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Arbitrating Section 75-1.1 Claims: Blessing or Curse?

Ellis Winters

Ellis & Winters

Arbitrating Section 75-1.1 Claims: Blessing or Curse?

Recently, in Goins v. TitleMax of Virginia, the U.S. District Court for the Middle District of North Carolina underscored the “severely circumscribed” nature of judicial review of arbitration awards, observing that such review “is among the narrowest known at law.” Indeed, the Court explained, as long as an arbitrator provides “some basis” for his or her assessment and calculations of damages, courts are not at liberty to vacate an arbitration award. Unfortunately for TitleMax, the award here involved treble damages under N.C. Gen. Stat. § 75-16 based on violations of N.C. Gen. Stat. § 75-1.1 and the North Carolina Consumer Finance Act (CFA), N.C. Gen. Stat. § 53-164.


A class of plaintiffs sued two TitleMax entities for entering into car-title loan transactions, often known as “payday loans,” at unlawful interest rates. The complaint alleges violations of the CFA, North Carolina’s usury statutes (N.C. Gen. Stat. § 24-1.1), and section 75-1.1. The case was initially brought in state court but was removed to federal court by the defendants. The Middle District of North Carolina then compelled arbitration of all but a few of the plaintiffs’ claims. 

At arbitration, TitleMax argued that North Carolina law should not apply because the loan transactions had taken place outside the state. Nevertheless, the arbitrator found that the loans fell within the scope of the CFA and had violated both the CFA and section 75-1.1. The arbitrator ordered TitleMax to pay treble damages exceeding $365,000. 

Plaintiffs promptly filed a motion to enforce the arbitration award. TitleMax opposed the motion and asked the court to vacate the award, arguing that the award showed a “manifest disregard for well-settled North Carolina law” by improperly calculating treble damages. 

TitleMax argued that the arbitrator erred by conflating the frameworks for calculating damages under the CFA and section 75-1.1. According to TitleMax, the arbitrator improperly determined the treble damages by using the CFA’s statutory penalty, rather than plaintiffs’ actual damages, as the base amount to multiply. Given TitleMax’s attack on the award, trebling the statutory penalties likely gave plaintiffs a much bigger payday than if their loan amounts were multiplied.

Judicial Review of an Arbitration Award

The court began by observing that judicial review of an arbitration award “is among the narrowest known at law” and that “even a mistake of fact or misinterpretation of law by an arbitrator provides insufficient grounds for the modification of an award.” 

Highlighting the exceedingly high bar to overcome an arbitrator’s award, the court explained that a reviewing court may ask only “whether the arbitrators did the job they were told to do—not whether they did it well, or correctly, or reasonably, but simply whether they did it.” 

The court explained that a party opposing enforcement of an arbitration award bears the “heavy burden” of showing reasons why an award can be vacated under either the common law or the Federal Arbitration Act (FAA). An award may be vacated at common law where “the award evidences a manifest disregard of the law,” which “require[s] something beyond showing that the arbitrators misconstrued the law.” The arbitrator essentially must have refused to apply a clearly defined legal principle. An award will be vacated under the FAA if the arbitrator exceeded his or her powers “or so imperfectly executed them that a mutual, final, and definite award upon the subject matter was not made.”

The Court’s Analysis

The court held that TitleMax failed to show that the arbitrator manifestly disregarded the law. According to the court, TitleMax did no more than challenge the arbitrator’s interpretation of applicable law, which courts have consistently held does not justify vacating an arbitration award. Indeed, the court observed, when parties consent to arbitration, they assume the risk that the arbitrator may interpret the law in an unfavorable way, and a court cannot overturn the award just because the arbitrator misinterpreted the applicable law.

Here, the arbitrator awarded treble damages under section 75-16 in connection with the plaintiffs’ claim for damages for violations of the CFA. Specifically, the arbitrator interpreted State ex rel. Cooper v. NCCS Loans Inc. as allowing violations of the CFA to serve as a basis for treble damages under section 75-16. 

In NCCS Loans, the North Carolina Court of Appeals affirmed a summary judgment order finding that a claim could be brought under section 75-1.1 based on a violation of the CFA. Notably, the court there explained that “violations of statutes designed to protect the consuming public and violations of established public policy may constitute unfair and deceptive practices” and found that the “practice of offering usurious loans was a clear violation of this policy.”

Interestingly, the North Carolina Court of Appeals subsequently held in a different case, Odell v. Legal Bucks, LLC, that a violation of North Carolina’s usury statute (N.C. Gen. Stat. § 24-1.1) is not a per se violation of section 75-1.1 but that usury can combine with additional “unfair and deceptive acts” to violate section 75-1.1.

Here, however, the arbitrator found that the usurious loan agreements between TitleMax and the plaintiffs were a per se violation of the CFA allowing for treble damages under section 75-16. TitleMax argued that the arbitrator’s award under the CFA’s penalty provision constituted punitive damages and thus was improper for trebling under section 75-16. The court rejected that argument, finding it tantamount to a disagreement with the arbitrator’s interpretation of North Carolina law. The court found that the arbitrator had “reasonably considered the damages to be compensatory” rather than punitive and trebled them under applicable law.

In sum, the court found that it was not allowed to determine whether the arbitrator’s analysis of the CFA and its interplay with section 75-1.1 or North Carolina case law was correct. It was enough that the arbitrator just “did his job.” The court did not, and could not, decide whether he did it correctly. 


It is difficult to imagine a scenario where a party could convince a court to overturn an arbitration award in light of the “severely circumscribed” standard of review. Barring an arbitrator’s complete refusal to engage in virtually any analysis, litigants who choose arbitration are bound by the arbitrator’s final award, for better or worse. 

TitleMax, which undoubtedly put arbitration clauses in its consumer-loan contracts, forced plaintiffs to arbitrate. TitleMax likely thought it stood a better chance in arbitration than in a court. In the end, though, at least in this case, TitleMax’s enforcement of its arbitration clause was less of a blessing and more of a curse. TitleMax was left with little recourse once it lost the arbitration. Had plaintiffs’ claims been decided in a trial court, TitleMax would have an opportunity to get a second bite at the apple on appeal. An appellate court could have examined the important legal question TitleMax raised in its challenge to the arbitration award. 

In arbitration, TitleMax may have benefited from having a panel of three arbitrators, as opposed to just one. Generally, having some built-in redundancy, in addition to the right to select at least one of the arbitrators, may afford defendants some ability to avoid an adverse outcome like TitleMax experienced in this case.

January 18, 2023
Posted in  Other 75-1.1 Issues