Case Information
*1 Before SHEDD and DUNCAN, Circuit Judges, and Timothy M. CAIN, United States District Judge for the District of South Carolina, sitting by designation. Reversed by published opinion. Judge Duncan wrote the opin- ion, in which Judge Shedd and Judge Cain joined. COUNSEL ARGUED: John A. Houlihan, EDWARDS WILDMAN PALMER, LLP, Boston, Massachusetts, for Appellant. Thomas Joseph Minton, GOLDMAN & MINTON, PC, Balti- more, Maryland, for Appellee. ON BRIEF: Thomas H. Wint- ner, EDWARDS ANGELL PALMER & DODGE, LLP, Boston, Massachusetts, for Appellant. Bernard T. Kennedy, THE KENNEDY LAW FIRM, Edgewater, Maryland, for Appellee.
OPINION
DUNCAN, Circuit Judge:
Santander Consumer USA ("Santander") appeals from the district court’s order denying its motion to compel arbitration and stay court proceedings of Antonia Rota-McLarty’s ("Rota-McLarty") claims against it. While finding that an enforceable arbitration agreement encompassing Rota- McLarty’s claims existed, the district court nevertheless con- cluded that Santander had waived its right to enforce arbitra- tion by its delay. After assuring ourselves of jurisdiction, we conclude the record does not support the district court’s find- ing of waiver. We therefore reverse and remand with direc- tions to refer the claims to arbitration.
I.
The relevant facts are few and undisputed. On July 5, 2007, Rota-McLarty, a Maryland resident, purchased a used car Rota-McLarty originally brought her claims against Drive Financial Services ("Drive"), a Texas corporation which no longer exists. Santander, an Illinois corporation with its principal place of business in Texas, is the successor by mergers to Drive, and has taken its place in the litigation. For simplicity, we refer to the lender solely as Santander.
from Easterns Automotive Group ("Easterns") in Rockville, Maryland. In completing that transaction, Rota-McLarty exe- cuted two contracts with Easterns. The first was a Buyer’s Order, which provides the terms of the sale and contains an agreement to arbitrate disputes.
The second was a Retail Installment Sale Contract ("RISC"), which does not contain an arbitration provision. The RISC provides the financing terms for Rota-McLarty’s loan and information about repossession rights and proce- dures. Additionally, the RISC contains an integration clause, which states: "This contract contains the entire agreement between you and us relating to this contract. Any change to this contract must be in writing and we must sign it. No oral changes are binding." J.A. 19. Santander pre-approved the financing terms, and Easterns assigned the RISC to Santander immediately after the sale.
Rota-McLarty returned the car, which she claimed was defective, to Easterns’s lot in Maryland, having never made a payment on her loan. Santander sought collection of the out- standing debt after repossessing and selling the car at a loss.
II.
Rota-McLarty filed a putative class action in state court against Santander on March 9, 2010, alleging violations of various Maryland consumer protection laws for undisclosed finance charges and other unfair business practices. On April 13, 2010, Santander removed the complaint to federal court on the basis of diversity. Santander filed an answer the next day, and within a month the parties had agreed on a bifurcated discovery schedule, whereby the first stage would focus on the issue of hidden finance charges, with class and other dis- covery to follow. During the brief discovery period that ensued, Santander took Rota-McLarty’s deposition on both stage one and stage two issues, and Rota-McLarty took East- erns’s deposition and sought production of various docu- *4 4
ments. One such document was a letter Easterns had received from Santander in 2007, detailing the terms of the RISC assignment, which Rota-McLarty asserts supports her hidden finance charge allegations. [2]
On September 30, 2010, Santander moved to compel non- class arbitration of Rota-McLarty’s claims and to stay the pro- ceedings in federal court. Santander claimed the delay in seeking arbitration was caused by uncertainty in the law regarding whether it would be forced into class arbitration, which was clarified by the Supreme Court’s decision in Stolt- Nielsen S.A. v. AnimalFeeds Int’l Corp. , 559 U.S. ___, 130 S.Ct. 1758, 1775 (2010) ("[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so."). Santander waited longer, until a district court had applied Stolt-Nielsen in the consumer context, to file its motion.
In denying Santander’s motion, the district court deemed the underlying transaction purely intrastate in nature, and applied the Maryland Uniform Arbitration Act (the "MUAA"), Md. Code Ann., Cts. & Jud. Proc. §§ 3-201 et seq. , rather than the Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 1-14. Concluding that the Buyer’s Order and RISC must be read together despite an integration provision in the latter, the court found there was an enforceable arbitration agreement between Rota-McLarty and Santander, which encompassed her claims. Nonetheless, the court denied San- In the letter, Santander states it is sending a check to Easterns for Rota- McLarty’s RISC for $15,143.07, even though the total "amount pur- chased" was $19,261.00. J.A. 109. Rota-McLarty argues this amount reveals a hidden finance charge, but Santander disagrees, asserting that the disparity represents an "acquisition fee" that need not be disclosed under Maryland law and, further, had already been produced by Santander in discovery. Specifically, Santander relied on Jock v. Sterling Jewelers, Inc. , 725 F.
Supp. 2d 444, 450 (S.D.N.Y. 2010), which was later reversed, 646 F.3d 113 (2d Cir. 2011).
tander’s motion on grounds that Santander had waived its right to compel arbitration through unjustified delay and by having participated significantly in discovery. Santander now appeals.
III.
Santander argues that the district court erred in failing to apply the FAA and in finding waiver. Rota-McLarty dis- agrees, and also contests the district court’s conclusion that a binding arbitration agreement existed between the parties. Before turning to the merits, however, we must first assure ourselves of our jurisdiction over this appeal.
A.
Courts of appeal ordinarily may review only final decisions of district courts. Wheeling Hosp., Inc. v. Health Plan of the Upper Ohio Valley, Inc. , 683 F.3d 577, 584 (4th Cir. 2012); Arthur Andersen LLP v. Carlisle , 556 U.S. 624, 627 (2009); see also 28 U.S.C. § 1291. Although the district court’s order denying Santander’s motion to compel arbitration and stay proceedings is not a final decision, we may nevertheless exer- cise appellate jurisdiction if the order falls within an excep- tion to the final judgment rule established by the FAA.
The FAA provides for appeals from, inter alia , orders "re- fusing a stay of any action under section 3 of this title," [4] or "denying a petition under section 4 of this title [5] to order arbi- tration to proceed." 9 U.S.C. § 16(a)(1)(A)-(B). Congress’s purpose in creating appellate jurisdiction for these orders was to effectuate a "strong policy favoring arbitration" through Section 3 of the FAA allows the district court to stay proceedings pending arbitration, upon application of one of the parties. See 9 U.S.C. § 3. Section 4 allows a party to petition the district court for an order direct-
ing arbitration to proceed pursuant to an agreement. See 9 U.S.C. § 4. appeal rules, whereby "an order that favors litigation over arbitration . . . is immediately appealable, even if interlocu- tory in nature." Stedor Enters., Ltd. v. Armtex, Inc. , 947 F.2d 727, 730 (4th Cir. 1991).
Here, our determination of whether the district court’s order falls within an exception comprises two steps. We must first decide whether the transaction is one that involves inter- state commerce to which the FAA applies. If so, we then examine whether Santander’s motion did, in fact, adequately invoke §§ 3 or 4, thus giving us appellate jurisdiction under § 16 of the FAA.
1.
Turning first to the question of whether the parties’ agree- ment falls within the scope of the FAA, we note that the reach of the statute is broad. It operates to enforce an arbitration provision included in "a contract evidencing a transaction involving commerce." 9 U.S.C. § 2; see also 13D Wright, Miller, & Cooper, Federal Practice and Procedure § 3569 (2008), where "commerce" means "commerce among the sev- eral States," 9 U.S.C. § 2. The Supreme Court has interpreted this provision as exercising the full scope of Congress’s commerce-clause power. Allied-Bruce Terminix Cos. v. Dob- son , 513 U.S. 265, 273-77 (1995). Moreover, the term "evi- dencing a transaction" requires only that the transaction in fact involved interstate commerce, not that the parties con- templated it as such at the time of the agreement. Id. at 281. Application of the FAA requires demonstration of four elements: "(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute." Whiteside v. Teltech Corp. , 940 F.2d 99, 102 (4th Cir. 1991); see also Adkins v. Labor Ready, Inc. , 303 F.3d 496, 500-01 (4th Cir. 2002). Because only the third element is in dis- pute here, we omit discussion of the others.
The district court’s analysis of whether the underlying transaction is solely intrastate in nature consists of one sen- tence: "There is no indication that Rota-McLarty’s transaction involved interstate commerce, and the parties agree that Maryland law governs their relationship." J.A. 129. We are constrained to disagree.
The underlying transaction here is simply a consumer credit arrangement between a citizen of one state and a financing company in another. Although diversity of citizenship—or lack thereof—is not by itself enough to determine the nature of a transaction, see Maxum Founds., Inc. v. Salus Corp ., 779 F.2d 974, 978 n.4 (4th Cir. 1985) ("[T]he mere circumstance of diversity of citizenship between [the parties] is not suffi- cient to command the application of the [FAA]."), we need not rely solely on it here. The financing, which originated from a foreign state, was integral to Rota-McLarty’s purchase of the used car from Easterns. We agree with sister circuits, which have concluded that reliance upon funds from a foreign source in a transaction is sufficient to implicate the FAA. See, e.g. , Jenkins v. First Am. Cash Advance of Georgia , 400 F.3d 868, 874-75 (11th Cir. 2005) ("payday loan" completed by a Georgia consumer in the Georgia office of loan company involved interstate commerce where the funds were approved and disbursed by a national bank based in South Dakota). Therefore, the FAA applies.
Our conclusion is bolstered by two additional factors. First, we have held that the FAA does not impose a burden upon the party invoking the FAA to put forth specific evidence proving the interstate nature of the transaction. Maxum , 779 F.2d at 978 n.4 ("Where . . . the party seeking arbitration alleges that the transaction is within the scope of the [FAA], and the party opposing application of the [FAA] does not come forward with evidence to rebut jurisdiction under the federal statute, we do not read into the [FAA] a requirement of further proof by the party invoking the federal law."). Santander has made the requisite initial showing, which Rota-McLarty has failed *8 8
to rebut. Indeed, she admits "the interstate nature of the trans- action embodied in the RISC . . . should be hardly controver- sial," Appellee’s Br. at 9, and we agree.
Second, in deciding to apply the FAA, we need not identify any specific effect upon interstate commerce, so long as "in the aggregate the economic activity in question would repre- sent ‘a general practice . . . subject to federal control.’" Citi- zens Bank v. Alafabco, Inc. , 539 U.S. 52, 56-57 (2003) (citation omitted). We agree with Santander that "the broad impact of consumer automobile lending on the national econ- omy" is evident. Appellant’s Br. at 28; cf. Citizen’s Bank , 539 U.S. at 58 ("[W]ere there any residual doubt about the magni- tude of the impact on interstate commerce caused by the par- ticular economic transactions in which the parties were engaged, that doubt would dissipate upon consideration of the ‘general practice’ those transactions represent. No elaborate explanation is needed to make evident the broad impact of commercial lending on the national economy or Congress’s power to regulate that activity pursuant to the Commerce Clause." (internal citation omitted)).
Rota-McLarty contends that because the Buyer’s Order contains a
Maryland choice-of-law provision, Maryland law must govern the arbitra-
tion provision as well.
See
J.A. 17 ("This Agreement shall be governed
and controlled in accordance with the laws of the State of Maryland.")
Rota-McLarty’s argument misunderstands several points of law. Unques-
tionably, a contract’s general choice-of-law provision does not displace
federal arbitration law if the contract involves interstate commerce.
See
Porter v. Hayden Co. v. Century Indem. Co.
,
For these reasons, we find that the underlying transaction
relates to interstate commerce, and that the district court erred
in declining to apply the FAA. We are thus assured that fed-
eral law supplies not only our procedural framework, but also
the substantive law regarding arbitration.
Preston v. Ferrer
,
2.
We next address the narrower issue of whether Santander’s motion adequately invoked §§ 3 or 4 of the FAA so as to create appellate jurisdiction under the statute’s exception to the final judgment rule. Guided by our precedent in Wheeling , we find that it did.
Consonant with the approach taken by our sister circuits,
Wheeling
held that the proper inquiry focuses on substance
rather than nomenclature.
look beyond the caption to the essential attributes of the motion itself. The goal of this inquiry is to deter- mine whether it is plainly apparent from the four corners of the motion that the movant seeks only the relief provided for in the FAA, rather than any other judicially-provided remedy.
Id.
Specifically, in examining the four corners of the motion, our focus is on the relief requested. If the essence of the requested relief "‘is that the issues presented be decided exclusively by an arbitrator and not by any court,’" the denial of that motion is appealable under § 16. Wheeling , 683 F.3d at 585 (citation omitted). If, however, the requested relief would be "‘a judicial remedy that is inconsistent with the position that the issues involved may be decided only by the arbitrator,’" then the motion should no longer be viewed as "proceeding exclusively under the FAA," and interlocutory review under § 16 is not proper. Id. (citation omitted).
Guided by Wheeling , we conclude the denial of Santander’s motion is immediately appealable. Although the cap- tion—"motion to compel arbitration and stay proceed- ings"—does not specifically reference §§ 3 or 4, it clearly invokes the relief provided in those sections. Further, Santan- der’s memorandum in support of that motion asks the court to "grant Santander’s motion, compel non-class arbitration of Rota-McLarty’s claims, and stay all other aspects of this action pending further order of the Court." J.A. 95. It does not, by contrast, request any "‘judicial remedy that is incon- sistent with the position that the issues involved may be decided only by the arbitrator.’" Wheeling , 683 F.3d at 586 (citation omitted). Rota-McLarty has not pointed to any authority other than the FAA upon which Santander could have intended to rely in seeking to compel arbitration and stay litigation, much less shown how the relief Santander sought is inconsistent with the position that Rota-McLarty’s claims must be decided by an arbitrator.
For these reasons, we find that the four corners of Santan- der’s motion make it abundantly clear Santander sought enforcement of the arbitration agreement. Denial of that motion is therefore immediately appealable.
B.
Turning now to the substantive issues on appeal, we exam- ine whether a valid arbitration agreement exists between the parties, and, if so, whether Santander was in default of its right to enforce that agreement.
1.
The question of whether an enforceable arbitration agree- ment exists between Rota-McLarty and Santander is a matter of contract interpretation governed by state law, which we review de novo. FindWhere Holdings, Inc. v. Sys. Env’t Optimization, LLC , 626 F.3d 752, 755 (4th Cir. 2010).
We must first determine whether Santander, as an assignee only to the RISC, which contains an integration clause provid- ing that it is the complete agreement between the parties, and not the Buyer’s Order, which includes the arbitration lan- guage, could invoke arbitration. Relying on Maryland cases instructing courts to look to the intent of the parties to deter- mine the preclusive effect of an integration clause, the district court found that the circumstances surrounding the transaction here indicated that the parties did not intend the RISC to be a final and complete integration of their agreement. Rather, they intended that the two agreements should be interpreted together. Further, the court concluded that Rota-McLarty’s claims fell within the scope of the arbitration provision. Rota- McLarty challenges both conclusions. We consider each in turn.
a.
With respect to the integration clause, Rota-McLarty essen- tially repeats her arguments before the district court. She Rota-McLarty does advance a novel theory in support of integration on appeal, premised on Md. Code Regs. § 11.12.01.15, which provides that "every vehicle sales contract or agreement shall be evidenced by an instru- ment in writing containing all of the agreements of the parties." See Appellee’s Br. at 19. She seems to argue that the regulation requires one document by itself to constitute the parties’ agreement, and thus we must read the Buyer’s Order alone. Even if this argument is not waived, Rota- McLarty fails to provide any authority for her interpretation of the cited regulation, nor for the proposition that this regulation supplants an entire established body of Maryland law governing contract interpretation. relies heavily on Hartford Accident & Indem. Co. v. Scarlett Harbor Assocs., Ltd. , 695 A.2d 153 (Md. 1997), which she asserts "cannot be distinguished on any principled basis" from the instant matter. Appellee’s Br. at 17. In that case, the court examined two contracts. The first, between a condominium developer and a construction contractor, contained an arbitra- tion provision, while the second, the contractor’s performance bond with a bonding company, did not. The court declined to allow the bonding company to enforce the arbitration provi- sion contained in the construction contract, even though the bond incorporated that contract by reference. Hartford , 695 A.2d at 155.
We disagree with Rota-McLarty that the circumstances in that case mirror those in the case at hand. Far from indistin- guishable, Hartford is inapposite because Santander does not rely on language in the RISC, but instead points to language in the Buyer’s Order itself, which states that it applies to the assignee of the RISC, including several times in the arbitra- tion provision. Thus, we do not have the same concerns as the court in Hartford that the parties did not intend the arbitra- tion provision, specifically, to govern their agreement.
The facts in this case support the district court’s finding
that the Buyer’s Order and RISC were made as part of a sin-
gle transaction, and should be interpreted together under
Maryland law.
See Shoreham Developers, Inc. v. Randolph
Hills, Inc.
,
by itself to be a final and complete integration of the agreed
upon terms");
Jaguar Land Rover North America, LLC v.
Manhattan Imported Cars, Inc.
,
b.
Rota-McLarty’s second argument, that Santander should not be able to enforce the arbitration agreement because it contains a carve-out for assignees of the RISC, is similarly unconvincing. The flaw in her interpretation of the arbitra- tion clause becomes evident when the carve-out is viewed in the context of the arbitration clause:
A Dispute is any question as to whether something must be arbitrated, as well as . . . any purely mone- tary claim greater than $1,000 in the aggregate, whether contract, tort, or other, arising from (1) the negotiation of and terms of the Buyer’s Order, (2) any service contract or Insurance product, or (3) any Rota-McLarty also argues that the carve-out renders the promise illu- sory and thus that the agreement is unenforceable for lack of mutuality. However, because we ultimately reject her interpretation of the carve-out, we need not address her mutuality argument, which depends upon reading the clause to exempt Santander from arbitration.
retail installment sale contract or lease (but this arbi- tration provision does not apply to and shall not be binding on any assignee thereof).
J.A. 18 (enumeration added). Basic principles of contract interpretation instruct us to look first to the plain meaning of the contract’s terms, and also to give meaning to each word used and avoid constructions that render language meaning- less, superfluous, or contradictory. See DIRECTV, Inc. v. Mat- tingly , 829 A.2d 626, 637 (Md. 2003).
Here, the parenthetical phrase that constitutes the carve-out follows, and modifies, a list of three types of monetary claims that are subject to arbitration. The parenthetical exempts the forced arbitration of any "purely monetary claim greater than $1,000" by an assignee of that claim. It does not pertain to assignees of the RISC in particular; rather, it indicates that a person to whom an otherwise-qualifying monetary claim has been assigned cannot enforce arbitration. Santander is not the assignee of any monetary claim, but instead is the assignee of the entire agreement embodied in the RISC. The interpreta- tion advanced by Rota-McLarty not only ignores the structure of the sentence containing the carve-out, but it also operates at odds with the remainder of the arbitration provision, which contemplates the binding nature of the agreement on Santan- der by equating the "Dealer" and the "assignee of any [RISC]" in several places. See, e.g. , J.A. 18 ("[A]ll disputes . . . shall be resolved by binding arbitration by one arbitrator located in the Dealer’s area in the state of Maryland selected by the Dealer (or the assignee of any [RISC]) with the consent of the Purchaser."). We thus find nothing in the language of the arbi- tration provision to indicate it was not intended to be enforce- able by Santander as assignee of the RISC.
2.
Finally, we examine the district court’s finding that Santan- der waived its right to enforce the arbitration agreement. We review the district court’s decision to deny Santander’s arbi- tration request de novo, with deference to its underlying fac- tual findings, Forrester v. Penn Lyon Homes, Inc. , 553 F.3d 340, 342 (4th Cir. 2009), and conclude that the court made several errors.
Applying Maryland arbitration law, the district court found
that whether a party has waived its right to arbitrate depends
on "the extent of its participation in judicial proceedings,
including whether an answer has been filed; whether there
was a legitimate reason for the participation; and whether the
delay in seeking arbitration prejudiced the other party." J.A.
137. Additionally, the court proclaimed that the "‘belated
insistence on arbitration [that] has all the markings of a simple
strategic decision’ is improper."
Id.
(quoting
Abramson v.
Wildman
,
As a threshold matter, we note the district court erred by applying the wrong law. Under the FAA, a party may lose its right to compel arbitration if it "is in default in proceeding with such arbitration." 9 U.S.C. § 3. This principle of "de- fault" is akin to waiver, but not identical. Unlike some waiver *16 16
doctrines, "the circumstances giving rise to a statutory default
are limited and, in light of the federal policy favoring arbitra-
tion, are not to be lightly inferred,"
Maxum
,
Generally, a litigant defaults on its right to invoke the FAA
where it "‘so substantially utiliz[es] the litigation machinery
that to subsequently permit arbitration would prejudice the
party opposing the stay.’"
Forrester
,
Accordingly, we employ our recent approach of substituting the term
"default" for the term "waiver" in the FAA context, in order "to achieve
uniformity and prevent confusion."
Wheeling
,
First, in comparison to our decisions considering the issue, the length of delay in this case was relatively short. At most, Santander waited six and a half months—from the date Rota- McLarty filed her complaint in state court—to file its motion to compel arbitration and stay proceedings in federal court. We have previously held that a delay of several months, with- out more, is insufficient to demonstrate the opposing party there are many reasons to favor the earliest possible selection of forum, including efficiency, preservation of judicial resources, and fairness. See, e.g. , Cabinetree of Wisconsin v. Kraftmaid Cabinetry, Inc. , 50 F.3d 388, 391 (8th Cir. 1995) (noting that a party’s desire to "weigh its options" in deciding whether to seek to compel arbitration while the litigation goes on is "the worst possible reason for delay" and amounts to "want[ing] to play heads I win, tails you lose"); Fisher v. A.G. Becker Paribas, Inc. , 791 F.2d 691, 694 (9th Cir. 1986) (default may be established if the opposing party can show: "(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts"). However, in keeping with the strong policy in favor of arbitration established by the FAA, the Fourth Circuit has not expanded the default analysis to include consideration of a party’s knowledge or motive. And, even under such a test, Rota-McLarty has failed to establish Santander was attempting to game the system, such as by seeking arbitration after the district court’s unfavorable disposition of a motion or discovery dispute. In its reply brief, Santander calculated its delay in seeking arbitration
as "approximately six month[s]," Reply Br. at 20, but at oral argument
urged us not to "start the clock" until the date it received the district
court’s decision applying
Stolt-Nielsen
to consumer transactions. We
reject that late-asserted proposition as unsupported by Fourth Circuit pre-
cedent.
See Forrester
,
suffered actual prejudice. See, e.g. , Patten , 380 F.3d at 205 (no prejudice inherent in four-month delay); Maxum , 779 F.2d at 982 (same, with three-month delay); cf. Forrester , 553 F.3d at 343-44 (default proper where litigation had proceeded for over two years before the moving party sought arbitration); Fraser , 817 F.2d at 252-53 (same, with four-year delay).
Here, nothing in the record supports a finding that Rota-
McLarty was prejudiced by the length of the delay itself. Her
general assertion that she "committed substantial resources to
the case on the premise that the Court would have an opportu-
nity to rule on a motion for class certification," Appellee’s Br.
at 29, is both unsubstantiated and unconvincing. Although
incurring significant expense as a result of extended litigation
can be part of actual prejudice, such cases usually involve
resources expended specifically in response to motions filed
by the party who later seeks arbitration.
See, e.g.
,
Fraser
, 817
F.2d at 252 (prejudice found in part because opposing party
"had to respond to a number of potentially damaging motions,
including a motion for partial summary judgment and three
motions to dismiss.") And where, as here, Rota-McLarty has
provided no evidentiary support for her claimed "significant
expense," this argument fails entirely.
Patten
,
b.
The second factor in our prejudice inquiry looks to the nature and extent of Santander’s litigation activities. Here, The district court described the length of Santander’s delay as "six months after Rota-McLarty sued, and five months after filing an answer." J.A. 137. Thus, it was not the district court’s factual finding that was erro- neous, but instead its legal conclusion that the length of delay weighed in favor of finding prejudice. 19
Santander "utilized the litigation machinery" in a few—mostly minimal—ways: it removed the complaint to federal court, filed an answer, proposed a bifurcated discovery plan, took Rota-McLarty’s deposition on both phase one and phase two issues, and waited for clarity in the law in order to avoid class arbitration. No dispositive motions were filed. For her part, Rota-McLarty engaged in some discovery as well, which resulted in Easterns’s production of a document that Rota-McLarty styles as a smoking gun proving her claim of an undisclosed finance charge. Rota-McLarty asserts these activities support a finding of prejudice because Santander proposed a two-phase plan that limited her discovery rights, while ignoring those limitations itself by taking her deposition on both phases, and exploiting pre-trial discovery not avail- able in arbitration.
Like the district court, Rota-McLarty fails to tether her dis-
cussion of Santander’s litigation activities to any actual preju-
dice. She does not explain how either her deposition or the
document produced by Easterns would be to Santander’s
advantage, or unavailable, in arbitration. Neither the district
court nor Rota-McLarty specified what aspect of Rota-
McLarty’s litigation strategy was revealed,
[16]
or what benefit
Santander has gained through litigation at Rota-McLarty’s
expense, thereby prejudicing her. The mere participation in
discovery is not sufficient to indicate default.
See Maxum
, 779
F.2d at 982 (finding opposing party was not prejudiced by
moving party’s attendance at depositions, even though it may
have benefited for purposes of later arbitration proceeding,
and "declin[ing] to create a rule that would require a party
Whether a party was required to respond to dispositive motions may
factor into our prejudice analysis, although we have "counsel[ed] against
adopting a bright line rule that the mere filing of a dispositive motion on
the merits is inherently prejudicial."
Wheeling
,
seeking arbitration to avoid a finding of default by ignoring court-ordered discovery deadlines"). Consequently, Rota- McLarty has failed to establish the prejudice necessary to jus- tify finding Santander defaulted on its right to enforce the arbitration agreement under the FAA. Rota-McLarty’s claims should be sent to arbitration pursuant to the parties’ agree- ment.
IV.
For the foregoing reasons, the order of the district court is REVERSED .