Jacqueline Galloway v. Santander Consumer USA, Inc
2016 U.S. App. LEXIS 6434
4th Cir.2016Background
- Galloway financed a 2007 vehicle purchase under a retail installment contract (RISC) governed by Maryland law; the RISC required written, signed amendments.
- CitiFinancial sent Galloway an Amended Agreement (including an arbitration clause) proposing lower monthly payments; it instructed her to sign and return the document for review/approval.
- Galloway signed and faxed the Amended Agreement in November 2008; CitiFinancial never signed it, but soon reduced Galloway’s payment to $366.43 (86¢ more than the Amended Agreement’s $365.57) and she paid that amount for years.
- CitiFinancial later assigned the loan to Santander; after default Santander repossessed and sold the vehicle and waived any deficiency.
- Galloway sued in state court alleging breach and statutory violations; Santander removed, moved to compel arbitration under the Amended Agreement, and the district court compelled arbitration and dismissed the case.
- The Fourth Circuit affirmed, holding as a matter of Maryland contract law that (1) the parties formed an agreement incorporating the written Amended Agreement (with a minor unwritten modification), and (2) the written arbitration clause satisfied the FAA’s writing requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a binding agreement to arbitrate was formed | Galloway: the operative modification lowering payments was not reduced to a writing signed by CitiFinancial; factual dispute requires a jury | Santander: the Amended Agreement (with arbitration clause) plus Galloway’s return of the signed document and subsequent payments established the agreement | Held: No genuine factual dispute; as a matter of law parties formed an agreement including the arbitration clause (the payment conduct manifested assent) |
| Whether CitiFinancial’s reduction to $366.43 constituted acceptance or a counteroffer | Galloway: any variation is a counteroffer and no acceptance occurred without mutual written signatures | Santander: the 86¢ difference was de minimis and CitiFinancial’s conduct accepted or counteroffered which Galloway accepted by performance | Held: The court treated CitiFinancial’s change as a minor counteroffer and found Galloway accepted by repeated performance |
| Whether the RISC clause requiring signed written amendments bars an oral/performance modification | Galloway: the contract required signed writing for modifications so unsigned changes are ineffective | Santander: parties may modify by conduct; such a clause does not preclude modification by performance | Held: Under Maryland law such a clause does not preclude modification by conduct; waiver or modification can be by implication/performance |
| Whether the FAA’s writing requirement is satisfied when some terms were agreed only by performance | Galloway: because the operative modification (payment amount) was unwritten, the arbitration clause is not enforceable under the FAA | Santander: the arbitration provision itself was in a writing (the Amended Agreement) and Galloway assented to it by performance; FAA requires only that the arbitration provision be in writing | Held: The written arbitration provision satisfies the FAA even if a minor term was agreed by performance; arbitration clause enforceable |
Key Cases Cited
- Whiteside v. Teltech Corp., 940 F.2d 99 (4th Cir. 1991) (purpose of FAA to enforce private arbitration agreements like other contracts)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (FAA primary substantive provision declaring written arbitration provisions enforceable)
- Seawright v. American Gen. Fin. Servs., 507 F.3d 967 (6th Cir. 2007) (FAA writing requirement satisfied by a written arbitration provision even if acceptance is by conduct)
- Chorley Enters. v. Dickey’s Barbecue Rests., Inc., 807 F.3d 553 (4th Cir. 2015) (standard for obtaining a jury trial on existence of arbitration agreement akin to summary-judgment burden)
- Rota-McLarty v. Santander Consumer USA Inc., 700 F.3d 690 (4th Cir. 2012) (elements for FAA application include a written agreement with arbitration provision)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (courts apply ordinary state-law contract principles to decide whether parties agreed to arbitrate)
- Hovnanian Land Inv. Grp., LLC v. Annapolis Towne Ctr. at Parole, LLC, 25 A.3d 967 (Md. 2011) (Maryland law does not give dispositive effect to contractual limitations requiring written modifications; conduct can modify or waive such provisions)
- Learning Works, Inc. v. Learning Annex, Inc., 830 F.2d 541 (4th Cir. 1987) (Maryland law requires unqualified acceptance; variations create counteroffers)