Antitrust Law Daily Wrap Up, PRIVACY—N.D. Ind.: Arbitrator to determine whether arbitration required for TCPA claim by student loan borrower, (Feb 14, 2014)

By Edward L. Puzzo, J.D.

Due to a valid arbitration agreement contained within a student loan note, an arbitrator must make the determination as to whether a Telephone Consumer Protection Act claim brought by the borrower against the note-holder must be arbitrated or heard in court, the federal district court in Ft. Wayne, Indiana has ruled (Tuttle v. Sallie Mae, Inc., February 11, 2014, DeGuilio, J.).

On 2007, plaintiff Melissa Tuttle obtained a student loan. In 2013, Tuttle brought a claim against loan note-holder Sallie Mae, alleging that that collection calls made to her cellular phone violated the Telephone Consumer Protection Act (TCPA). Sallie Mae responded by moving to stay litigation and compel arbitration of the TCPA claim, based upon an arbitration agreement in the promissory note. In response, Tuttle disputed whether the arbitration agreement was valid and, even if it was, whether it should be enforced because legislative intent for TCPA claims was that they should be heard in a judicial forum.

Validity. In determining the validity of the arbitration agreement of the note, the court determined that the note was entered into in Indiana, and that it contained no valid choice of law provision, but that, applying Indiana’s “most intimate contacts” test under its choice of law rules, Indiana substantive law applied here.

In arguing that the arbitration agreement was valid, Sallie Mae stated that the signed note with the arbitration agreement was sufficient evidence that Tuttle signed it. The court agreed, stating that it was well established in Indiana that an individual is presumed to understand the documents which she signs and cannot be released from the terms of a contract due to her failure to read the documents.

Conscionability. Tuttle argued that the arbitration agreement was unconscionable because it was “buried in a multipage document”, but the court found that allegation failed to establish that the arbitration agreement was either procedurally or substantively unconscionable. The court noted that Tuttle did not avail herself of the option to opt-out of the arbitration agreement, and that the existence of an opt-out provision vitiated any conceivable claim that the circumstances under which she initially signed the agreement was procedurally unfair. The court further noted that the arbitration agreement was not hidden; sections were bolded and capitalized. Finally, the court noted, Tuttle did not claim that any of the terms within the arbitration agreement were unfair. Accordingly, the court found that the arbitration agreement was not unconscionable and was valid.

Scope. Within the arbitration agreement, the court noted, was a provision that provided that the arbitrators would decide any disputes concerning the validity, enforceability, arbitrability or scope of the arbitration agreement or the note. The Supreme Court has recognized that parties can agree to arbitrate “gateway” issues, such as whether a dispute falls within the scope of an arbitration agreement. Accordingly, the court ruled, the question of whether or not a TCPA claim fell within the scope of the arbitration agreement was for the arbitrator, not the court, to decide.

The court also rejected Tuttle’s argument that the TCPA claim arose independently from the note. An arbitration agreement may reach disputes having their origin or genesis in the contract, whether or not they implicate interpretation or performance of the contract per se, the court stated.

Court or arbitrator. Finally, the court rejected Tuttle’s argument that Congress intended that a court, not an arbitrator, hear all TCPA cases. The Supreme Court has held that the use of the terms “action,” “class action,” and “court” were not sufficient to infer an intent to preclude arbitration but rather were “utterly commonplace” phrases used to describe civil actions, the court stated.

Consequently, finding that the arbitration agreement was valid, and that the arbitrator may determine whether or not the TCPA claim fell under that agreement, the court granted Sallie Mae’s Motion to Compel Arbitration and Stay Litigation.

The case is Civil Action No. 1:13-CV-183 JD-RBC

Attorneys: Ryan Lee (Krohn & Moss Ltd) for Melissa Tuttle. Bonnie L. Martin (Ogletree Deakins Nash Smoak & Stewart PC) for Sallie Mae Inc.

Companies: Sallie Mae, Inc.

Cases: Privacy ConsumerProtection IndianaNews