PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2160
LAVERNE JONES; STACEY JONES, f/k/a Stacey Ness; KERRY NESS,
Individually and on behalf of the Certified Class,
Plaintiffs - Appellants,
v.
BERNALDO DANCEL; AMERIX CORPORATION; 3C INCORPORATED;
CAREONE SERVICES, INCORPORATED; ASCEND ONE CORPORATION,
Defendants – Appellees.
-------------------------
CIVIL JUSTICE, INC.; PUBLIC JUSTICE CENTER, INC.; MARYLAND
CONSUMER RIGHTS COALITION, INC.,
Amici Supporting Appellants.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, Senior District
Judge. (1:14-cv-02375-JFM)
Argued: May 12, 2015 Decided: July 6, 2015
Before TRAXLER, Chief Judge, and GREGORY and KEENAN, Circuit
Judges.
Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Chief Judge Traxler and Judge Gregory joined.
ARGUED: G. Oliver Koppell, LAW OFFICES OF G. OLIVER KOPPELL &
ASSOCIATES, New York, New York, for Appellants. Lawrence S.
Greenwald, GORDON FEINBLATT LLC, Baltimore, Maryland, for
Appellees. ON BRIEF: Peter A. Holland, THE HOLLAND LAW FIRM,
P.C., Annapolis, Maryland; Gregory S. Duncan, LAW OFFICE OF
GREGORY S. DUNCAN, Charlottesville, Virginia; Joseph S. Tusa,
TUSA P.C., Southold, New York, for Appellants. Catherine A.
Bledsoe, Brian L. Moffet, GORDON FEINBLATT LLC, Baltimore,
Maryland, for Appellees. Joseph S. Mack, CIVIL JUSTICE, INC.,
Baltimore, Maryland, for Amici Curiae.
2
BARBARA MILANO KEENAN, Circuit Judge:
In this appeal, we consider whether the district court
erred in denying a motion to vacate certain aspects of an
arbitration award. The subject of the parties’ dispute involved
various “credit repair” services provided to plaintiff
consumers, for which some of the disclosure requirements of the
Credit Repair Organizations Act (CROA, or the Act), 15 U.S.C.
§ 1679 et seq., were not met. The arbitrator awarded the
plaintiffs only punitive damages for those violations, finding
that the plaintiffs had failed to prove actual damages under the
Act. The arbitrator also determined that the amounts of
attorneys’ fees and costs requested by the plaintiffs under CROA
were unreasonable. The plaintiffs argue that in reaching these
conclusions, the arbitrator manifestly disregarded the law and
exceeded the scope of his authority under the Federal
Arbitration Act (FAA), 9 U.S.C. § 1 et seq.
We hold that the district court did not err in declining to
vacate the challenged portions of the arbitration award.
Accordingly, we affirm the district court’s judgment.
I.
Between 1998 and 2003, plaintiffs Laverne Jones, Stacey
Jones, and Kerry Ness entered contracts to participate in debt
management programs with a credit counseling agency, Genus
3
Credit Management Corporation (Genus). Under those contracts,
among other things, the plaintiffs authorized Genus to seek
reductions in the plaintiffs’ debt owed to their creditors, and
to withdraw various amounts from the plaintiffs’ bank accounts
for monthly payments to those creditors. The contracts each
contained the following arbitration provision:
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.
Although Genus represented itself as a non-profit
organization providing debt management services free of charge,
Genus accepted “voluntary” contributions from the plaintiffs
(voluntary contributions) as well as “voluntary contributions
from [participating] creditors” (fair share payments). Genus
contracted with other corporations, including Amerix Corporation
(Amerix) and its affiliates, to perform critical functions such
as marketing, enrollment, and payment processing services, and
4
paid those corporations significant portions of the voluntary
contributions and fair share payments that Genus received.
In 2004, the plaintiffs jointly filed a class action
complaint against Genus, Amerix, and several other defendants
(collectively, the original defendants) in the United States
District Court for the District of Maryland, alleging a
conspiracy to commit violations of federal and state law. The
district court dismissed the action, holding that the
arbitration provisions in the plaintiffs’ contracts required
that the plaintiffs arbitrate their claims. See Jones v. Genus
Credit Mgmt. Corp., 353 F. Supp. 2d 598, 602-03 (D. Md. 2005).
The court later supplemented its decision, directing that an
arbitrator first should decide whether any arbitration would
involve class-wide claims or only individual claims asserted by
the plaintiffs. See Genus Credit Mgmt. Corp. v. Jones, 2006 WL
905936, at *1 (D. Md. Apr. 6, 2006) (unpublished).
The plaintiffs accordingly initiated an arbitration action
alleging individual and class claims against the original
defendants, seeking damages in excess of $270 million on behalf
of themselves and a nation-wide class of consumers. 1 By the time
1 In the district court, the original defendants filed a
civil action in which they unsuccessfully challenged the
arbitrator’s determination “that, in the abstract, the
arbitration between the Underlying Plaintiffs and the Underlying
Defendants could proceed as a class arbitration.” Amerix Corp.
(Continued)
5
the arbitration had proceeded to a hearing on the merits of the
plaintiffs’ claims, the claims included alleged violations of:
(1) CROA; (2) the Racketeer Influenced and Corrupt Organizations
Act (RICO), 18 U.S.C. § 1961 et seq.; (3) the Maryland Consumer
Protection Act (MCPA), Md. Code, Com. Law § 13-101 et seq.; (4)
the Maryland Debt Management Services Act (MDMSA), Md. Code,
Fin. Inst. § 12-901 et seq.; and (5) Maryland common law on
matters of fraud and breach of fiduciary duty.
After discovery was completed, the arbitrator certified a
nation-wide class of consumers only with regard to the
plaintiffs’ CROA and MCPA claims. 2 The district court confirmed
the arbitrator’s class certification, and we affirmed the
district court’s judgment on appeal. See Genus Credit Mgmt.
Corp. v. Jones, No. 1:09-cv-01498-JFM (D. Md. Sept. 8, 2009),
aff’d, Amerix Corp. v. Jones, 457 F. App’x 287 (4th Cir. Dec. 9,
2011) (unpublished per curiam). However, by the time of our
v. Jones, 457 F. App’x 287, 290 (4th Cir. Dec. 9, 2011); see
Genus Credit Mgmt. Corp. v. Jones, No. 1:05-cv-03028-JFM (D. Md.
Apr. 6, 2006). The defendants did not appeal the district
court’s dismissal of this civil action. See Amerix, 457 F.
App’x at 290.
2Initially, the arbitrator also certified a class with
respect to the plaintiffs’ RICO and unjust enrichment claims.
However, the arbitrator later decertified the class with respect
to the RICO claims, and noted in his final award that the
plaintiffs’ unjust enrichment claims had been removed from the
arbitration by the time of the final merits hearing.
6
decision in that appeal, some of the original defendants had
entered into class-wide settlements with the plaintiffs. The
arbitrator approved the plaintiffs’ settlements with these
original defendants and awarded more than $2.6 million in
attorneys’ fees, noting that the proceedings had been pending
for over five years and that the work of plaintiffs’ counsel had
been “exemplary.” Following the settlements, the defendants
remaining in the case included Amerix, Amerix’s founder Bernaldo
Dancel (Dancel), and several of Amerix’s affiliates.
After extensive hearings, the arbitrator issued an 80-page
final arbitration award granting the plaintiffs only partial
relief on their claims. The arbitrator rejected the plaintiffs’
RICO and MCPA claims as well as the plaintiffs’ other state law
claims, including the alleged MDMSA violations, breaches of
fiduciary duty, and common law fraud claims.
With respect to a subset of the plaintiffs’ class and
individual claims brought under CROA, the arbitrator found that
the defendants were liable for certain statutory violations. In
particular, the arbitrator concluded that the defendants were
“credit repair organizations” within the meaning of CROA, 3 and
3
The arbitrator found that defendants Amerix, Dancel, 3C
Incorporated, and CareOne Services, Incorporated, constituted
credit repair organizations because their “business of improving
creditworthiness is an activity sufficiently close to the
literal reading of CROA as to bring that business within its
(Continued)
7
that although the plaintiffs had not proved that the defendants
violated the Act by making untrue or misleading statements 4 or by
unlawfully billing consumers for debt management services, 5 the
evidence nonetheless showed that the defendants had failed to
make certain disclosures to consumers mandated under the Act.
Those disclosure provisions required that the defendants
take particular action to inform consumers of their rights under
federal and state law. See 15 U.S.C. § 1679c (requiring credit
repair organizations to provide consumers with a document
summarizing their right to accurate information in certain
credit reports); § 1679d (requiring that any contract between a
regulatory ambit.” The arbitrator did not make any such finding
regarding defendant Ascend One Corporation (Ascend One), given
the arbitrator’s earlier conclusion that Ascend One was not a
successor to Amerix for liability purposes. Although we observe
that this finding was not challenged on appeal, we continue to
refer to the defendants in the collective sense for the purposes
of this opinion.
4 See 15 U.S.C. § 1679b(a)(3) (prohibiting the making or
usage of “any untrue or misleading representation of the
services of the credit repair organization”).
5 See 15 U.S.C. § 1679b(b) (“No credit repair organization
may charge or receive any money or other valuable consideration
for the performance of any service which the credit repair
organization has agreed to perform for any consumer before such
service is fully performed.”). The plaintiffs urge that the
arbitrator held that the defendants violated this subsection of
the statute, but there is no support in the record for this
assertion. Indeed, the arbitrator concluded that voluntary
contributions were not amounts required for the exchange of
credit repair services.
8
credit repair organization and a consumer contain specific terms
and conditions of payment, a detailed description of the
services to be performed, information identifying the credit
repair organization, and a conspicuous statement regarding the
consumer’s right to cancel the contract); § 1679e(b) (requiring
credit repair organizations to supply consumers with
cancellation forms, as well as copies of completed contracts and
any other signed documents). Although the arbitrator recognized
that the defendants “did make a number of disclosures that
either met some of the [statutory] requirements or came
reasonably close to doing so,” the arbitrator nevertheless
concluded that “[a]lmost is not good enough,” and that the
defendants’ violations “denied hundreds of thousands of
consumers the information and options that should have been
given to them under the disclosure requirements of CROA.”
In determining the amount of compensatory damages to award
the plaintiffs for the defendants’ statutory violations, the
arbitrator observed that the plaintiffs sought compensation only
for the voluntary contributions of certain class members as
damages under CROA’s actual damages provision, 15 U.S.C.
§ 1679g(a)(1)(B). Under that statute, actual damages include
“any amount paid by the person to the credit repair
organization.” 15 U.S.C. § 1679g(a)(1)(B).
9
The arbitrator interpreted this actual damages provision as
contemplating payment from a consumer on a quid pro quo basis in
return for a defined credit repair service. The arbitrator
reasoned that this interpretation was consistent with use of the
term “payment” elsewhere in the statute, as well as with general
legal definitions of that term. Applying this interpretation,
the arbitrator concluded that the plaintiffs’ voluntary
contributions were not “amount[s] paid” under Section
1679g(a)(1)(B), primarily because a significant percentage of
class members did not make any voluntary contributions in
exchange for credit repair services. Accordingly, the
arbitrator declined to award any actual damages under CROA.
The arbitrator concluded, however, that the plaintiffs
could recover for certain violations under CROA’s punitive
damages provision, 15 U.S.C. § 1679g(a)(2). Noting that
defendants Amerix and Dancel did not observe CROA’s disclosure
requirements when they “should have perceived that CROA applied
to their business,” the arbitrator analyzed those defendants’
financial data, their ability to pay a judgment, and the nature
of their misconduct. Based on those factors, the arbitrator
awarded the plaintiffs $1,948,264 in punitive damages, jointly
10
and severally against Amerix and Dancel. 6 The arbitrator
explained that in his view, this amount would “serve as a
powerful deterrent,” was “well within” the financial
capabilities of Amerix and Dancel, and would not “put [them] out
of business []or into bankruptcy.”
Finally, the arbitrator considered the plaintiffs’ request
for several million dollars in attorneys’ fees and costs. This
request was in addition to the fees of about $2.6 million
already awarded in the case. Although the arbitrator recognized
that under CROA, defendants “shall be liable” to successful
plaintiffs for “the costs of the action, together with
reasonable attorneys’ fees,” 15 U.S.C. § 1679g(a)(3), the
arbitrator found that the additional fee and cost requests were
unreasonable. The arbitrator explained that plaintiffs’ counsel
had failed to account separately for time spent on successful
claims and time spent on unsuccessful claims. The arbitrator
also found that plaintiffs’ counsel had failed to substantiate
proposed lodestar billing rates, and had submitted time and
expense entries that otherwise were “defective.”
6
After finding that it would be “neither practical nor
required to distribute de minimis amounts” of the award of
punitive damages to the 487,066 class members, the arbitrator
ruled that those damages should be distributed in equal portions
to two cy pres recipients, namely, the National Consumer Law
Center and the National Association of Consumer Advocates. In
addition, the arbitrator granted incentive awards to the three
class representatives.
11
Treating the attorneys’ fees already received by
plaintiffs’ counsel from the prior settlements as “set-offs”
against the amounts sought, the arbitrator concluded that any
amounts payable for the items that were substantiated were
exceeded by the greater amounts the attorneys already had
received. Accordingly, the arbitrator declined to award
additional attorneys’ fees or costs.
The plaintiffs filed the present civil action in the
district court, challenging the arbitrator’s refusal to award
actual damages and additional attorneys’ fees and costs, and
seeking to confirm the arbitrator’s award of punitive damages.
The district court held that based on the “limited” standard of
review applicable to arbitration awards, as well as the
“thoughtful and well-considered” nature of the arbitrator’s
conclusions, “there is absolutely no basis for overturning the
arbitrator’s decision.” Accordingly, the court granted the
plaintiffs’ motion to confirm in part the arbitrator’s final
award, and denied the plaintiffs’ motion to vacate in part the
final award. The plaintiffs timely appealed the district
court’s denial of their motion to vacate.
II.
The plaintiffs argue that the district court committed
reversible error by refusing to vacate the arbitrator’s finding
12
that the plaintiffs failed to establish under CROA: (1) actual
damages; or (2) a basis for additional attorneys’ fees and
costs. The plaintiffs assert that the arbitrator ignored or
fundamentally misinterpreted the relevant provisions of the Act,
thereby manifestly disregarding the law and exceeding his powers
under Section 10(a)(4) of the FAA. We review de novo the
district court’s denial of a motion to vacate an arbitration
award. Wachovia Sec., LLC v. Brand, 671 F.3d 472, 478 (4th Cir.
2012).
A.
We first examine the standard of review that applies to a
district court’s review of an arbitration award. In
articulating this standard, we focus on the plaintiffs’ argument
that although judicial review of an arbitration award in federal
court ordinarily is very limited, such a narrow focus is
inappropriate here because the arbitrator’s decision involved
the resolution of statutory claims. We disagree with the
plaintiffs’ contention.
The FAA provides four grounds on which an arbitration award
may be vacated. Those grounds are: (1) when the award was
procured by corruption, fraud, or undue means; (2) when there
was evident partiality or corruption on the part of an
arbitrator; (3) when an arbitrator was guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause shown,
13
or in refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior causing prejudice to
the rights of any party; or (4) when an arbitrator exceeded his
or her powers, or so imperfectly executed them that a mutual,
final, and definite award upon the subject matter submitted was
not made. 9 U.S.C. § 10.
The Supreme Court explained in Hall Street Associates, LLC
v. Mattel, Inc., 552 U.S. 576 (2008), that under the FAA, a
court “must” confirm an arbitration award “unless” a party to
the arbitration demonstrates that the award should be vacated
under one of the above four enumerated grounds. Id. at 582.
After the decision in Hall Street, we further have clarified
that an arbitration award may be vacated when the arbitrator
“manifestly disregards” the law. Wachovia Sec., 671 F.3d at
483.
As a general matter, however, judicial review of an
arbitration award in federal court is “severely circumscribed”
and “among the narrowest known at law.” Id. at 478 (quotation
omitted); Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142
F.3d 188, 193 (4th Cir. 1998). Such limited review is
appropriate given the fact that the arbitral forum is designed
to assist parties in avoiding much of the expense and delay that
often is associated with litigation. See Apex Plumbing Supply,
142 F.3d at 193. Thus, we have emphasized that a district court
14
may not overturn an arbitration award “just because it believes,
however strongly, that the arbitrators misinterpreted the
applicable law.” Wachovia Sec., 671 F.3d at 478 n.5 (citation
omitted).
The plaintiffs argue, nevertheless, that these principles
do not govern the present case because the arbitrator considered
remedies created by statute, rather than rights established by
contract. In support of their position, the plaintiffs rely on
two Supreme Court decisions addressing the arbitration of
federal statutory claims.
In the first of these decisions, Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the
plaintiffs focus solely on the Court’s statement that “by
agreeing to arbitrate a statutory claim, a party does not forgo
the substantive rights afforded by the statute; it only submits
to their resolution in an arbitral, rather than a judicial,
forum.” Id. at 26 (brackets, citation, and internal quotation
marks omitted). Contrary to the plaintiffs’ contention,
however, this statement does not alter the standard for judicial
review of an arbitration award involving statutory remedies, but
simply emphasizes that such remedies are available in
arbitration proceedings as well as in our courts. Thus, in
Gilmer, the Court held that a claim under the Age Discrimination
in Employment Act (ADEA) was subject to the parties’ prior
15
agreement to arbitrate disputes arising out of a worker’s
employment, because arbitration was not precluded by the text,
legislative history, or underlying purposes of the ADEA, and did
not deprive the plaintiff of a fair opportunity to present his
claim. Id. at 26-33.
The second decision cited by the plaintiffs, CompuCredit
Corp. v. Greenwood, 132 S. Ct. 665 (2012), likewise fails to
support the plaintiffs’ argument for heightened judicial review
of arbitration decisions involving statutory claims. In
CompuCredit, the Court upheld an agreement compelling the
arbitration of CROA claims, holding that although CROA prohibits
the waiver of any right granted under the Act, CROA does not
prevent parties from agreeing to arbitrate claims arising under
its provisions. 7 Id. at 669-73.
In contrast to the claimants in Gilmer and CompuCredit, the
plaintiffs here do not dispute the enforceability of the
7 We have reached similar conclusions with respect to the
enforceability of arbitration agreements requiring the
arbitration of federal statutory claims. See, e.g., In re
Cotton Yarn Antitrust Litig., 505 F.3d 274 (4th Cir. 2007)
(concluding that plaintiffs failed to meet their burden of
showing that the no-joinder terms and one-year limitations
periods of their arbitration agreements prevented them from
vindicating their rights under antitrust laws); Bradford v.
Rockwell Semiconductor Sys., Inc., 238 F.3d 549 (4th Cir. 2001)
(rejecting challenge to a fee-splitting provision in an
agreement compelling arbitration of discrimination claims,
reasoning that such a provision does not necessarily deprive
claimants of an adequate forum in which to resolve their
statutory rights).
16
arbitration provisions in their contracts, but seek heightened
scrutiny of the arbitrator’s decision. Thus, the plaintiffs’
argument fails because it is nothing more than an attempt to
revive an argument squarely rejected in Gilmer, in which the
Court explained that although a narrow standard of review
applies to arbitrators’ decisions regarding statutory claims,
“such review is sufficient to ensure that arbitrators comply
with the requirements of the statute at issue.” Id. at 32 n.4
(citation and internal quotation marks omitted). Accordingly,
in view of the Court’s clear language rejecting the plaintiffs’
position, we proceed to consider the merits of their appeal
under the “extremely limited” standard of review that governs
our analysis. See Wachovia Sec., 671 F.3d at 478 n.5.
B.
The plaintiffs argue that the district court erred by
refusing to vacate the arbitration award on the ground that the
arbitrator manifestly disregarded the law. A court may vacate
an arbitration award under the manifest disregard standard only
when a plaintiff has shown that: (1) the disputed legal
principle is clearly defined and is not subject to reasonable
debate; and (2) the arbitrator refused to apply that legal
principle. Id. at 483. Moreover, as we have observed, the
manifest disregard standard is not an “invitation to review the
merits of the underlying arbitration,” id., or to establish that
17
the arbitrator “misconstrued” or “misinterpreted the applicable
law.” 8 Id. at 478 n.5 & 481.
We conclude that the plaintiffs have failed to satisfy
their burden of showing that the arbitrator manifestly
disregarded the law. The plaintiffs fall far short of meeting
this burden because their argument, reduced to its essence, does
nothing more than challenge the arbitrator’s interpretation of
applicable law.
In particular, the plaintiffs argue that the arbitrator
manifestly disregarded the plain text of CROA’s actual damages
provision. Under that provision, a person who has established
that a credit repair organization is liable under the Act may
recover “any amount paid by the person to the credit repair
organization.” 15 U.S.C. § 1679g(a)(1)(B). The plaintiffs
contend that Section 1679g(a)(1)(B) clearly includes certain
forms of damages that the arbitrator concluded were beyond the
8We are not persuaded by amici curiae that we should
revisit our standard for manifest disregard. Amici cite Cole v.
Burns International Security Services, 105 F.3d 1465 (D.C. Cir.
1997), in which the D.C. Circuit held that an arbitration
agreement was enforceable, and stated that in cases involving
“novel or difficult legal issues,” courts may “review an
arbitrator’s award to ensure that its resolution of public law
issues is correct.” Id. at 1487. We have not adopted Cole, and
discern no reason to do so here. See Wachovia Sec., 671 F.3d at
483 (observing that our two-part test “has for decades
guaranteed that review for manifest disregard not grow into the
kind of probing merits review that would undermine the
efficiency of arbitration”).
18
scope of the statute, including the fair share payments remitted
by participating creditors and the voluntary contributions made
by certain plaintiffs. We disagree.
At the outset, we observe that at the final arbitration
hearing, the plaintiffs abandoned the argument that they were
entitled to receive fair share payments as actual damages. 9
Therefore, we consider only the arbitrator’s determination that
voluntary contributions did not constitute “amount[s] paid”
under Section 1679g(a)(1)(B).
With respect to that determination, we cannot say that the
arbitrator’s interpretation fell beyond the scope of reasonable
debate. The arbitrator construed the actual damages provision
in the context of the statute as a whole, observing that another
section of the Act defined a “credit repair organization” by
referencing the sale, provision, or performance of credit repair
9 We note, however, that even if the plaintiffs had
preserved the argument, the arbitrator considered the competing
arguments regarding whether the fair share payments qualified as
actual damages under the Act. On the one hand, the arbitrator
observed, those amounts were remitted by third-party creditors,
and therefore may not qualify as amounts paid
“by the person” under Section 1679g(a)(1)(B). On the other
hand, the arbitrator noted that the amounts could be considered
“indirect payments” by the consumer. The existence of
reasonable debate on the subject undermines the plaintiffs’
position that the applicability of CROA’s actual damages
provision was clearly defined.
19
services “in return for the payment of money or other valuable
consideration.” 10 15 U.S.C. § 1679a(3).
Given the absence of binding precedent requiring a contrary
result, we conclude that the arbitrator’s determination, that
“amount[s] paid” under the Act were limited to sums paid by the
plaintiffs in return for the defendants’ services, did not
constitute a refusal to heed a clearly defined legal principle.
Wachovia Sec., 671 F.3d at 483. Although another arbitrator
might have reached a different conclusion and found that the
Act’s actual damages provision covered all amounts paid,
irrespective whether the payments were “required” for the
exchange of credit repair services, it is not for us to pass
judgment on the strength of the arbitrator’s chosen rationale.
See id. at 481. Thus, we hold that the arbitrator did not
10 The plaintiffs assert that the arbitrator’s conclusion
that the voluntary contributions did not constitute “amount[s]
paid by the person” under 15 U.S.C. § 1679g(a)(1)(B) is
“irrevocably inconsistent” with his earlier conclusion that the
some of the defendants constituted credit repair organizations
under 15 U.S.C. § 1679a(3), because those defendants rendered
credit repair services “in return for the payment of money or
other valuable consideration.” As the defendants point out,
however, the plaintiffs’ argument fails to appreciate that
Section 1679g(a)(1)(B) operates only with respect to amounts
paid “by the person,” whereas Section 1679a(3) broadly defines a
“credit repair organization” in terms of amounts paid by any
person in exchange for credit repair services.
20
manifestly disregard the law by determining that the plaintiffs
failed to prove actual damages under the Act. 11
We next consider the plaintiffs’ argument regarding their
request for additional attorneys’ fees and costs. According to
the plaintiffs, the arbitrator’s refusal to award the additional
amounts requested violated CROA, which directs that a plaintiff
recover “[i]n the case of any successful action to enforce any
liability under [the actual damages or punitive damages
provisions], the costs of the action, together with reasonable
11We also find no merit in the plaintiffs’ other challenges
to the arbitrator’s refusal to award actual damages. First, the
plaintiffs argue that the arbitrator ignored CROA and imposed
his own “personal notions of right and wrong” by expressing
concern for whether a damages award would “put [the defendants]
out of business []or into bankruptcy.” This argument
misrepresents the arbitrator’s statements regarding the
financial status of two defendants, which statements were made
exclusively in the context of measuring the extent of punitive
damages. In considering the deterrent or punitive effect of
punitive damages, it is well accepted that a court may consider
a defendant’s “ability to pay.” See, e.g., Saunders v. B.B. &
T. Co. of Va., 526 F.3d 142, 154-55 (4th Cir. 2008) (citing TXO
Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 462 n.28
(1993) (plurality opinion)).
Second, the plaintiffs argue that in refusing to award
actual damages under CROA, the arbitrator disregarded a Maryland
statute providing that no person may require a voluntary
contribution from consumers for debt management services. We
observe, however, that the arbitrator found that the defendants
did not require voluntary contributions from the plaintiffs.
Moreover, we fail to see how an alleged violation of a state
statute bears on the question whether the arbitrator manifestly
disregarded the law when he refused to award actual damages
under CROA, a federal statute.
21
attorneys’ fees.” 15 U.S.C. § 1679g(a)(3). We disagree with
the plaintiffs’ argument.
As the arbitrator correctly observed, a plaintiff seeking
to recover attorneys’ fees under a fee-shifting statute bears
the burden of demonstrating that the requested fees are
reasonable. See Fair Hous. Council of Greater Washington v.
Landow, 999 F.2d 92, 97-98 (4th Cir. 1993). We similarly have
observed that a plaintiff seeking to recover costs is entitled
to compensation only for “reasonable litigation expenses.” See
Daly v. Hill, 790 F.2d 1071, 1084 (4th Cir. 1986).
In the present case, the arbitrator found that the
additional amounts of attorneys’ fees and costs requested were
unreasonable. The arbitrator identified several serious
deficiencies with the plaintiffs’ fee request, including
counsel’s use of “block billing” practices, quotation of
unjustified billing rates, and submission of time entries that
failed to segregate successful claims from unsuccessful claims.
The arbitrator also noted that plaintiffs’ counsel submitted
improper requests for questionable litigation expenses,
including “bills from costly restaurants” and excessive travel
and lodging costs.
In view of these circumstances, we conclude that the
arbitrator did not refuse to heed any clearly defined legal
principles. Instead, the arbitrator correctly observed that
22
given the existence of such serious deficiencies, he had the
authority to disallow the fee request in its entirety. See Fair
Hous. Council, 999 F.2d at 97 (forbidding plaintiffs from
submitting “a fee request which is merely an opening bid in the
quest for an award”). Although he elected not to dismiss all
the requested fees and costs in summary fashion, the arbitrator
nevertheless effectively disallowed what he concluded were
unreasonable attorneys’ fees and costs, by significantly
reducing the requested amounts and by “setting off” the
attorneys’ fees and costs that plaintiffs’ counsel already had
received from prior settlements. 12 While it may be debatable
whether the arbitrator performed this task “well,” the record in
this case shows that the arbitrator undertook a careful analysis
of the applicable legal principles and reached a decision
supported by his interpretation of our precedent. Wachovia
Sec., 671 F.3d at 478 n.5. Accordingly, we reject the
12 The plaintiffs challenge the method by which the
arbitrator performed the lodestar analysis under the Supreme
Court’s decision in Perdue v. Kenny A. ex rel. Winn, 559 U.S.
542, 552-53 (2010), as well as the extent to which the
arbitrator explicitly considered the twelve factors adopted by
this Court to determine the adequacy of awards of attorneys’
fees in Barber v. Kimbrell’s, Inc., 577 F.2d 216, 226 n.28 (4th
Cir. 1978). We find no basis to vacate the arbitration award,
given that the arbitrator explicitly considered Perdue and
appears to have incorporated the factors set forth in Barber in
his analysis of the reasonableness of attorneys’ billing rates
and time expended on successful claims.
23
plaintiffs’ various arguments regarding their request for
additional attorneys’ fees and costs.
C.
Finally, the plaintiffs advance an alternative argument
that the arbitrator exceeded his powers under Section 10(a)(4)
in his rulings on actual damages, attorneys’ fees, and costs.
We disagree.
By its terms, Section 10(a)(4) allows courts to vacate
arbitration awards only when arbitrators “exceeded their powers,
or so imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was not made.”
9 U.S.C. § 10(a)(4). As the Supreme Court recently observed in
Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013), a
plaintiff seeking relief under this provision bears the “heavy
burden” of showing that the arbitrator acted outside the scope
of the authority granted by the parties in their contract, by
“issuing an award that simply reflects his own notions of
economic justice.” Id. at 2068 (citations, brackets, and
internal quotation marks omitted).
Here, the plaintiffs do not argue that the arbitrator
failed to observe any limitations on his authority imposed by
the relevant arbitration provisions in the parties’ contracts.
Instead, the plaintiffs merely restate a theory that we already
have rejected, namely, that the arbitrator misinterpreted
24
various legal principles. Moreover, as we already have
discussed, the plaintiffs have misrepresented the record by
characterizing the arbitrator’s analysis of appropriate punitive
damages as reflecting the arbitrator’s “notions of economic
justice.” Id. (citation and brackets omitted); see supra note
11. Because the arbitrator interpreted the parties’ arbitration
provision and the applicable legal authorities in rendering the
award in the present case, we hold that the arbitrator did not
exceed the scope of his contractually delegated authority under
Section 10(a)(4) of the FAA. 13
III.
For these reasons, we affirm the district court’s judgment.
AFFIRMED
13We find no merit in the plaintiffs’ separate assertion
that the length and form of the district court’s written order
shows that the court failed to perform sufficient judicial
review of the arbitrator’s final award. Indeed, we conclude
that the district court’s order properly observed that judicial
review of arbitration decisions was “limited,” that the
arbitrator’s decision in this case was “thoughtful and well-
considered,” and that there was “no basis for overturning that
decision.”
25