Mehdi Noohi v. Toll Bros., Inc.
2013 U.S. App. LEXIS 4188
| 4th Cir. | 2013Background
- Plaintiffs Mehdi Noohi and Soheyla Bolouri contracted with Toll MD V Limited Partnership (Toll Brothers subsidiary) to buy a preconstruction Maryland home, with deposits totaling $77,008.
- The Agreement required mortgage approval within 60 days, and Toll Brothers could void the contract or extend the period; Plaintiffs bore mortgage-related obligations.
- Arbitration clause Section 13 required that disputes be resolved by binding arbitration, with Plaintiffs signing under the agreement.
- Plaintiffs’ mortgage applications were rejected or later terminated; Toll Brothers sought to keep the deposits despite plaintiffs’ inability to secure financing.
- District court held the arbitration clause unenforceable for lack of mutual consideration under Maryland law (Cheek), denying Toll Brothers’ motion to dismiss or stay; Toll Brothers appealed under the FAA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the appeal is proper under the FAA §16(a). | Toll Brothers clearly sought enforcement of arbitration. | District court motion was stay/dismiss; appealability depends on FAA standards. | Yes, appeal jurisdiction exists under FAA §16(a). |
| Whether the arbitration provision lacks mutual consideration under Cheek. | Maryland law requires mutual consideration within the arbitration clause itself. | Arbitration provision is supported by consideration of the overall contract. | Arbitration provision unenforceable for lack of mutual consideration. |
| Whether Cheek is preempted by the FAA or Concepcion. | Cheek imposes mutuality not addressed by FAA; not preempted. | FAA preempts state law on arbitration provisions in consumer/class contexts. | Cheek not preempted; survives as Maryland law requirement. |
Key Cases Cited
- Cheek v. United Healthcare of Mid-Atlantic, Inc., 835 A.2d 656 (Md. 2003) (arbitration provision must have mutual consideration within itself)
- Hill v. Peoplesoft USA, Inc., 412 F.3d 540 (4th Cir. 2005) (arbitration agreement as standalone contract; enforceability limited to agreement terms)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration; §2 saving clause)
- Concepcion v. California, 131 S. Ct. 1740 (2011) (FAA preempts state rule on class arbitration within consumer contracts)
- Dan Ryan Builders, Inc. v. Nelson, 682 F.3d 327 (4th Cir. 2012) ( Maryland mutuality/consideration issue applied to arbitration provision)
- Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355 (4th Cir. 2012) (arbitrability de novo with policy favoring arbitration)