MARIA DEL ROSARIO HERNANDEZ, on behalf of herself and all others similarly situated v. Microbilt Corporation

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 22-3135
____________
MARIA DEL ROSARIO HERNANDEZ,
on behalf of herself and all others similarly situated
v.
MICROBILT CORPORATION,
Appellant
________________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 3:21-cv-04238)
District Judge: Honorable Freda L. Wolfson
________________
Submitted Under Third Circuit L.A.R. 34.1(a)
September 13, 2023
Before: JORDAN, BIBAS, and PORTER, Circuit Judges
(Filed: December 5, 2023)

-- 1 of 12 --

2
Angelo A. Stio, III
Troutman Pepper
301 Carnegie Center
Suite 400
Princeton, NJ 08543
Counsel for Appellant
Lauren K.W. Brennan
James A. Francis
John Soumilas
Francis Mailman Soumilas
1600 Market Street
Suite 2510
Philadelphia, PA 19103
Counsel for Appellee
__________
OPINION OF THE COURT
__________
PORTER, Circuit Judge.
MicroBilt Corporation seeks to compel Maria Del
Rosario Hernandez to arbitrate her claims under the Federal
Arbitration Act. 9 U.S.C. § 4. But Hernandez has fully com-
plied with MicroBilt’s arbitration provision, which allows her
to pursue her claims in court. We therefore lack the authority
to compel arbitration.
I

-- 2 of 12 --

3
Hernandez applied for a loan in 2020. The lender relied
on a MicroBilt product—an Instant Bank Verification report—
to verify Hernandez’s identity and bank account information.
But the report included the information of other individuals
sharing Hernandez’s name, one of whom was on a government
watch list. The lender denied Hernandez’s application based on
this inaccurate information.
Hernandez filed a lawsuit claiming that MicroBilt vio-
lated the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.
MicroBilt moved to compel arbitration because while applying
for the loan Hernandez consented to MicroBilt’s terms and
conditions, including an arbitration provision. Three clauses of
this arbitration provision are especially relevant.
First, the provision contains what MicroBilt dubs an
“Exclusive Resolution” clause. Opening Br. 8. “[Y]ou agree
that any dispute or claim arising out of or relating in any way
to your use of this Website and the products and services avail-
able hereunder, must be resolved exclusively by binding arbi-
tration.” J.A. 148.
Second, the provision incorporates the rules of a third-
party arbitration organization. “The arbitration will be con-
ducted before a single arbitrator in accordance with the rules
of the American Arbitration Association (‘AAA’).” Id.
And third, the provision limits the damages and costs
that consumers may recover in arbitration: “Each party is
responsible for its own attorneys’ fees,” and “punitive and con-
sequential damages” are not recoverable. Id.
Hernandez voluntarily dismissed her complaint and
submitted her claims to the AAA for arbitration. The AAA

-- 3 of 12 --

4
notified MicroBilt that its agreement with Hernandez was a
“consumer agreement,” so the AAA’s Consumer Arbitration
Rules applied. J.A. 30.
Under Consumer Rule 1(a), “[w]hen parties have pro-
vided for the AAA’s rules . . . as part of their consumer agree-
ment,” as Hernandez and MicroBilt have, “they shall be
deemed to have agreed that . . . AAA administration of the con-
sumer arbitration shall be an essential term of their consumer
agreement.” J.A. 57. Under Rule 1(b), the AAA’s administra-
tive duties “may be carried out through such of the AAA’s rep-
resentatives as it may direct,” not only arbitrators. J.A. 58. And
Rule 1(d) addresses the AAA’s power to decide whether to
administer a dispute:
The AAA administers consumer disputes that
meet the due process standards contained in the
Consumer Due Process Protocol and the
Consumer Arbitration Rules. The AAA will
accept cases after the AAA reviews the parties’
arbitration agreement and if the AAA determines
the agreement substantially and materially com-
plies with the due process standards of these
Rules and the Consumer Due Process Protocol.
Should the AAA decline to administer an arbitra-
tion, either party may choose to submit its dis-
pute to the appropriate court for resolution.
Id. (emphasis added).
Applying these rules, the AAA notified MicroBilt that
its arbitration provision included “a material or substantial
deviation from the Consumer Rules and/or Protocol.” Opening
Br. 9–10 (quoting J.A. 150). It found that the provision’s dam-

-- 4 of 12 --

5
ages limitation conflicted with Principle 14 of the Consumer
Due Process Protocol, which requires that an “arbitrator should
be empowered to grant whatever relief would be available in
court under law or in equity.” J.A. 122. The AAA stated that it
would decline to administer the arbitration under Rule 1(d) if
MicroBilt did not waive the damages limitation.
MicroBilt contacted the AAA to object to this adminis-
trative decision and learned that an AAA administrator, not an
arbitrator, had demanded the waiver. MicroBilt sought review
of the administrator’s decision before an arbitrator, but the
AAA refused. After months passed and MicroBilt did not
waive the damages limitation, the AAA declined to administer
the arbitration under Rule 1(d).
MicroBilt asked Hernandez to submit her claims to a
different arbitrator. But she refused, requesting a hearing
before the District Court. She concluded that she “must now
pursue her claims in Court” because the AAA dismissed the
case under Rule 1(d). J.A. 26. The District Court reinstated
Hernandez’s complaint and granted MicroBilt leave to move
to compel arbitration under 9 U.S.C. § 4. MicroBilt filed its
motion, and the District Court denied it.
MicroBilt appealed.
II1
Before compelling arbitration under § 4, we “must
determine that (1) there is an agreement to arbitrate and (2) the
1 The District Court had jurisdiction over Hernandez’s Fair
Credit Reporting Act claims under 28 U.S.C. § 1331. It denied
a motion to compel arbitration, so we have jurisdiction over

-- 5 of 12 --

6
dispute at issue falls within the scope of that agreement.”
Century Indem. Co. v. Certain Underwriters at Lloyd’s,
London, 584 F.3d 513, 523 (3d Cir. 2019). The parties agree
that both conditions are met in this case: A valid arbitration
provision covers Hernandez’s claims.
But our inquiry does not end there. We may compel
arbitration only where there is a “failure, neglect, or refusal . . .
to arbitrate under a written agreement.” 9 U.S.C. § 4. There
must be a “failure to comply” with MicroBilt’s arbitration pro-
vision, including the rules that it incorporates by reference. Id.
The District Court correctly denied MicroBilt’s motion
to compel because Hernandez fully complied with MicroBilt’s
arbitration provision. Under Consumer Rule 1(d), which the
provision incorporates, the AAA exercised its power to decline
to administer the arbitration. Consumer Rule 1(b) permits
AAA administrators to exercise this power, not only arbitra-
tors. And after an administrator exercised this power,
Hernandez was permitted to “submit [her] dispute to [an]
appropriate court for resolution.” J.A. 58. Because Hernandez
did not “fail[] to comply” with the arbitration provision, we
lack authority under § 4 to compel arbitration.
MicroBilt seeks to dodge this straightforward reading of
the arbitration provision with a barrage of arguments, including
that: (1) the AAA administrator improperly resolved an “arbi-
trability” issue that should have been resolved by an arbitrator;
(2) the provision’s Exclusive Resolution clause conflicts with
MicroBilt’s appeal under 9 U.S.C. § 16(a)(1)(B). Our review
of the order denying MicroBilt’s motion to compel arbitration
is plenary. Kirleis v. Dickie, McCamey & Chilcote, P.C., 560
F.3d 156, 159 (3d Cir. 2009).

-- 6 of 12 --

7
Hernandez’s return to court; and (3) the AAA’s application of
the Consumer Due Process Protocol was unreasonable. None
of these arguments succeeds.
A
The AAA declined to administer Hernandez’s claims
after finding that MicroBilt’s arbitration provision did not
comply with its “due process standards.” MicroBilt argues that
this power should have been exercised by an arbitrator, not an
administrator, because it raised “arbitrability” issues that were
delegated exclusively to arbitrators. This argument fails
because the provision allowed administrators to exercise this
power and no arbitrability issues were raised.
Arbitration is a creature of contract, so the terms of
MicroBilt’s arbitration provision govern who, if anyone, was
allowed to dismiss Hernandez’s claims. Consumer Rule 1(d)
allows “the AAA” to “decline to administer an arbitration.”
J.A. 58. And Rule 1(b) allows the “authority and duties of the
AAA” to be “carried out through such of the AAA’s represent-
atives as it may direct,” not just arbitrators. Id. Declining to
administer an arbitration under Rule 1(d) is an “authority” of
the AAA. Id. Thus, the AAA may “direct” administrators to
“carr[y] out” its authority under Rule 1(d). Id. To this extent,
MicroBilt’s arbitration provision is consistent with an admin-
istrator declining to administer Hernandez’s claims.2
MicroBilt argues that administrators may not exercise
this power because it implicates “arbitrability” issues that the
2 Because this authority is unambiguous, we do not address
MicroBilt’s alternative argument that it is ambiguous whether

-- 7 of 12 --

8
provision delegates exclusively to arbitrators. Under
Consumer Rule 14(a), which the provision incorporates, arbi-
trators “shall have the power to rule on . . . the existence, scope,
or validity of” the provision. J.A. 65 (emphasis added). Courts
have found that, solely by operation of Rule 14(a), these “arbi-
trability” issues fall exclusively to arbitrators. See, e.g., Ciccio
v. SmileDirectClub, LLC, 2 F.4th 577, 582 (6th Cir. 2021) (“By
incorporating the AAA rules, the parties agreed that an arbitra-
tor would decide gateway questions of arbitrability.”).
But the administrator’s decision to dismiss Hernandez’s
claims did not implicate the “existence, scope, or validity” of
the arbitration provision, because Hernandez and MicroBilt
agree on all three of these gateway issues. J.A. 65. They agree
that a valid arbitration provision exists and covers Hernandez’s
claims. And they agree on the provision’s scope: that it incor-
porates the AAA’s Consumer Rules, including Rule 1(d),
which empowers the AAA to apply the Consumer Due Process
Protocol. See Resp. Br. 12 (“There is no dispute that the AAA’s
Consumer Rules and Consumer Due Process Protocol
apply . . . .”).
MicroBilt compares this case to Ciccio, where the Sixth
Circuit held that an AAA administrator’s application of Rule
1(d) violated an exclusive delegation to arbitrators. 2 F.4th at
582. But there, the parties disagreed over their arbitration
agreement’s scope—whether it incorporated the AAA’s
“Healthcare Policy Statement.” See id. at 580. The administra-
tor applied the Healthcare Policy Statement and declined to
administer the case under Rule 1(d), thereby resolving an arbi-
trability issue. Id. at 582–83 (“[W]hether the Agreement incor-
an administrator could exercise Rule 1(d) power, such that an
arbitrator must resolve this ambiguity.

-- 8 of 12 --

9
porates the Healthcare Policy Statement is a gateway question
of arbitrability . . . .”). Hernandez and MicroBilt, in contrast,
do not disagree over the due process standards that apply under
Rule 1(d). Their arbitration provision’s scope was therefore
undisputed for the purposes of the administrator’s decision.
Hernandez and MicroBilt disagree over whether the
provision’s damages limitation violates the Consumer Due
Process Protocol. But this concerns how the Protocol should be
applied, not whether Rule 1(d) permits its application.
Compare Ciccio, 2 F.4th at 582 (“On its face, this case is about
whether the Agreement incorporates the Healthcare Policy
Statement.”). It therefore does not implicate the provision’s
scope. The parties agree that the provision’s scope includes
Rules 1(b) and 1(d), which empower the AAA to direct its
administrators to apply the Protocol.
Ultimately, MicroBilt’s definition of “arbitrability” is
overbroad, covering “any decision that has the effect of pre-
venting the arbitration from even occurring.” Opening Br. 4.
The arbitration provision delegates disputes over its existence,
scope, and validity to arbitrators, but it permits administrators
to apply the Protocol in declining to administer cases, even
when the underlying claims are withheld from arbitrators.
Categorizing how the Protocol applies—as opposed to whether
it applies—as an arbitrability issue would effectively rewrite
the provision. It would require arbitrators to exercise a power
that the provision allows administrators to exercise. Because
arbitration is a creature of contract, the parties were free to

-- 9 of 12 --

10
allow administrators to exercise this power. And under § 4, we
lack the authority to rewrite their agreement.
B
Next, MicroBilt argues that the arbitration provision’s
Exclusive Resolution clause conflicts with Hernandez’s return
to court. After all, the clause requires “that any dispute or claim
. . . must be resolved exclusively by binding arbitration.” J.A.
148 (emphasis added). Hernandez’s return to court conflicts
with this clause, according to MicroBilt, because it allows a
court to “resolve[]” her claims, not an arbitrator. Id.
But the Exclusive Resolution clause and Hernandez’s
return do not conflict, because the parties agreed to arbitrate
“in accordance” with the AAA’s rules. J.A. 148. Hernandez
has fully complied with those rules. First, she submitted a
demand for arbitration to the AAA. The AAA exercised its
power, under its rules, to decline to administer her case. Then
she returned to court, as permitted by those same rules.
Several courts have allowed plaintiffs to return to court
after administrative dismissals under Rule 1(d), despite general
agreements to arbitrate. This suggests that the Exclusive
Resolution clause does not conflict with Hernandez’s return to
court. In Greco v. Uber Techs., Inc., for example, the parties
agreed “that any dispute, claim or controversy . . . will be set-
tled by binding arbitration.” No. 4:20-cv-02698-YGR, 2020
U.S. Dist. LEXIS 161510, at *2 (N.D. Cal. Sept. 3, 2020)
(internal quotation marks omitted). But the AAA declined to
administer the plaintiff’s claim because the defendant failed to
pay its fees, and the plaintiff returned to court under Rule 1(d).
Id. at *4. The court did not compel the plaintiff to return to
arbitration, despite the parties’ general agreement to arbitrate.

-- 10 of 12 --

11
Id. at *12; see also Waters v. Vroom Inc., No. 22-cv-1191 TWR
(AGS), 2023 U.S. Dist. LEXIS 7252, at *1 (S.D. Cal. Jan. 13,
2023) (denying motion to compel and allowing the plaintiff to
proceed in court, despite the parties’ agreement to “resolve any
and all disputes and claims” in arbitration); Forby v. One
Techs., LP, 616 F. Supp. 3d 588, 591, 602 (N.D. Tex. 2022)
(denying motion to compel after plaintiff returned to court
under Rule 1(d), despite a general agreement that all claims
would be “resolved” in arbitration).
The parties in each of these cases agreed that their dis-
putes would be “resolved” or “settled” in arbitration. This did
not conflict with the plaintiffs returning to court under Rule
1(d). Likewise, Hernandez and MicroBilt agreed to arbitrate in
accordance with the AAA’s rules, and those rules brought
Hernandez back to court. Altogether, there is no conflict
between the arbitration provision, including the Exclusive
Resolution clause, and Hernandez’s return to court.3
C
Ultimately, MicroBilt’s real gripe is with the merits of
the AAA’s administrative decision. It argues that there is no
conflict between the Consumer Due Process Protocol and the
damages limitation in the arbitration provision. The District
3 Because there is no conflict, we do not address MicroBilt’s
arguments that the Exclusive Resolution clause “supersede[s]”
the AAA’s administrative decision, Opening Br. 16, or that the
clause must be “harmonized” with the AAA’s rules such that
Hernandez may be compelled to return to arbitration, id. at 33.

-- 11 of 12 --

12
Court disagreed, finding that the AAA’s determination was
reasonable.
But MicroBilt does not explain how we have the author-
ity to review the AAA’s decision. Under Rule 1(d), Hernandez
was permitted to return to court when “the AAA decline[d] to
administer [the] arbitration,” without qualification. J.A. 58.
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. And under 9 U.S.C. § 4, we may compel
arbitration only if Hernandez failed to comply with that deal.
She did not. She fully complied. We therefore lack the author-
ity to review the AAA’s decision.
Similarly, MicroBilt misunderstands our authority in
asking us, in the alternative, to sever the damages limitation
from the arbitration provision. The provision includes a sever-
ability clause, but that clause is triggered only where the “pro-
vision is held to be invalid or otherwise unenforceable.” J.A.
148. That condition was not satisfied in this case, because the
AAA’s decision did not turn on whether “any part of the con-
tract is legally enforceable.” J.A. 30. And even if the damages
limitation were invalid, our authority under § 4 would not
change. The plain terms of Rule 1(d) permitted Hernandez to
return to court after the AAA dismissed her case, regardless of
the damages limitation’s validity.
* * * * *
For these reasons, we will affirm the District Court’s
order denying MicroBilt’s motion to compel.

-- 12 of 12 --