Rosario Hernandez sued MicroBilt after a verification report the company issued inaccurately stated she was on a government watch list, leading to her being denied a loan. Citing a mandatory arbitration agreement in her loan application, MicroBilt moved to compel, and Hernandez dismissed her court complaint and submitted her claims to the AAA for arbitration.
AAA found that a damages limitation in the arbitration agreement was inconsistent with its Consumer Due Process Protocol, and told MicroBilt it would decline to administer the arbitration unless MicroBilt waived that limitation. MicroBilt declined to do so, so AAA declined to administer the arbitration. The district court thus reinstated Hernandez’s suit. MicroBilt moved to compel, and the district court denied.
The Third Circuit affirmed. The Arbitration Agreement explicitly incorporated AAA’s rules, which provide that when AAA declines to administer an arbitration, either party may choose to proceed in court. That, the Third Circuit held, was exactly what Ms. Hernandez did here, rejecting arguments that the AAA administrator had usurped the arbitrability decision committed to the arbitrator and that returning to district court was inconsistent with the exclusivity provision of the arbitration clause. The court also explained it lacked any authority to review AAA’s decision that the damages cap was inconsistent with its rules. It explained:
MicroBilt’s arbitration provision, including the AAA rules that it incorporates, does not condition her return to court on the AAA’s decision being correct, or even reasonable. That is the deal the parties struck.
