Court Opinion

ID: 9348616
Source: CourtListenerOpinion
Date Created: 2022-12-20 14:08:39.068031+00
Date Added: 2024-06-11T16:42:29.777710
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                       2022-NCCOA-558

                                        No. COA21-374

                                     Filed 16 August 2022

     Guilford County, No. 19-CVD-2593

     JENNIFER SNIPES, Plaintiff,

                  v.

     TITLEMAX OF VIRGINIA, INC., Defendant.

           Appeal by plaintiff from order entered 24 March 2021 by Judge Caroline

     Pemberton in District Court, Guilford County. Heard in the Court of Appeals 11

     January 2022.

           Brown, Faucher, Peraldo & Benson, PLLC, by Drew Brown, for plaintiff-
           appellant.

           Troutman Pepper Hamilton Sanders, LLP, by Jason D. Evans and William J.
           Farley III, for defendant-appellee.

           STROUD, Chief Judge.

¶1         Plaintiff, Jennifer Snipes, appeals from an order vacating an arbitration award

     in her favor and dismissing her claims against Defendant, TitleMax of Virginia.

     Because the trial court properly reviewed the arbitrator’s award based on the essence

     of the contract doctrine and, upon de novo review, properly found the arbitrator’s

     award did not draw its essence from the parties’ contract, we affirm the vacatur of

     the arbitrator’s award. But because the trial court could not dismiss Plaintiff’s claims
                                  SNIPES V. TITLEMAX OF VA., INC.

                                              2022-NCCOA-558

                                             Opinion of the Court

     based on its vacatur of the arbitrator’s award, we remand for the trial court, in its

     discretion, to either direct a rehearing by the arbitrator or decide the issues originally

     sent to the arbitrator.

                                        I.      Background

¶2         This case arises out of a “Motor Vehicle Title Loan Agreement” between

     Plaintiff and Defendant from August 2016 in which Plaintiff received a loan of just

     under $2,500 secured by title to her vehicle with an interest rate and fees of

     approximately 144%.         While Plaintiff lives in North Carolina, she traveled to

     Virginia, where Defendant is based, to enter into the Loan Agreement. The Loan

     Agreement contains two provisions pertinent to this appeal. A provision entitled

     “Governing Law, Assignment and Amendment” provides, in relevant part, “This Loan

     Agreement shall be governed by the laws of the State of Virginia, except that the

     Waiver of Jury Trial and Arbitration Provision is governed by the Federal Arbitration

     Act, 9 U.S.C. §§ 1–16 (‘FAA’).”

¶3         The “Waiver of Jury Trial and Arbitration Provision” provides for an arbitrator

     to “issue a final and binding decision” on any dispute that arises under the Loan

     Agreement, with the term “dispute” being “given the broadest possible meaning and

     includ[ing], without limitation” inter alia “all federal or state law claims, disputes or

     controversies, arising from or relating directly or indirectly to th[e] Loan Agreement.”

     (Capitalization altered.)
                               SNIPES V. TITLEMAX OF VA., INC.

                                        2022-NCCOA-558

                                       Opinion of the Court

¶4         On 14 January 2019, Plaintiff filed a complaint against Defendant arising out

     of the Loan Agreement. Specifically, Plaintiff alleged the Loan Agreement violated

     “the North Carolina Consumer Finance Act, North Carolina usury statutes, and the

     North Carolina Unfair and Deceptive Trade Practices Act.” “Plaintiff also sought

     punitive damages.” Pursuant to the Loan Agreement’s arbitration provision, Plaintiff

     included a motion to compel arbitration in her complaint explaining she filed the

     action “to toll the application of the statute of limitations.” In response, Defendant

     filed a motion to dismiss the case for improper venue under North Carolina Rule of

     Civil Procedure 12(b)(3), N.C. Gen. Stat. § 1A-1, Rule 12(b)(3) (2019), on the grounds

     Plaintiff did not live in the county where the case was filed and Defendant did not

     have an office there.

¶5         On 22 May 2019, the trial court entered an order denying Defendant’s motion

     to dismiss, granting Plaintiff’s motion to compel arbitration, and staying litigation

     “pending completion of the arbitration ordered.” The parties then “arbitrated their

     dispute on the papers” they had submitted “without an evidentiary hearing.”

¶6         On 16 November 2020, the arbitrator issued an award in favor of Plaintiff for

     approximately $12,800—representing treble damages. In the award, the arbitrator

     explained he had to choose between applying Virginia law and applying North

     Carolina law to the dispute as well as the importance of the difference between those

     two options:
                                SNIPES V. TITLEMAX OF VA., INC.

                                         2022-NCCOA-558

                                        Opinion of the Court

                  This case involves the extension of a loan to Claimant, a
                  North Carolina resident, secured by an automobile titled in
                  North Carolina, where the loan documents were signed in
                  Respondent’s office in Virginia. The loan carried an
                  interest rate of nearly 150%, a rate that clearly violates the
                  North Carolina Consumer Finance Act (the “CFA”), but
                  that is arguably not illegal in Virginia. The question to be
                  resolved is whether the language of the CFA applies to the
                  transaction at issue here.

     Despite this recognition, the arbitration award never mentioned the Loan

     Agreement’s express Virginia choice of law provision.          The arbitration award

     exclusively focuses on North Carolina’s Consumer Finance Act in its primary analysis

     before also discussing an argument Defendant made based on the Commerce Clause

     of the United States Constitution and addressing damages and fees.

¶7         The same day the arbitrator entered his award, Plaintiff filed a motion to

     confirm the arbitration award and enter judgment. On 15 February 2021, Defendant

     filed a motion to vacate the arbitration award. In its motion, Defendant argued the

     trial court should vacate the arbitration award for two reasons: (1) because the award

     “strayed both from the interpretation and application of the agreement” in that it

     inter alia “refus[ed] to enforce the parties’ valid choice-of-law provision” and (2)

     because the arbitrator “showed a manifest disregard for the law” by refusing to

     enforce the choice-of-law provision and by ignoring “a well-established principle of

     constitutional law,” the Commerce Clause. As part of its prayer for relief in its motion

     to vacate, Defendant also asked the trial court to dismiss Plaintiff’s claims and enter
                                   SNIPES V. TITLEMAX OF VA., INC.

                                            2022-NCCOA-558

                                          Opinion of the Court

     judgment on its behalf.

¶8            On 24 March 2021, the trial court entered an order “granting Defendant’s

     motion to vacate [the] arbitration award and denying Plaintiff’s motion to confirm

     [the] arbitration award.” (Capitalization altered.) After making Findings of Fact on

     the procedural history of the case, the trial court made Conclusions of Law explaining

     how it could only vacate an arbitration award on limited grounds including manifest

     disregard of law and an award failing to draw its essence from the parties’ agreement.

     Applying those doctrines to the arbitration award, the trial court concluded the Loan

     Agreement “contains an unambiguous, valid, and enforceable choice-of-law provision

     confirming that Virginia law applies” and the arbitration award “demonstrated a

     manifest disregard of the law” and “fail[ed] to draw its essence from the Loan

     Agreement” by ignoring the choice of law provision favoring Virginia law and instead

     applying North Carolina law. As a result, the trial court granted Defendant’s motion

     to vacate the arbitration award and denied Plaintiff’s motion to confirm the

     arbitration award. Based on its decision to vacate the arbitration award, the trial

     court also dismissed Plaintiff’s claims stating: “Plaintiff’s claims against Defendant

     are hereby dismissed with prejudice.”

¶9            On 20 April 2021, Plaintiff filed a written notice of appeal from the trial court’s

     order.
                                   SNIPES V. TITLEMAX OF VA., INC.

                                             2022-NCCOA-558

                                            Opinion of the Court

                                           II.    Analysis

¶ 10          Plaintiff contends the trial court erred by “granting Defendant-Appellee’s

       motion to vacate [the] arbitration award” and by “denying Plaintiff-Appellant’s

       motion to confirm [the] arbitration award.” (Capitalization altered.) As both parties

       agree, these two arguments are two sides of the same coin because under the Federal

       Arbitration Act (“FAA”)1 a court “must” confirm an arbitration award “unless the

       award is vacated, modified, or corrected as prescribed in sections 10 and 11” of the

       Act. 9 U.S.C. § 9. We first provide background on the law governing vacatur under

       the FAA to help situate the parties’ specific arguments on the trial court’s order

       vacating the arbitrator’s award.

¶ 11          “The FAA declares a liberal policy favoring arbitration,” such that “[j]udicial

       review of an arbitration award is severely limited in order to encourage the use of

       arbitration and in turn avoid expensive and lengthy litigation.” See Carpenter v.

       Brooks, 139 N.C. App. 745, 750–51, 534 S.E.2d 641, 645 (2000) (citing Moses H. Cone

       1The FAA governs this case because the title loan between Plaintiff and Defendant specifies
       the arbitration clause “is governed by the” FAA. See In re Fifth Third Bank, Nat. Ass’n, 216
       N.C. App. 482, 487, 716 S.E.2d 850, 854 (2011) (explaining the FAA governed because the
       arbitration clause of the promissory note in question stated the FAA would “apply to the
       construction, interpretation, and enforcement of this arbitration provision” (quotations
       omitted)). As the Supreme Court of the United States has explained, state courts have a
       “prominent role in arbitral enforcement” under the FAA. See Badgerow v. Walters, ___ U.S.
       ____, _____, 212 L. Ed. 2d 355, 363 (2022) (quotations and citation omitted) (stating as part
       of an analysis on how the FAA does not provide independent jurisdiction for “applications to
       confirm, vacate, or modify arbitral awards (under Sections 9 through 11)”).
                                   SNIPES V. TITLEMAX OF VA., INC.

                                              2022-NCCOA-558

                                          Opinion of the Court

       Hospital v. Mercury Constr. Corp., 460 U.S. 1, 74 L. Ed. 2d 765 (1983)) (including

       “liberal policy” quote immediately before listing FAA grounds for vacating an

       arbitration award); First Union Securities, Inc. v. Lorelli, 168 N.C. App. 398, 399–

       400, 607 S.E.2d 674, 676 (2005) (including other quote immediately after listing FAA

       grounds for vacatur). This policy favoring arbitration by limiting judicial review

       manifests in two ways. First, “under the FAA, an arbitration award is presumed

       valid, and the party seeking to vacate it must shoulder the burden of proving the

       grounds for attacking its validity.” First Union, 168 N.C. App. at 400, 607 S.E.2d at

       676 (quoting Carpenter, 139 N.C. App. at 751, 534 S.E.2d at 646) (internal quotations,

       citations, and alterations omitted).

¶ 12         Second, the FAA limits vacatur of arbitration awards to the situations listed

       in § 10 of the statute. See Carpenter, 139 N.C. App. at 750–51, 534 S.E.2d at 645–46

       (explaining “[u]nder the FAA, arbitration awards may be vacated only in limited

       situations” before listing the grounds in § 10). Specifically, § 10(a) limits vacatur to

       the following situations:

                    (1) where the award was procured by corruption, fraud, or
                    undue means;
                    (2) where there was evident partiality or corruption in the
                    arbitrators, or either of them;
                    (3) where the arbitrators were guilty of misconduct in
                    refusing to postpone the hearing, upon sufficient cause
                    shown, or in refusing to hear evidence pertinent and
                    material to the controversy; or of any other misbehavior by
                    which the rights of any party have been prejudiced; or
                                  SNIPES V. TITLEMAX OF VA., INC.

                                           2022-NCCOA-558

                                          Opinion of the Court

                    (4) where the arbitrators exceeded their powers, or so
                    imperfectly executed them that a mutual, final, and
                    definite award upon the subject matter submitted was not
                    made.

       9 U.S.C. § 10. “The text of the FAA” and the “national policy favoring arbitration

       with just the limited [judicial] review needed to maintain arbitration’s essential

       virtue of resolving disputes straight away” in turn “compel[] a reading of the §[] 10 .

       . . categories as exclusive.” In re Fifth Third Bank, 216 N.C. App. at 487, 716 S.E.2d

       at 854 (alterations from original omitted and own alterations added) (quoting Hall

       Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 588, 170 L. Ed. 2d 254, 265

       (2008)).

¶ 13         The exclusivity of the § 10(a) categories does not require a party seeking

       vacatur of an arbitration award or a court vacating such an award to cite the specific

       language of the section; rather courts have at times read other doctrines into § 10’s

       specific text. For example, the Supreme Court of the United States recognized the

       essence of the contract doctrine fits within § 10(a)(4)’s provision for vacatur when the

       “arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4); see Oxford Health Plans LLC

       v. Sutter, 569 U.S. 564, 569–70, 186 L. Ed. 2d 113, 119–20 (2013) (explaining a court

       can overturn the arbitrator’s determination under § 10(a)(4) only when the arbitrator

       exceeded his contractually delegated authority by issuing an award based on his own

       policy determinations rather than “drawing its essence from the contract” (quoting
                                  SNIPES V. TITLEMAX OF VA., INC.

                                           2022-NCCOA-558

                                          Opinion of the Court

       Eastern Associated Coal Corp. v. United Mine Workers of America, Dist. 17, 531 U.S.

       57, 62, 148 L. Ed. 2d 354 (2000) (alterations omitted))).

¶ 14         The essence of the contract doctrine pre-existed Hall Street Associates’s

       declaration § 10’s categories were exclusive. See Eastern Associated Coal Corp., 531

       U.S. at 62, 148 L. Ed. 2d at 360 (a case from 2000 stating, “[A]n arbitrator’s award

       must draw its essence from the contract and cannot simply reflect the arbitrator’s

       own notions of industrial justice.” (quotations and citations omitted)). But, post-Hall

       Street Associates, the doctrine was incorporated into one of the categories within §

       10(a). See Oxford Health Plans, 569 U.S. at 569–70, 186 L. Ed. 2d at 119–20 (laying

       out the essence of the contract doctrine as part of determining “the arbitrator did not

       exceed his powers” under § 10(a)(4) (alterations omitted)).

¶ 15         Not all pre-existing doctrines necessarily survived Hall Street Associates,

       however. For example, before Hall Street Associates, courts would vacate arbitration

       awards when the arbitrator “manifestly disregarded the law.” See In re Fifth Third,

       216 N.C. App. at 487–89, 716 S.E.2d at 854–55 (quoting Fourth Circuit case Three S

       Delaware, Inc. v. DataQuick Information Systems, Inc., 492 F.3d 520, 529 (4th Cir.

       2007), to explain manifest disregard of the law after recognizing appellant only cited

       cases from before Hall Street Associates). As this Court has recognized, “the United

       States Supreme Court has ‘not decided whether manifest disregard survives the

       decision in Hall Street Associates . . . .’” In re Fifth Third Bank, 216 N.C. App. at 487–
                                    SNIPES V. TITLEMAX OF VA., INC.

                                              2022-NCCOA-558

                                            Opinion of the Court

       88, 716 S.E.2d at 854 (alterations from original omitted) (quoting Stolt-Nielsen S.A.

       v. AnimalFeeds Int’l Corp., 559 U.S. 662, 672 n.3, 176 L. Ed. 2d 605, 616 n.3 (2010));

       see also Wachovia Securities, LLC v. Brand, 671 F.3d 472, 483 (4th Cir. 2012) (noting

       a federal circuit court split on the issue because the Fourth Circuit considers manifest

       disregard still in existence in contrast to the Fifth and Eleventh Circuits).2

¶ 16          With this background on the FAA and the limited grounds on which it allows

       judicial review, we now return to Plaintiff-Appellant’s specific arguments. Plaintiff

       argues three grounds on which we should reverse the trial court’s decision to vacate

       the arbitration award: (1) “the trial court impermissibly conducted a de novo review”

       of the award; (2) “the essence of the contract doctrine does not apply” such that the

       trial court could not have vacated the award on that ground; and (3) the arbitrator

       “did not commit a manifest disregard of law” as the trial court found.3 (Capitalization

       2 We cite Wachovia Securities on the circuit-split issue only for ease of reference because the
       trial court relied on it in its order vacating the arbitration award here. For a discussion of
       the circuit split more broadly, see generally Stuart M. Boyarsky, The Uncertain Status of the
       Manifest Disregard Standard One Decade After Hall Street, 123 Dick. L. Rev. 167, 187–205
       (2018) (recounting Hall Street Associates and the ensuing circuit split with decision from each
       circuit).
       3 Plaintiff also includes a sub-section arguing the arbitrator “had no obligation to further

       explain his rejection of [Defendant]’s choice-of-law provision” in the award such that the lack
       of explanation “certainly was no basis on which the trial court could properly vacate” the
       award. The trial court’s order included a Conclusion of Law explaining “[t]he arbitrator
       demonstrated a manifest disregard of the law by ignoring and refusing to enforce the
       unambiguous choice-of-law provision in the Loan Agreement.” As a result, the further
       explanation argument best fits within Plaintiff’s broader manifest disregard of law
       argument.
                                  SNIPES V. TITLEMAX OF VA., INC.

                                           2022-NCCOA-558

                                          Opinion of the Court

       altered.)

¶ 17           We first address Plaintiff’s argument the trial court “impermissibly conducted

       a de novo review” because if the manner of the trial court’s review was wrong, we

       must reverse. See First Union Securities, 168 N.C. App. at 400, 607 S.E.2d at 676

       (“Judicial review of an arbitration award is severely limited . . . .”). Given the trial

       court’s order rests on two independent grounds of essence of the contract and manifest

       disregard, we can proceed on either basis. Given our courts and the Supreme Court

       of the United States have thus far declined to answer whether manifest disregard

       survived Hall Street Associates, see In re Fifth Third Bank, 216 N.C. App. at 487–88,

       716 S.E.2d at 854–55 (explaining the U.S. Supreme Court has not decided the matter

       before declining to determine whether manifest disregard is still valid), we will

       address the trial court’s “essence of the contract” grounds first and only proceed to

       “manifest disregard” if the trial court erred by vacating the arbitrator’s award on the

       basis of the essence of the contract doctrine.

       A. Applicable Law and Standard of Review

¶ 18           Before addressing the trial court’s review of the arbitrator’s award, we first

       examine the applicable law and our standard of review of the trial court’s decision.

¶ 19           When reviewing orders based on federal statutes such as the FAA, we look to

       a mix of state and federal court decisions. As this Court explained in In re Fifth Third

       Bank:
                                  SNIPES V. TITLEMAX OF VA., INC.

                                           2022-NCCOA-558

                                          Opinion of the Court

                    According to well-established law, when an “action is
                    brought under [a] Federal statute . . . in so far as it has
                    been construed by the Supreme Court of the United States,
                    we are bound by that construction.” Dooley v. R.R., 163
                    N.C. 454, 457–58, 79 S.E. 970, 971 (1913). However, “North
                    Carolina appellate courts are not bound, as to matters of
                    federal law, by decisions of federal courts other than the
                    United States Supreme Court.” Enoch v. Inman, 164 N.C.
                    App. 415, 420–21, 596 S.E.2d 361, 365 (2004) (citing
                    Security Mills v. Trust Co., 281 N.C. 525, 529, 189 S.E.2d
                    266, 269 (1972)). Even so, despite the fact that they are
                    “‘not binding on North Carolina’s courts, the holdings and
                    underlying rationale of decisions rendered by lower federal
                    courts may be considered persuasive authority in
                    interpreting a federal statute.’” McCracken & Amick, Inc.
                    v. Perdue, 201 N.C. App. 480, 488 n. 4, 687 S.E.2d 690, 695
                    n. 4 (2009) (quoting Security Mills, 281 N.C. at 529, 189
                    S.E.2d at 269), disc. review denied, 364 N.C. 241, 698
                    S.E.2d 400 (2010).

       216 N.C. App. at 488–89, 716 S.E.2d at 855. Of course, we are also bound by decisions

       of our Supreme Court and by prior panels of this Court. See, e.g., In re O.D.S., 247

       N.C. App. 711, 721–22, 786 S.E.2d 410, 417 (2016) (“One panel of this Court cannot

       overrule a prior panel of this Court, or our Supreme Court.” (citing In re Civil Penalty,

       324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989))).

¶ 20         Turning to “the standard of review of the trial court’s vacatur of [an]

       arbitration award,” it “is the same as for any other order in that we accept findings

       of fact that are not clearly erroneous and review conclusions of law de novo.”

       Carpenter, 139 N.C. App. at 750, 534 S.E.2d at 645 (quotations and citation omitted).
                                 SNIPES V. TITLEMAX OF VA., INC.

                                          2022-NCCOA-558

                                         Opinion of the Court

       B. Trial Court’s Review

¶ 21         Plaintiff first argues “the trial court impermissibly conducted a de novo review

       of” the arbitration award. (Capitalization altered.) Specifically, Plaintiff argues

       “[t]he transcript of the proceedings demonstrates” the trial judge “simply

       misunderstood the role of the court in connection with a request for the confirmation

       of an arbitration award” in that she “impermissibly substituted her judgment for that

       of” the arbitrator.

¶ 22         We reject Plaintiff’s argument because it improperly focuses on the hearing

       rather than the written order. “The trial judge’s comments during the hearing as to

       . . . law are not controlling; the written court order as entered is controlling.”

       Fayetteville Publishing Co. v. Advanced Internet Technologies, Inc., 192 N.C. App.

       419, 425, 665 S.E.2d 518, 522 (2008) (citing Draughon v. Harnett Cty. Bd. of Educ.,

       158 N.C. App. 208, 215, 580 S.E.2d 732, 737 (2003), aff’d per curiam, 358 N.C. 131,

       591 S.E.2d 521 (2004)). Thus, all the trial judge’s comments to which Plaintiff points

       here are not controlling; we only review the entered written order vacating the

       arbitrator’s award.

¶ 23         Turning to the written order, Plaintiff does not demonstrate the trial court

       impermissibly conducted a de novo review. As laid out above, “[u]nder the FAA,

       arbitration awards may be vacated only in limited situations.” Carpenter, 139 N.C.

       App. at 750, 534 S.E.2d at 645. The trial court’s written order lists two alternative
                                  SNIPES V. TITLEMAX OF VA., INC.

                                           2022-NCCOA-558

                                          Opinion of the Court

       bases for vacating the arbitration award: (1) “the award fails to draw its essence from

       the Loan Agreement” and (2) the arbitrator “demonstrated a manifest disregard of

       the law.” We have already explained essence of the contract is an acceptable grounds

       for review as the Supreme Court of the United States has determined it falls within

       § 10(a)(4) of the FAA. See Oxford Health Plans, 569 U.S. at 569–70, 186 L. Ed. 2d at

       119–20 (laying out the essence of the contract doctrine as part of determining “the

       arbitrator did not exceed his powers” under § 10(a)(4)). Thus, on at least one of the

       alternative grounds, the trial court’s review was proper.

¶ 24         If at least one of the grounds for review was proper and with the uncertainty

       around the continued existence of manifest disregard, we would not need to address

       the propriety of the trial court’s review on that ground. First, we can consider

       whether to uphold the trial court’s order based on the essence of the contract doctrine.

       Second, even if we cannot uphold the order based on essence of the contract grounds,

       we could determine the order needs to be reversed because, presuming arguendo

       manifest disregard is still a valid ground, Defendant failed to show a manifest

       disregard below. See In re Fifth Third Bank, 216 N.C. App. at 488, 716 S.E.2d at 855

       (concluding party failed to demonstrate manifest disregard of the law such that the

       court did not need to “determine the extent, if any, to which ‘manifest disregard of

       the law’ remains a valid non-statutory basis for vacating an arbitration award”).

       Thus, only if we first determine the trial court improperly applied essence of the
                                  SNIPES V. TITLEMAX OF VA., INC.

                                             2022-NCCOA-558

                                         Opinion of the Court

       contract but correctly applied manifest disregard do we need to determine whether

       the trial court properly reviewed for manifest disregard. Only in that scenario would

       the existence of manifest disregard be dispositive such that we have to address the

       question the Supreme Court of the United States and this Court have avoided. In re

       Fifth Third Bank, 216 N.C. App. at 487–88, 716 S.E.2d at 854–55. We first evaluate

       the essence of the contract ground.

       C. Essence of the Contract

¶ 25         Plaintiff argues the trial court’s vacatur of the arbitration award based on the

       essence of the contract doctrine “is erroneous in two regards.” First, Plaintiff argues

       the doctrine does not apply because she did “not assert[] any breach of contract

       claims.” Second, she contends even if it applies, the award “is, at a minimum,

       rationally inferable from material terms contained in the parties’ loan agreement.”

¶ 26         As noted, essence of the contract is a doctrine that fits with the FAA provision

       allowing for vacatur where the arbitrators “exceeded their powers.”        9 U.S.C. §

       10(a)(4); see Oxford Health Plans, 569 U.S. at 569–70, 186 L. Ed. 2d at 119–20

       (explaining a court can overturn the arbitrator’s determination under § 10(a)(4) only

       when the arbitrator exceeded his contractually delegated authority by issuing an

       award based on his own policy determinations rather than “drawing its essence from

       the contract” (quoting Eastern Associated Coal, 531 U.S. at 62, 148 L. Ed. 2d 354)).

       The bar for an arbitrator’s award drawing its essence from a contract is low; the
                                  SNIPES V. TITLEMAX OF VA., INC.

                                             2022-NCCOA-558

                                            Opinion of the Court

       arbitrator need only be “‘arguably construing or applying the contract.’” See Eastern

       Associated Coal, 531 U.S. at 62, 148 L. Ed. 2d at 360 (explaining as long as the

       arbitrator is doing that, “the fact that ‘a court is convinced he committed serious error

       does not suffice to overturn his decisions.’” (quoting United Paperworkers Int’l Union,

       AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 98 L. Ed. 2d 286 (1987)); see also Oxford

       Health Plans, 569 U.S. at 573, 186 L. Ed. 2d at 122 (“Under § 10(a)(4), the question

       for a judge is not whether the arbitrator construed the parties’ contract correctly, but

       whether he construed it at all.”).

¶ 27         As an example of this low bar, in Oxford Health Plans, when the arbitrator

       explained “his . . . decision was ‘concerned solely with the parties’ intent as evidenced

       by the words’” of the relevant contract clause and performed a “textual analysis,” the

       Supreme Court of the United States found the arbitrator was construing the contract

       “focusing, per usual, on its language.” 569 U.S. at 570–71, 186 L. Ed. 2d at 120–21.

       As a result, “to overturn his decision, [the Court] would have to rely on a finding that

       he misapprehended the parties’ intent,” but “§ 10(a)(4) bars that course: It permits

       courts to vacate an arbitral decision only when the arbitrator strayed from his

       delegated task of interpreting a contract, not when he performed that task poorly.”

       Id., 569 U.S. at 571–72, 186 L. Ed. 2d at 121.

¶ 28         The United States Court of Appeals for the Fourth Circuit (“Fourth Circuit”)

       has also expanded upon the essence of the contract doctrine in a persuasive manner.
                                 SNIPES V. TITLEMAX OF VA., INC.

                                          2022-NCCOA-558

                                         Opinion of the Court

       It has clarified vacatur is appropriate for “an award that contravenes the plain and

       unambiguous terms of the” contract. See Patten v. Signator Ins. Agency, Inc., 441

       F.3d 230, 237 (4th Cir. 2006) (citing United Paperworkers Int’l Union, 484 U.S. at 38,

       98 L. Ed. 2d 286) (explaining the “deferential” standard of review of arbitration

       awards “does not require” affirming such an award). In other words, a court can

       vacate an arbitration award on the grounds it fails to draw its essence from the

       contract “when an arbitrator has disregarded or modified unambiguous contract

       provisions or based an award upon his own personal notions of right and wrong.”

       Three S Delaware, 492 F.3d at 528 (citing Patten, 441 F.3d at 235).

¶ 29         For example, in Patten, the Fourth Circuit considered an issue of the timeliness

       of the arbitration demand when the governing agreement “contained no explicit time

       limitation.” 441 F.3d at 236. The Fourth Circuit found the arbitrator’s award “failed

       to draw its essence from the governing arbitration agreement” because the

       arbitrator’s imposition of a one-year limitations period “contradicted the plain and

       unambiguous terms” of the agreement. Id. at 236–37. While that example covers

       interpreting the scope of arbitration, the essence of the contract doctrine extends to

       other provisions as well. E.g. MCI Constructors, LLC v. City of Greensboro, 610 F.3d

       849, 861–62 (4th Cir. 2010) (applying doctrine to aspects of contract related to

       “damages claim”).
                                  SNIPES V. TITLEMAX OF VA., INC.

                                           2022-NCCOA-558

                                         Opinion of the Court

¶ 30          Here, the trial court vacated on essence of the contract grounds by explaining:

       “Additionally, the award fails to draw its essence from the Loan Agreement as the

       application of North Carolina law is inconsistent with the plain language of the Loan

       Agreement stating that Virginia law applies.”        In a section on “Governing Law,

       Assignment and Amendment,” the Loan Agreement states: “This Loan Agreement

       shall be governed by the laws of the State of Virginia, except that the Waiver of Jury

       Trial and Arbitration Provision is governed by the Federal Arbitration Act, 9 U.S.C.

       §§ 1–16 (‘FAA’).” Thus, a “plain and unambiguous term[]” of the contract provides

       Virginia law applies. Patten, 441 F.3d at 237.

¶ 31          The arbitration award recognized the arbitrator needed to decide whether to

       apply North Carolina law or Virginia law and explained the differences between the

       two:

                    This case involves the extension of a loan to Claimant, a
                    North Carolina resident, secured by an automobile titled in
                    North Carolina, where the loan documents were signed in
                    Respondent’s office in Virginia. The loan carried an
                    interest rate of nearly 150%, a rate that clearly violates the
                    North Carolina Consumer Finance Act (the “CFA”), but
                    that is arguably not illegal in Virginia. The question to be
                    resolved is whether the language of the CFA applies to the
                    transaction at issue here.

¶ 32          Despite this recognition, the arbitration award never considers or even

       mentions the Loan Agreement’s Virginia choice of law provision.               Instead, the

       arbitration award exclusively focuses on North Carolina’s Consumer Finance Act in
                                  SNIPES V. TITLEMAX OF VA., INC.

                                          2022-NCCOA-558

                                         Opinion of the Court

       its primary analysis. Thus, as in Patten, vacatur is appropriate here because the

       arbitration award “contradicted the plain and unambiguous terms” of the Loan

       Agreement. Patten, 441 F.3d at 236. The arbitrator here did not construe the

       governing contract “at all.” See Oxford Health Plans, 569 U.S. at 573, 186 L. Ed. 2d

       at 122 (“Under § 10(a)(4), the question for a judge is not whether the arbitrator

       construed the parties’ contract correctly, but whether he construed it at all.”). As

       such, the arbitration award does not draw its essence from the contract and therefore

       the arbitrator exceeded his power. See id., 569 U.S. at 569–70, 186 L. Ed. 2d at 119–

       20 (explaining a court can overturn the arbitrator’s determination under § 10(a)(4)

       when the award does not “draw[] its essence from the contract”). As a result, the trial

       court properly vacated the arbitrator’s award.

¶ 33         Plaintiff first argues “the essence of the contract doctrine does not apply”

       because she did not assert “any breach of contract claims.” (Capitalization altered.)

       First, this statement has no basis when looking at Fourth Circuit precedent we found

       persuasive above. E.g. MCI Constructors, 610 F.3d at 852, 861–62 (applying essence

       of the contract doctrine in case where complaint alleged claims including negligent

       misrepresentation and wrongful termination). Patten is one of the cases applying

       essence of the contract doctrine when the claims were not all contractual in nature,

       see 441 F.3d at 232, 236–37 (applying doctrine when underlying claims submitted to

       arbitration included age discrimination and wrongful termination), and Plaintiff cites
                                     SNIPES V. TITLEMAX OF VA., INC.

                                             2022-NCCOA-558

                                            Opinion of the Court

       Patten a page later in her own briefing on essence of the contract doctrine.

¶ 34         Second, the only case law authority Plaintiff cites to support this proposition

       is a “Memorandum Opinion and Order” from the United States District Court for the

       Middle District of North Carolina (“Middle District”) in Strange et al. v. Select

       Management     Resources,      LLC    et   al.,   No.   1:19-cv-00321   (M.D.N.C.   2021).

       (Capitalization altered.) According to the copy of Strange et al. included in the

       addendum to Plaintiff’s brief, when the Middle District was analyzing a party’s

       argument the arbitrator refused to apply a choice of law provision, it was reviewing

       on the grounds of manifest disregard of the law, not essence of the contract. Thus,

       we reject Plaintiff’s unsupported assertion that essence of the contract doctrine only

       applies to contract claims.

¶ 35         Plaintiff’s other argument is that even if the essence of the contract doctrine

       does apply, the arbitrator’s award is “at a minimum, rationally inferable from

       material terms contained in the parties’ loan agreement.” (Citing Patten, 441 F.3d at

       235.) Plaintiff is correct that “[a]n arbitration award fails to draw its essence from

       the agreement only when the result is not ‘rationally inferable from the contract.’”

       Patten, 441 F.3d at 235 (quoting Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142

       F.3d 188, 193 n.5 (4th Cir. 1998). But Patten itself defeats Plaintiff’s argument. In

       Patten, when the arbitrator’s award “disregarded the plain and unambiguous

       language of the” governing contract, the Fourth Circuit found “[t]he arbitrator’s
                                  SNIPES V. TITLEMAX OF VA., INC.

                                           2022-NCCOA-558

                                          Opinion of the Court

       ruling . . . resulted in an award that, in the language of Apex Plumbing, simply was

       ‘not rationally inferable from the contract.’” Id. at 235–37 (quoting Apex Plumbing,

       142 F.3d at 193 n.5). While Plaintiff points to a portion of the Loan Agreement

       relating to the interest rate and possession of title taking place at the NCDMV, that

       does not cure the arbitrator’s failure to mention the choice of law provision when

       choice of law was the question he recognized he had to answer.            Because the

       arbitrator’s award “disregarded the plain and unambiguous language of the” Loan

       Agreement requiring application of Virginia law, the award “simply was ‘not

       rationally inferable from the contract.’” Id. at 235–37. Therefore, the arbitrator’s

       award failed to draw its essence from the Loan Agreement.

¶ 36         The issue before us is solely “Whether the trial court erred by granting

       Defendant-Appellee’s Motion to Vacate [the] Arbitration Award.” We conclude the

       trial court did not err in granting that motion because the arbitrator’s lack of mention

       or consideration of the Loan Agreement’s choice of law provision means his award

       does not draw its essence from the parties’ contract containing that provision, and a

       failure to draw from the essence of the contract is a valid ground on which to vacate

       an arbitration award.

¶ 37         Therefore, after de novo review, we affirm the trial court’s order vacating the

       arbitration award. Because we affirm, the trial court’s vacatur order on essence of

       the contract grounds, we do not need to address its alternative ground of manifest
                                   SNIPES V. TITLEMAX OF VA., INC.

                                             2022-NCCOA-558

                                            Opinion of the Court

       disregard. Also, as we explained above, because we affirm the trial court’s order

       granting Defendant’s motion to vacate the arbitration award, we also affirm its order

       denying Plaintiff’s motion to confirm the arbitration award.             See 9 U.S.C. § 9

       (explaining a court “must grant” an order confirming an arbitration award “unless

       the award is vacated . . .”).

                                 III.    Trial Court’s Dismissal

¶ 38          After vacating the arbitration award, the trial court also dismissed the case

       saying, “Plaintiff’s claims against Defendant are hereby dismissed with prejudice.”

       The trial court’s use of the word “hereby” indicates its dismissal of Plaintiff’s claims

       turns on its decision to vacate the arbitration award. While the trial court properly

       vacated the arbitration award as we have explained above, the FAA does not allow it

       to then dismiss the action. The FAA explains, “If an award is vacated . . . the court

       may, in its discretion, direct a rehearing by the arbitrators.”4 9 U.S.C. § 10(b). The

       United States Supreme Court has explained if a court, in its discretion, chooses not

       to “‘direct a rehearing by the arbitrators’” then the court “must . . . decide the question

       that was originally referred to the” arbitrators. See Stolt-Nielsen, 559 U.S. at 677,

       4 The omitted portion of § 10(b) restricts the trial court’s ability to direct a rehearing to
       situations where “the time within which the agreement required the award to be made has
       not expired.” 9 U.S.C. §10(b). That restriction does not apply here because the arbitration
       provisions of the Loan Agreement do not include a “time within which” the award has to be
       made.
                                   SNIPES V. TITLEMAX OF VA., INC.

                                               2022-NCCOA-558

                                            Opinion of the Court

       176 L. Ed. 2d at 619 (quoting 9 U.S.C. § 10(b)) (so explaining in terms of its own

       review after vacating an arbitration panel’s award).           Therefore, a court cannot

       dismiss a case following vacatur of an arbitration award under the FAA. As a result,

       we remand to the trial court to, in its discretion, choose between “‘direct[ing] a

       rehearing by the arbitrator[]’” or “decid[ing] the question that was originally referred”

       to the arbitrator. Stolt-Nielsen, 559 U.S. at 677, 176 L. Ed. 2d at 619 (quoting 9 U.S.C.

       § 10(b)).

                                         IV.     Conclusion

¶ 39          We hold the trial court properly reviewed to determine whether the award

       drew its essence from the Loan Agreement and did not err in vacating the arbitrator’s

       award and, based on our de novo review, properly concluded the award did not.

       Because we affirm based on the essence of the contract doctrine, we do not reach the

       trial court’s alternative ground for vacatur, i.e. manifest disregard. Given we affirm

       the trial court’s order vacating the arbitrator’s award, we also affirm its order denying

       Plaintiff’s motion to confirm the award. The trial court, however, could not dismiss

       the case in reliance on its vacatur of the arbitration award. We remand for the trial

       court, in its discretion, to either direct a rehearing by the arbitrator or decide for itself

       the issues originally sent to the arbitrator.

              AFFIRMED AND REMANDED.

              Judges TYSON and GORE concur.