Plaintiffs and potential class members
without regard to whether any such person was a resident of
Maryland at the time of the alleged tortious conduct. 4 In
support of this contention, the Remaining Underlying Defendants
rely upon Consumer Protection Div. v. Outdoor World Corp., 603
A.2d 1376, 1382 (Md. Ct. Spec. App. 1992), for the proposition
that the Maryland Consumer Protection Act prohibits false or
misleading statements or inducements from being sent to Maryland
residents within Maryland’s borders, but does not apply to
protect non-Maryland residents under the same circumstances.
We begin our consideration of this issue by noting that
manifest disregard of the law is not an enumerated ground for
vacating an arbitration award under the Federal Arbitration Act.
9 U.S.C. § 10(a); MCI Constructors, LLC v. City of Greensboro,
610 F.3d 849, 857 (4th Cir. 2010). However, prior to the
Supreme Court’s opinion in Hall Street Assocs., LLC v. Mattel,
4
As we previously stated, none of the Underlying Plaintiffs
resided in Maryland during the time relevant to their claims
under the Maryland Consumer Protection Act.
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Inc., 552 U.S. 576 (2008), many courts, including the Fourth
Circuit, recognized an arbitrator’s manifest disregard of the
law as a viable common law ground for vacating an arbitration
award. See, e.g., Remmey v. PaineWebber, Inc.,
32 F.3d 143, 149
(4th Cir. 1994). Since Hall Street Assocs. issued, some courts
have expressed skepticism about the continued validity of
manifest disregard of the law as a valid basis for vacating an
arbitration award. See, e.g., T.Co Metals, LLC v. Dempsey Pipe
& Supply, Inc.,
592 F.3d 329, 338–40 (2d Cir. 2010).
Because we conclude the Remaining Underlying Defendants
have not established that the Arbitrator manifestly disregarded
the law as they allege, we need not decide whether a court may
still vacate an arbitration award if it flows from the
Arbitrator’s manifest disregard of the law. Specifically, the
Remaining Underlying Defendants fail to establish that the
Arbitrator, in making his Class Determination Award, was “aware
of the law, understood it correctly, found it applicable to the
case before [him], and yet chose to ignore it in propounding
[his] decision . . .”; all requirements of the manifest
disregard of the law ground for vacatur. Remmey, 32 F.3d at
149. Rather, the record makes clear that the Arbitrator found
the Maryland residency requirement recognized in Outdoor World
Corp. inapplicable to the claims of the Underlying Plaintiffs
and potential class members under the Maryland Consumer
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Protection Act based upon language in the EasyPay Contract.
See, e.g., (J.A. 51) (“[T]he parties to the contract agreed to
have Maryland substantive rules of liability apply to their
disputes without reference to whether the particular customer
was or was not a Maryland resident.”). Under this circumstance,
we cannot say that the Arbitrator manifestly disregarded the law
with respect to his certification of a nationwide class of
consumers under the Maryland Consumer Protection Act without
regard to whether such consumers are residents of Maryland.
In conclusion, we affirm the district court’s confirmation
of the Class Certification Award.
AFFIRMED
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