A District Court judge in Indiana has confirmed an arbitration award in favor of a credit union and denied a borrower’s motion to vacate, finding the arbitrator conducted a fair process and that an alleged verbal agreement to hold off on repossession was unenforceable under Indiana law.
The background: The plaintiff filed suit against a the defendant, a federal credit union, alleging the lender wrongfully repossessed two vehicles after an employee allegedly agreed to hold the repossession order if the borrowers made two payments of $4,700 by specified deadlines.
- The plaintiff had taken out two loans with the credit union: a commercial loan of $60,010 secured by a 2023 Ford Transit, and a retail loan of $40,934 secured by a 2016 GMC Yukon. Both loans fell into default.
- The plaintiff alleged that after default notices were issued, she spoke with a credit union representative who agreed the repossession would be held if payments were made by certain dates, but the vehicles were repossessed before those dates occurred.
- A partial payments was made after the vehicles were repossessed and they were returned a week later. The borrowers then failed to make any further monthly payments on either loan.
- The plaintiff accused the defendant of wrongfully repossessing the vehicles and the defendant moved the case to arbitration based on provisions in the loan agreements. An arbitrator granted summary disposition in favor of the credit union on all claims, finding the alleged verbal agreement was unenforceable under Indiana’s statute of frauds and lender liability act because it was never put in writing.
- The arbitrator also found the borrowers had defaulted on both loans and awarded the credit union damages and possession of both vehicles.
- The plaintiffs sought to vacate the arbitrator’s ruling while the defendant moved to have it confirmed.
The ruling: Judge Damon R. Leichty of District Court for the Northern District of Indiana confirmed the arbitration award and denied the plaintiff’s motion to vacate.
- The plaintiff argued the arbitrator denied her a fair hearing by resolving the dispute through summary disposition without an evidentiary hearing, which she contended amounted to refusing to hear material evidence under the Federal Arbitration Act.
- The judge rejected that argument, noting that an arbitrator is not required to hold a full evidentiary hearing and need only give each party an adequate opportunity to present evidence and arguments. The standard for vacating an award on this ground is met only when an arbitrator wrongly excludes the sole evidence on a pivotal issue.
- The plaintiff did not identify what testimony the arbitrator refused to hear or explain why its absence left a key issue without any evidence. She also did not dispute that the credit union had submitted a recording of the phone call between the plaintiff and the credit union representative.
- Judge Leichty found the arbitrator’s decision required no live testimony because Indiana law made the outcome clear: without a written modification, the alleged verbal agreement could not be enforced, and the record indisputably showed the borrowers had defaulted.
- The court confirmed the award, entering judgment of $66,879.09 against the borrowers on the commercial loan and $43,247.16 on the retail loan, and granting the credit union immediate possession of both vehicles.
