A TCPA action that was filed in Massachusetts federal court against Sallie Mae, Inc. was recently dismissed because of the arbitration clause contained in the promissory notes that the plaintiff electronically signed when she secured three student loans.
Background: Auto-Dialed Debt Collection Calls
Each promissory note contained an arbitration provision that required any claims relating to the collection of the debt or alleged violations of statute to be submitted to binding arbitration. Each promissory note also contained a conspicuous “right to reject” clause under the arbitration agreement, which permitted the plaintiff to submit a signed rejection notice within a specified time frame in order to opt out of the arbitration requirement. The plaintiff never submitted an opt out notice.
Thereafter, Sallie Mae began its debt collection calling campaign to try to collect the principal due and owing on its loans to the plaintiff. Over the course of two months, Sallie Mae placed close to 150 auto-dialed calls to the plaintiff’s mobile telephone through use of an automated telephone dialing system (autodialer) without the plaintiff’s consent.
The plaintiff sued Sallie Mae for violating the Telephone Consumer Protection Act (“TCPA”). Sallie Mae promptly moved to dismiss the action or, in the alternative, stay the action and compel arbitration. The plaintiff denied the existence of a binding agreement to arbitrate and further argued that arbitration of TCPA claims in general is inappropriate because Congress intended to preclude a waiver of judicial remedies for TCPA violations.
Holding: TCPA Claims are Arbitrable
The court agreed with Sallie Mae that the plaintiff had signed several documents that consented to arbitration. Further, each promissory note conspicuously alerted the plaintiff to the arbitration agreement and the right to reject it. Therefore, absent fraud on the part of Sallie Mae, the plaintiff was bound to the terms of the parties’ agreements – regardless of whether she read or understood them. The court then considered whether the plaintiff could prove that Congress, when enacting the TCPA, intended that all TCPA claims must be exclusively heard in court. The plaintiff argued that Congress described the TCPA’s remedies in terms of court actions only and, therefore, judicial remedies cannot be waived in favor of arbitration.
The court rejected the plaintiff’s argument, relying on the U.S. Supreme Court’s decision last year in CompuCredit Corp v. Greenwood, which addressed and expressly rejected the same argument. As we previously have reported, other courts have followed suit.
The bottom line: the court dismissed the action because: (i) the parties entered into binding contracts which contained conspicuous agreements to arbitrate; (ii) the agreements to arbitrate were broad enough to encompass statutory claims (such as claims arising under the TCPA); and (iii) TCPA claims are not solely subject to resolution in courts of law.
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