944 F.3d 225
4th Cir.2019Background
- Berkeley County School District sued Hub International, Knauff Insurance, and former CFO Brantley Thomas alleging a long‑running insurance‑steering and kickback scheme that caused millions in losses. The operative complaint pleads RICO and state common‑law claims and attaches a federal information, state indictment, emails, and a payments spreadsheet.
- Hub moved to compel arbitration under the Brokerage Service Agreements (six agreements dated 2002–2011) that contain AAA commercial arbitration clauses; two early agreements (2002, 2003) are signed, four later agreements (2005–2011) are unsigned.
- Berkeley Schools responded that it never agreed to arbitrate: its procurement director declared the unsigned agreements are not in school records and that CFO Thomas lacked unilateral contracting authority; Berkeley’s counsel also denied prior knowledge of the agreements at a hearing.
- The district court denied arbitration, finding no meeting of the minds: it concluded the unsigned agreements were not agreed to, payments were the product of Thomas’s fraud, Thomas acted outside the scope of his employment, and Cartwright’s signature on the 2002 agreement did not bind the school. The court did not conduct a trial under 9 U.S.C. § 4.
- The Fourth Circuit vacated and remanded, holding that genuine, material factual disputes exist (assent, knowledge, actual/apparent agency) and that § 4 required summary trial proceedings to resolve them before deciding the motion to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly resolved factual disputes about formation of arbitration agreement without a § 4 trial | Berkeley Schools: no arbitration agreement; unsigned agreements not in records; payments resulted from Thomas’s fraud; Thomas lacked authority | Appellants: agreements (including unsigned ones) governed by performance (payments); two early signed agreements show knowledge/assent | Court: material factual disputes exist about making of agreement; §4 required the court to proceed to trial; vacated and remanded |
| Whether Berkeley Schools accepted the unsigned 2005–2011 Brokerage Service Agreements by performance (payments) | Payments were caused by Thomas’s fraud and thus cannot be treated as acceptance | Payments to broker/consultant demonstrate acceptance and knowledge of terms | Court: whether payments constitute acceptance is a disputed material fact for trial under §4 |
| Whether CFO Thomas had actual or apparent authority to bind Berkeley Schools to the agreements | Thomas lacked actual authority to unilaterally contract; his actions were for personal kickbacks and outside scope | As CFO responsible for procuring insurance, Thomas had authority to procure policies and bind the district | Court: existence and scope of Thomas’s actual or apparent authority are disputed factual issues that must be decided at trial under §4 |
| Relevance/effect of the June 2002 and June 2003 signed agreements | Cartwright (signatory) was Thomas’s subordinate and could not bind the district; early agreements not dispositive of the operative complaint | Signed 2002/2003 agreements predate alleged misconduct and show prior assent/knowledge | Court: those agreements may be relevant to knowledge/assent but cannot resolve the dispute on the present record; left for trial on remand |
Key Cases Cited
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) (courts, not arbitrators, decide whether an arbitration agreement was formed)
- Chorley Enters., Inc. v. Dickey’s Barbecue Rests., Inc., 807 F.3d 553 (4th Cir. 2015) (if making of arbitration agreement is in issue with supporting facts, court must proceed summarily to trial)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (summary judgment standard; materiality of factual disputes)
- Minnieland Private Day Sch., Inc. v. Applied Underwriters Captive Risk Assurance Co., 913 F.3d 409 (4th Cir. 2019) (de novo review of denial of §4 motion)
- Meyer v. Uber Tech., Inc., 868 F.3d 66 (2d Cir. 2017) (remand required where factual issue exists regarding formation of arbitration agreement)
- Howard v. Ferrellgas Partners, L.P., 748 F.3d 975 (10th Cir. 2014) (district court must move promptly to trial where factual questions about arbitration formation remain)
- Sandvik AB v. Advent Int’l Corp., 220 F.3d 99 (3d Cir. 2000) (affirming need for trial on agent’s authority to bind principal to arbitration)
- Par‑Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir. 1980) (remanding for trial on employee authority to bind employer)