Antitrust Law Daily Wrap Up, PRIVACY—D. Mass.: TCPA claims were subject to arbitration, (Oct 29, 2013)

By Jody Coultas, J.D.

A borrower was required to arbitrate Telephone Consumer Protection Act (TCPA) claims filed against Sallie Mae, Inc. for approximately 147 automated calls made to collect student loan payments, the federal district court in Worcester, Massachusetts has held (Cyganiewicz v. Sallie Mae, Inc., October 24, 2013, Hillman, T.). The arbitration agreements in promissory notes securing student loans were valid and enforceable, and the TCPA claims were squarely within the scope of the agreements, according to the court.

The borrower held three promissory notes securing three separate student loans extended by Sallie Mae. Each loan included an arbitration agreement that provided that either party may elect to arbitrate, and require the other party to arbitrate, any “Claim,” as well as a sub-section providing borrowers with an opportunity to reject the arbitration agreement. After the borrower received appoximately147 automated phone calls from Sallie Mae, the borrower filed the TCPA claim.

A party seeking to compel arbitration under the Federal Arbitration Act (FAA) must demonstrate that a valid agreement to arbitrate exists, that the movant is entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause’s scope.

The arbitration agreements were valid and enforceable, according to the court. The borrower asserted that Sallie Mae did not present any evidence or documentation showing that the borrower signed or executed any document consenting to arbitration. However, Sallie Mae provided documents clearly showing that the borrower signed three promissory notes, and that each note contained a conspicuous arbitration agreement and a specific provision allowing one to reject the arbitration agreement. The borrower signed each of the notes and did not sign any of the rejection notices to show she was rejecting the arbitration agreement. The borrower’s claim that Sallie Mae did not specifically call her attention to the arbitration agreements was also unavailing.

The TCPA claims arising out of Sallie Mae’s calling practices fell squarely within the scope of the arbitration agreements, according to the court. The borrower argued that the arbitration agreements cannot be interpreted to cover the TCPA claims because the agreements did not specifically mention unlawful conduct, in violation of the TCPA. Sallie Mae presented the agreements, which clearly stated the arbitration agreement covered disputes relating to “the imposition or collection of principal,” specifically including disputes alleging “violation of statute.” The TCPA claims unambiguously fell within the scope of the agreement because they related to the collection of the principle of the loan and they alleged a violation of statute.

Since the borrower failed to present evidence of a congressional intent to preclude waiver of a judicial forum for TCPA claims, the court held that the borrower’s TCPA claims were arbitrable. The borrower argued that the TCPA claims were not arbitrable because Congress intended to preclude waiver of the judicial forum for such claims. If the parties enter into an arbitration agreement, it should be enforced unless Congress “has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.” Congressional intent to preclude waiver of judicial remedies may be shown by means of statutory text, legislative history, or some inherent conflict between arbitration and the statute’s underlying purposes. The borrower argued that Congress intended to preclude waiver of judicial remedies because Congress described TCPA’s remedies in terms of court suits. This argument has been addressed and explicitly rejected by the U.S. Supreme Court.

The case is No. 13-40067-TSH.

Attorneys: David R. Jackowitz (Shaevel & Krems) for Melissa Cyganiewicz. John T. Graff (Hirsch Roberts Weinstein, LLP) for Sallie Mae Inc.

Companies: Sallie Mae, Inc.

Cases: Privacy MassachusettsNews