Consumer Protection — $2.6M in Fees Enough for CROA Claim

Jones v. Dancel (Lawyers Weekly No. 15-01-0710, 25 pp.) (Keenan, J.) No. 14-2160, July 6, 2015; USDC at Baltimore, Md. (Motz, J.) 4^th Cir.

Holding: In this class action alleging defendants violated the Credit Repair Organizations Act, the 4^th Circuit upholds a district court’s refusal to set aside an arbitrator’s decision awarding plaintiffs only punitive damages on the violations and finding plaintiffs’ attorney’s fees and requested costs were unreasonable.

Plaintiffs initiated an arbitration action alleging individual and class claims and seeking damages in excess of $270 million on behalf of themselves and a nationwide class of consumers. After discovery, the arbitrator certified a class of consumers only with regard to plaintiffs’ CROA claims and claims under the Maryland Consumer Protection Act. After an appeal to this court on the class certification, some of the original defendants settled claims against them, and the arbitrator approved the settlements and awarded more than $2.6 million in attorney’s fees. On the claims that remained, the arbitrator awarded plaintiffs $1,948,264 in punitive damages, jointly and severally against defendants Amerix Corporation and Bernaldo Dancel. In light of the fees already awarded, the arbitrator found the additional fee and cost requests were unreasonable.

We conclude plaintiffs have failed to satisfy their burden of showing that the arbitrator manifestly disregarded the law. Their argument, reduced to its essence, does nothing more than challenge the arbitrator’s interpretation of applicable law.

Given the absence of binding precedent requiring a contrary result, we conclude the arbitrator’s determination – that “amounts paid” under the CROA were limited to sums paid by the plaintiffs in return for defendants’ services – did not constitute a refusal to heed a clearly defined legal principal. Although another arbitrator might have reached a different conclusion and found that the Act’s actual damages provision covered all amounts paid by consumers to a CRO, irrespective of 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. We hold the arbitrator did not manifestly disregard the law by determining that the plaintiffs failed to prove actual damages under the Act.

In denying additional fees and costs, the arbitrator also identified several serious deficiencies with plaintiffs’ fee request, including 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 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 the arbitrator did not refuse to heed any clearly defined legal principles. Although the arbitrator elected not to dismiss all the requested fees and costs in summary fashion, the arbitrator nevertheless effectively disallowed what he concluded were unreasonable fees and costs by significantly reducing the requested amounts and “setting off” the fees and costs received from prior settlements. We reject plaintiffs’ various arguments regarding their request for additional attorney’s fees and costs.

We also reject plaintiffs’ alternative argument that the arbitrator exceeded his powers under 9 U.S.C. § 10(a)(4) in his rulings on actual damages, attorney’s fees and costs.

Judgment affirmed.