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March 19, 2026 Get Citation Alerts Download PDF Add Note

USAA Savings Bank v. Michael Goff

Court of Appeals for the Seventh Circuit

• Citations: None known
• Docket Number: 25-1730

• Judges: Leedissents

• Opinion

• Authorities (15)

• Cited By (0)

• Summaries (0)

• Similar Cases (20.5K)

• PDF

Combined Opinion

                        by Leedissents

In the
United States Court of Appeals
For the Seventh Circuit

No. 25-1730
USAA SAVINGS BANK,
Plaintiff-Appellant,

v.

MICHAEL GOFF,
Defendant-Appellee.

Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
1:23-cv-15955 — Edmond E. Chang, Judge.

ARGUED NOVEMBER 5, 2025 — DECIDED MARCH 19, 2026

Before RIPPLE, KIRSCH, and LEE, Circuit Judges.
KIRSCH, Circuit Judge. After USAA Savings Bank closed
Michael Goff’s credit card account, Goff commenced arbitra-
tion pursuant to the parties’ contract. The arbitrator awarded
Goff $10,000 in punitive damages. USAA sought vacatur of
the award, contending that the arbitrator failed to conduct a
post-award review of punitive damages, as required by the
arbitration agreement. The district court confirmed the
2 No. 25-1730

damages award, reasoning that the arbitrator had not ex-
ceeded her authority. USAA appeals and Goff moves for sanc-
tions. Because the arbitrator disregarded the express terms in
the agreement governing punitive damages, we cannot say
that she was interpreting the arbitration agreement when she
failed to conduct the post-award review. We reverse the dis-
trict court and deny Goff’s motion for sanctions.
I
After closing Michael Goff’s credit card account, USAA
Savings Bank provided Goff with conflicting reasons for do-
ing so. Goff commenced arbitration against USAA pursuant
to an arbitration clause in the parties’ credit card agreement,
seeking actual and punitive damages.
The arbitration agreement permits an arbitrator to award
punitive damages. However, the agreement also provides:
Before the decision [to award punitive dam-
ages] becomes final, the arbitrator must also
conduct a post-award review of any punitive
damages, allowing the parties the same proce-
dural rights and using the same standards and
guidelines that would apply in a judicial pro-
ceeding in the state where the arbitration is lo-
cated. Any ruling based on this post-award re-
view must be set forth in writing with a rea-
soned explanation.
The arbitration agreement also maintains that the arbitrator
should apply American Arbitration Association (AAA) rules
in effect at the time of the arbitration, unless they conflict with
the terms of the arbitration agreement.
After conducting an evidentiary hearing, the arbitrator
No. 25-1730 3

determined that USAA failed to provide Goff with adequate
notice after an adverse action—closing Goff’s credit card ac-
count—as required by the Equal Credit Opportunity Act
(ECOA), 15 U.S.C. § 1691. The arbitrator concluded that Goff
suffered no actual damages because of the account closure but
still awarded him $10,000 in punitive damages. The arbitrator
then submitted a final award, confirming the punitive dam-
ages and granting Goff’s counsel $77,428 in legal fees.
USAA filed a Request for Required Post-Award Review.
USAA cited the provisions in the arbitration agreement that
said that an arbitrator should conduct a post-award review of
punitive damages before a decision becomes final. Since the
arbitrator did not conduct the post-award review, USAA ar-
gued that the punitive damages award was not a final deci-
sion. However, the arbitrator reaffirmed the punitive dam-
ages award, finding that the arbitration was conducted in ac-
cordance with the Consumer Arbitration Rules of the AAA,
and that these rules did not permit her to “re-determine the
merits of any claim already decided.”
USAA filed a lawsuit in a federal district court and moved
to vacate the arbitration award on the basis that the arbitrator
exceeded her authority by failing to conduct a post-award re-
view. The district court denied USAA’s motion and con-
firmed the arbitrator’s award. The district court noted that the
arbitrator erred by failing to engage in the required post-
award review. However, the district court concluded that this
error did not warrant vacatur since the arbitrator’s award still
“drew from the essence of the arbitration agreement.” USAA
now appeals, and Goff moves for sanctions under Federal
Rule of Appellate Procedure 38.
4 No. 25-1730

II
When considering a district court’s decision to confirm an
arbitral award, we review questions of law de novo and find-
ings of fact for clear error. Cont’l Cas. Co. v. Certain Underwrit-
ers at Lloyds of London, 10 F.4th 814, 819 (7th Cir. 2021). But our
review of arbitration awards is “extremely limited.” Zimmer
Biomet Holdings, Inc. v. Insall, 108 F.4th 512, 515 (7th Cir. 2024)
(citation omitted). So long as the arbitrator’s award “draws its
essence from the collective bargaining agreement, and is not
merely his own brand of industrial justice,” we will enforce
the award. United Paperworkers Int’l Union, AFL-CIO v. Misco,
Inc., 484 U.S. 29, 36 (1987) (citation modified). Indeed, the rel-
evant question is “not whether … the arbitrators erred in in-
terpreting the contract; it is not whether they clearly erred in
interpreting the contract; it is not whether they grossly erred
in interpreting the contract; it is whether they interpreted the
contract.” U.S. Soccer Fed’n, Inc. v. U.S. Nat’l Soccer Team Play-
ers Ass’n, 838 F.3d 826, 832 (7th Cir. 2016) (citation modified).
The Federal Arbitration Act (FAA) provides that an arbi-
tration award may be vacated when an arbitrator has “ex-
ceeded their powers, or so imperfectly executed them that a
mutual, final, and definite award upon the subject matter sub-
mitted was not made.” 9 U.S.C. § 10 (a)(4). USAA argues that
we should vacate the arbitrator’s award under § 10(a)(4) be-
cause the arbitrator exceeded her authority by issuing a final
punitive damages award without first conducting a post-
award review, as required by the arbitration agreement. We
agree.
The arbitrator here concluded that punitive damages were
warranted because USAA violated the ECOA by failing to
provide adequate notice to Goff after it closed his credit card
No. 25-1730 5

account. But the arbitrator issued the punitive damages
award without first conducting a post-award review. When
USAA requested the arbitrator conduct the post-award re-
view, the arbitrator responded that she did not have authority
to re-determine the merits of the punitive damages award un-
der the AAA. That was an error. While the arbitration agree-
ment required the arbitrator to apply the AAA rules by de-
fault, the arbitrator was required to apply the terms of the ar-
bitration agreement when the rules conflicted. And here, the
arbitration agreement specifically provided that the arbitrator
should conduct a post-award review of punitive damages and
provide a reasoned explanation. Since the arbitrator failed to
comply with the arbitration agreement, there is no final arbi-
tration award, and the arbitrator erred in finding otherwise.
But our review doesn’t end there; the relevant question is
“whether the arbitrator (even arguably) interpreted the par-
ties’ contract, not whether [she] got its meaning right or
wrong.” Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569
(2013); Kinsella v. Baker Hughes Oilfield Operations, LLC, 66
F.4th 1099, 1104 (7th Cir. 2023) (“Only if there is no possible
interpretive route to the award may a noncontractual ba-
sis … be inferred and the award set aside.”) (citation modi-
fied). In other words, we ask “not whether the arbitrator mis-
interpreted the agreement, but only whether the arbitrator’s
inquiry disregarded the very language of the agreement it-
self.” Anheuser-Busch, Inc. v. Loc. Union No. 744, 280 F.3d 1133,
1137 (7th Cir. 2002).
The arbitrator in this case ignored the plain language of
the arbitration agreement—the clauses concerning the post-
award review and accompanying reasoned explanation—
when she denied USAA’s request for the post-award review.
6 No. 25-1730

There is nothing ambiguous about the relevant language. The
arbitration clause specifically requires the arbitrator to con-
duct a post-award review before a decision on damages be-
comes final. And as we have noted, arbitrators exceed their
authority when they ignore contractual language that is “clear
and unambiguous and need[s] no interpretation.” See id. at
1142 (vacating arbitration award where arbitrator “ignored
the clear and specific language of the commission-rates
clause, the arbitration clause, and the zipper clause”); Tootsie
Roll Indus., Inc. v. Loc. Union No. 1, 832 F.2d 81, 84–85 (7th Cir.
1987) (vacating arbitration award where arbitrator “failed to
follow the clear requirements of the agreement”); U.S. Soccer
Fed’n, Inc., 838 F.3d at 836–37 (vacating arbitration award
where arbitrator ignored express contractual language).
Goff suggests that the arbitrator was arguably interpreting
the arbitration agreement by attempting to harmonize the
AAA rules with the agreement, and at most made a minor
procedural error that doesn’t require vacatur. But it can’t be
said that the arbitrator was interpreting the arbitration agree-
ment since she ignored the express contractual limitations for
awarding punitive damages. U.S. Soccer Fed’n, Inc., 838 F.3d
at 836–37. Goff’s reliance on Major League Baseball Players As-
sociation v. Garvey, 532 U.S. 504 (2001) is also misplaced; as that
case points out, an arbitrator’s decision may be unenforceable
when she “strays from interpretation … and effectively dis-
penses [her] own brand of industrial justice” which is exactly
what happened here. Id. at 510 (citation modified). While Goff
suggests there is no mechanism to conduct the post-award re-
view under Illinois law, Illinois courts do have procedures to
review interim punitive damages rulings. See, e.g., 735 Ill.
Comp. Stat. 5/2-1203; Cable Am., Inc. v. Pace Electronics, Inc.,
919 N.E.2d 383, 391–92 (Ill. App. Ct. 2009). However, we don’t
No. 25-1730 7

need to decide which procedures should be used for the post-
award review since the arbitrator has discretion as to which
procedures apply on remand. Howsam v. Dean Witter Reynolds,
Inc., 537 U.S. 79, 84 (2002) (“Procedural questions which grow
out of the dispute and bear on its final disposition are pre-
sumptively not for the judge, but for an arbitrator, to decide.”)
(citation modified).
USAA didn’t agree to any kind of alternative method for
resolving damages disputes; it bargained for a post-award re-
view and a ruling in writing with a reasoned explanation
prior to any punitive damages becoming final. Parties are free
to “agree on rules under which any arbitration will proceed,”
and “courts and arbitrators must give effect to the contractual
rights and expectation of the parties.” Stolt-Nielsen S.A. v. An-
imalFeeds Int’l Corp., 559 U.S. 662, 682–83 (2010) (citation mod-
ified). Since the arbitrator did not give effect to the contract,
and since there is “no possible interpretive route” to the arbi-
trator’s decision, the arbitrator exceeded her authority. U.S.
Soccer Fed’n, Inc., 838 F.3d at 832 (citation modified).
That leaves Goff’s motion for sanctions under Federal Rule
of Appellate Procedure 38. As discussed, USAA’s argument
has merit and therefore the motion is denied.
“Even when the arbitrator’s award may properly be va-
cated, the appropriate remedy is to remand the case for fur-
ther arbitration proceedings.” Major League Baseball Players
Ass’n, 532 U.S. at 511. For the reasons stated, the district
court’s judgment is reversed, and the case is remanded to the
district court with instructions to further remand to the origi-
nal arbitrator for proceedings in accordance with this opinion.
See Burkart Randall v. Lodge No. 1076, 648 F.2d 462, 469 (7th
Cir. 1981); Green v. Ameritech Corp., 200 F.3d 967, 977–78 (6th
8 No. 25-1730

Cir. 2000) (parties’ agreement imposing a duty of explanation
on the arbitrator could be remanded back to the original arbi-
trator if the district court properly determined the “arbitra-
tor’s task [was] incompletely executed”).
REVERSED
No. 25-1730 9

LEE, Circuit Judge, dissenting. While reasonable minds
could disagree, in my view, the arbitrator’s grant of punitive
damages drew its essence from the arbitration agreement.
As noted by the majority opinion, the agreement pro-
vided: “Before the decision becomes final, the arbitrator must
also conduct a post-award review of any punitive damages,
allowing the parties the same procedural rights and using the
same standards and guidelines that would apply in a judicial
proceeding in the state where the arbitration is located.”
Here, the arbitrator arguably interpreted the post-award
review requirement to mean that punitive damages may be
awarded against a party that has been provided fair notice
and an opportunity to be heard. And, as we have held, even if
that interpretation were erroneous, it would not justify vaca-
tur. See Bhd. of Locomotive Eng’rs v. Union Pac. R.R. Co., 719 F.3d
801, 803 (7th Cir. 2013).
USAA insists that the arbitrator deprived it of any review
of the interim punitive damages award. But, looking at the fi-
nal award, I take the arbitrator at her word when she explains
that she heard the proofs and allegations of the parties and
saw it fit to confirm, adopt, and incorporate the interim award
of punitive damages. To my mind, the arbitrator’s ruling on
post-interim award review was set forth in writing with a rea-
soned explanation, as required by the agreement’s terms.
In addition, USAA contends that any absence of review
stripped it of its ability to dispute punitive damages. In my
assessment of the record, however, USAA had numerous op-
portunities to do so.
From day one, Goff’s demand for arbitration put USAA on
notice that Goff sought punitive damages under the Equal
10 No. 25-1730

Credit Opportunity Act, 15 U.S.C. § 1691e(b). And USAA had
chances to oppose an award of punitive damages at the evi-
dentiary hearing and during post-hearing briefing.
What’s more, after the arbitrator issued its interim award
of punitive damages, USAA had the opportunity to reopen
the hearing to review the interim award before the final award
was issued. The parties agreed to be bound by the American
Arbitration Association’s (AAA) procedural rules, and, as the
majority notes, the arbitration agreement provides that AAA
rules govern, unless they conflict with the agreement’s terms.
Those rules allowed the arbitrator to reopen a hearing at a
party’s request before a final award is made.
Accordingly, on this record, I would resolve any reasona-
ble doubt in favor of confirming the award, see Northern Indi-
ana Public Service Co. v. United Steelworkers of America, 243 F.3d
345, 347 (7th Cir. 2001), and respectfully dissent.