In an opinion described by the United States Court of Appeals for the Third Circuit as “Precedential”, the court answers the question concluding it does not have authority to compel arbitration. Hernandez v MicroBilt Corporation, No. 22-3135 (December 5, 2023).
Maria Del Rosario Hernandez sued MicroBilt Corporation claiming violations of the Fair Credit Reporting Act. MicroBilt moved to compel arbitration before the American Arbitration Association (“AAA”) as required by the agreement between the parties. Hernandez complied and initiated arbitration with the AAA.
The AAA found the agreement’s damages limitation conflicted with the AAA Consumer Due Process Protocol and therefore declined to administer the arbitration.
AAA Consumer Rule 1(a) provides in part, “Should the AAA decline to administer an arbitration, either party may choose to submit its dispute to the appropriate court for resolution”.
Hernandez then returned to federal district court to pursue her cause. MicroBilt again filed a motion to compel arbitration.
The Third Circuit found Hernandez fully complied with MicroBilt’s arbitration provision. She sought arbitration with the AAA. After the AAA exercised its power to decline to administer the dispute, Hernandez was authorized by the AAA rule to submit her dispute to an appropriate court for resolution. Because Hernandez did not fail to comply with the arbitration agreement, the court concluded it lacked authority to compel arbitration.
The Third Circuit opinion cites three federal district courts arriving at the same conclusion under similar circumstances.
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