Jаcqueline GALLOWAY, on her own behalf and on behalf of all others similarly situated, Plaintiff-Appellant, v. SANTANDER CONSUMER USA, INC., Defendant-Appellee.
No. 15-1392
United States Court of Appeals, Fourth Circuit
Decided: April 8, 2016.
Argued: Jan. 28, 2016.
Before TRAXLER, Chief Judge, and AGEE and WYNN, Circuit Judges.
Affirmed by published opinion. Chief Judge TRAXLER wrote the majority opinion, in which Judge AGEE joined. Judge WYNN wrote a dissenting opinion.
TRAXLER, Chief Judge:
Jacqueline Galloway appeals a district court order dismissing her action against Santander Consumer USA, Inc. seeking damages for breach of contract and alleging a violation of the Maryland Credit Grantor Closed End Credit Provisions (the “CLEC“), see
I.
The pertinent facts in this case are undisputed. Galloway used a loan she obtained through a retail installment contract (“the RISC“) to finance her purchase of a vehicle in March 2007. The CLEC governs the RISC‘s terms.
The RISC contained the transaction‘s financing terms as well as information concerning repossession rights and procedures. It listed the total amount financed as $22,916.28 and required Galloway to make 72 payments of $487.46 on the 17th day of every month. If a payment or part thereof was more than 15 days late, the RISC called for imposition of a late fee of five dollars or ten percent of the part of the payment that was late, whichever was greater. The RISC also included a modification provision stating that “[a]ny change
The RISC was assigned to CitiFinancial Auto, Ltd. (“CitiFinancial“), which took a security interest in the vehicle. Sometime before October 31, 2008, Galloway contacted CitiFinancial requesting a reduction in the amount of her monthly loan payment. The CitiFinancial representative with whom Galloway spoke told her that CitiFinancial would send her paperwork to review and sign and that, once she returned the signed papers, the company would consider whether to approve her request. Galloway stated that CitiFinancial told her they would notify her in writing concerning whether her request had been approved.
CitiFinancial then provided Galloway with a cover page and a two-page document. The cover page asked that she “review the attached documents and provide the signature(s) required.” J.A. 25. It requested that after she signed the paperwork, she “return [it] to CitiFinancial Auto for further review, approval and consideration.” J.A. 25. It also requested that she “retain a copy of this agreement for [her] records.” J.A. 25.
The two remaining pages constituted an amended agreement (the “Amended Agreement“). Under its terms, the Amended Agreement would take effect on October 31, 2008; Galloway‘s total amount due would be $20,213.50; her monthly payment would be reduced from $487.46 to $365.57; her first payment would be due December 14, 2008; and her last (and seventy-second) payment would be due on November 14, 2014. The Amended Agreement also included an arbitration agreement (the “arbitration agreement“) under which Galloway, CitiFinancial, and CitiFinancial‘s assignees, could elect to arbitrate any dispute, “whether in contract, tort or otherwise,” rather than proceed through a court action.1 J.A. 26-27. The arbitration agreement also prohibited Galloway from serving as a class representative or participating in a class action if arbitration was elected. Finally, the Amended Agreement provided that “all terms and provisions of the [RISC] shall remain in full force and effect except as expressly modified herein.” J.A. 26.
Galloway signed the Amended Agreement on November 12, 2008, and sent a copy of the signed agreement to CitiFinancial via fax.
The record does not reflect that CitiFinancial ever specifically sent Galloway written approvаl of the Amended Agreement. Nevertheless, Galloway states in her declaration that “sometime after November 14, 2008, CitiFinancial lowered [her] scheduled monthly payments to $366.43,” J.A. 17, an amount just 86 cents more than the amount contemplated in the Amended Agreement. Galloway immediately began making monthly payments of $366.43 beginning December 13, 2008, and continued to make payments in that amount for several years.
In her declaration, Galloway states that it was an “agreement between [her] and CitiFinancial entered into sometime after November 14, 2008” that lowered her payment amount from $487.46 to $366.43. J.A. 17. However, the record contains no evidence of any specific discussions between Galloway and CitiFinancial explaining or addressing the 86-cent discrepancy. And Galloway‘s declaration asserts that the agreement that “lowered [her] payments to $366.43 each month was not evidenced by a writing.” J.A. 17.
Galloway subsequently brought this action in state court, alleging that Santander breached the RISC and violated the CLEC by failing to provide sufficient notice before selling her vehicle. Galloway purports to bring suit on behalf of herself and all persons similarly situated.
Santander removed the case to federal district сourt. Santander also filed a motion to compel arbitration and stay federal district court proceedings under the Federal Arbitration Act (“FAA“),
Applying a summary-judgment-like standard, the district court concluded as a matter of law that Galloway had agreed to arbitration and that the agreement to arbitrate wаs enforceable under the FAA. See Galloway v. Santander Consumer USA, Inc., Civ. No. CCB-13-3240, 2014 WL 4384641 (D.Md. Sept. 3, 2014). The district court analyzed several alternative legal theories offered by Santander as support for its position that the parties agreed to arbitration. The court concluded that CitiFinancial‘s sending the Amended Agreement to Galloway was a mere invitation for Galloway to make an offer because the company retained the right at that time to reject Galloway‘s refinancing application even if Galloway signed the agreement. See id. at *3. However, the court concluded that Galloway‘s returning a copy of the executed agreement constituted an offer to enter into the agreement and that CitiFinancial accepted that offer by rеducing her monthly payment to only 86 cents more than the agreement had called for. See id.
Alternatively, the court concluded that CitiFinancial‘s proposal to reduce the payment to $366.43 constituted a counteroffer to make a minor modification to the dollar amounts in the Amended Agreement, which Galloway accepted by making the payments in the amount requested for several years without objection. See id. The district court rejected Galloway‘s argument that no new contract was formed because Galloway‘s returning a signed original of the Amended Agreement to CitiFinancial and CitiFinancial‘s written assent were both conditions precedent to modifying the RISC. See id. at *4. The district court concluded that the parties wаived any right they may have had to such formalities by virtue of their performance under their new agreement. See id. The court added that, under the doctrine of equitable estoppel, Galloway could not disclaim the Amended Agreement, having accepted the benefit of the agreement in the form of reduced monthly payments. See id.
Having determined that the parties bound themselves to the terms of the Amended Agreement, or at least to the terms of the Amended Agreement with the slightly modified payment amount, the court concluded that the written arbitration agreement was enforceable under the
II.
“We review de novo the district court‘s judgment compelling arbitration, as well as any questions of state contract law concerning the validity of the arbitration agreement.” Santoro v. Accenture Fed. Servs., LLC, 748 F.3d 217, 220 (4th Cir.2014).
“Sections 3 and 4 [of the FAA] . . . provide two parallel devices for enforcing an arbitration agreement: a stay of litigation in any case raising a dispute referable to arbitration,
[a] written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, . . . shall be valid, irrevocable, and enforceable.
We have stated that “[a]pplication of the FAA requires demonstration of four elements: ‘(1) the existеnce 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.‘” Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690, 696 n. 6 (4th Cir.2012) (quoting Whiteside, 940 F.2d at 102).
Only the second element is at issue here. Galloway does not dispute that the present action falls within the scope of the arbitration agreement, but she argues that the district court erred in concluding, without the benefit of a jury trial, that the provision was a term of any contract she and CitiFinancial entered into. She also alternatively maintains that if the arbitration agreement was a term of a contract the parties entered into, the district court erred in ruling that their acceptance of that provision satisfied the FAA‘s writing
A.
We first address Galloway‘s contention that she is entitled to a jury trial regarding whether she and CitiFinancial entered into a binding contract that included the arbitration agreement.
Under the FAA, “the party seeking a jury trial must make an unequivocal denial that an arbitration agreement exists—and must also . . . provide sufficient evidence in support of its claims such that a reasonable jury could return a favorable verdict under applicable law.” Chorley Enters., 807 F.3d at 564. Thus, “to obtain a jury trial, the parties must show genuine issues of material fact regarding the existence of an agreement to arbitrate.”3 Id. We conclude that the district court properly ruled that no such factual issue existed here.
The parties agree that principles of Maryland law control the question of whether they reached an agreement to arbitrate. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (“When deciding whether the parties agreed to arbitrate a certain matter . . . , courts generally . . . should apply ordinary state-law principles that govern the formation of contracts.“); see Chorley Enters., 807 F.3d at 563.
Under Maryland law, a prerequisite to the formation of a contract is mutual assent between the parties. See Cochran v. Norkunas, 398 Md. 1, 919 A.2d 700, 708 (2007). “Manifestation of mutual assent includes two issues: (1) intent to be bound, and (2) definiteness of terms.” Id. “A contract is formed when an unrevoked offer made by one person is accepted by another.” County Comm‘rs for Carroll Cnty. v. Forty W. Builders, Inc., 178 Md.App. 328, 941 A.2d 1181, 1209 (Spec.App.2008) (internal quotation marks omitted). “An ‘offer’ is the ‘manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.‘” Prince George‘s Cnty. v. Silverman, 58 Md.App. 41, 472 A.2d 104, 112 (Spec.App.1984). Importantly, an acceptance may be manifested by actions as well as by words. See Porter v. General Boiler Casing Co., 284 Md. 402, 396 A.2d 1090, 1095 (1979) (“The purpose of a signature is to demonstrate ‘mutuality or assent’ which could as well be shown by the conduct of the parties.“).
As it did below, Santander offers several theories concerning how a meeting of the minds occurred here. Santander first argues that CitiFinancial‘s sending Galloway the Amended Agreement for her signature amounted to an offer to enter to the agreement, and that Galloway‘s signing it and faxing a copy to CitiFinancial constituted her acceptance of the Amended Agreement. Just as the district court did, we reject this argument because CitiFinancial made clear to Galloway, both orally and in writing, that it retained the right to deny Galloway‘s request for lower monthly payments. Since CitiFinancial had not agreed that Galloway‘s execution of the Amended Agreement would bind the parties, the sending of the agreement to Galloway for her signature was a mere invitation to Galloway to make an offer. See Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 778 (4th Cir.2013) (“[W]hen some further act of the purported offeror is necessary, the purported offeree has no power to
Santander alternatively contends that the district court correctly ruled that CitiFinancial accepted Galloway‘s offer by lowering the amount of Galloway‘s monthly payment to 86 cents more than the amount the Amended Agreement specified, a difference described by the district court as “de minimis.” Galloway, 2014 WL 4384641, at *3. Galloway argues, however, that CitiFinancial‘s actions did not constitute an acceptance of her offer because, under Maryland law, any variation from the terms offered is considered to be a conditional acceptance or counteroffer, as opposed to an unconditional acceptance that would immediately create a binding agreement.4
Even assuming arguendo that Galloway is correct that CitiFinancial‘s actions did not bind the parties to an agreement, we agree with the district court‘s alternative ruling that CitiFinancial‘s actions proposing payments in an amount 86 cents more than the amount specified in the Amended Agreement constituted a counteroffer to modify the terms of the Amended Agreement in this minor way and that Galloway accepted the counteroffer by making the payments in this slightly increased amount.
Although Galloway contends that the question of whether a meeting of the minds occurred presеnted a genuine factual dispute, we conclude that the legal consequences of the parties’ undisputed actions are clear. When Galloway first inquired about lowering the amount of her monthly payment, CitiFinancial drafted the Amended Agreement and instructed her that if she signed it and returned it, the company would review her request. Galloway indicated her assent to the company‘s proposed terms when she executed the Amended Agreement on November 12, leaving CitiFinancial to undertake its formal review process. Within approximately one month, at some time early enough to allow Galloway to make her December payment in the new amount, CitiFinancial informed Galloway that it would lower Galloway‘s payment tо $366.43, almost the exact amount that the Amended Agreement had contemplated. On these facts, CitiFinancial could not reasonably be understood to be offering Galloway the option to her lower payment amount without accepting the other new terms specified in the Amended Agreement—such as, for example, the increase in the number of payments that Galloway would be required to make. Rather, CitiFinancial could only be reasonably understood to be proposing a very minor tweak to the terms that it had originally suggested and that Galloway had already indicated she would accept. See Learning Works, Inc. v. Learning Annex, Inc., 830 F.2d 541, 543 (4th Cir.1987) (“Maryland law . . . requires unqualified acceptance of an offer before a contract can be formed. If а purported acceptance varies from the terms of the offer, then it does not operate as an acceptance, but rather as a rejection of the offer and a counteroffer.“).5
Galloway argues that, under Maryland law, the parties could not validly modify the RISC without setting out all of the new terms together in a written document and signing the document. In support of her argument, Galloway maintains that a signature on a contract is a condition рrecedent if “the terms of the contract make the parties’ signatures a condition precedent to the formation of the contract.” All State Home Mortg., Inc. v. Daniel, 187 Md.App. 166, 977 A.2d 438, 447 (Spec.App.2009); see also Chirichella v. Erwin, 270 Md. 178, 310 A.2d 555, 557 (1973) (explaining that a condition precedent is “a fact, other than mere lapse of time, which, unless excused, must exist or occur before a duty of immediate performance of a promise arises“) (internal quotation marks omitted). While that legal proposition is correct, no term in the Amended Agreement indicated that CitiFinancial‘s signature was necessary to bind the parties, and Galloway does not contend otherwise.
Galloway does not suggest that when CitiFinancial agreed to reduce her payment to $366.43, the company indicated
Galloway informing her that it would lower her payment to $366.43 was oral or in writing. Galloway‘s declaration states that the agreement that “lowered [her] payments to $366.43 was not evidenced by a writing.” J.A. 17. It is unclear whether Galloway meant that CitiFinancial informed her orally that it would lower her payment to that amount or rather merely that there was no writing setting out all of the terms of the parties’ new agreement. Regardless, the means by which CitiFinancial informed Galloway of the amount of her new monthly payment is not material to our decision.
Additionally, although the reason for the 86-cent increase is also not material to our decision, the increase may be attributable to a late fee of $48.74 imposed on November 3, 2008, when Galloway failed to make her October payment in а timely manner, which increased the total amount she owed on her loan.
The only contractual language Galloway cites as the basis for her position thаt a written agreement signed by both parties was necessary to effectively modify the RISC is the language in the RISC itself stating that any future amendment would need to be by a signed writing. However, under Maryland law, contractual limitations on future modifications are not effective to prevent parties from entering into new agreements orally or by performance; rather, they only provide context for interpreting subsequent conduct. See Hovnanian Land Inv. Grp., LLC v. Annapolis Towne Ctr. at Parole, LLC, 421 Md. 94, 25 A.3d 967, 978-83 (2011) (Maryland “caselaw shows a persistent unwillingness to give dispositive and preclusive effect to contractual limitations on future changes to that contract . . . whether it is mutual modification, novation, waiver of remedies, or . . . a waiver of condition prеcedent“); University Nat‘l Bank v. Wolfe, 279 Md. 512, 369 A.2d 570, 576 (1977) (holding that parties may modify their original agreement by their conduct “notwithstanding a written agreement that any change to a contract must be in writing“); see also Porter, 396 A.2d at 1095 (explaining that formation of a contract does not require the parties’ signatures “unless the parties have made them necessary at the time they expressed their assent and as a condition modifying that assent” (emphasis added and internal quotation marks omitted)).
Here, as we have explained, the parties left no doubt that they intended to modify the terms of the RISC, even in the absence of a signed writing memorializing all of the new terms to which they agreed. Having led CitiFinancial to believe for many years that the parties had successfully amended the RISC even without a signed writing—and having accepted the benefit of the modification in the form of substantially lower monthly payment requirements—Galloway cannot now be heard to claim that there was no valid amendment in the absence of a signed writing. See Hovnanian, 25 A.3d at 979 (waiver of a provision requiring amendments to a contract to be in writing may be by express agreement or by implication).6 Accordingly, the district court properly concluded that the arbitration
B.
In addition to her state-law arguments, Galloway also maintains that any arbitration agreement that the parties entered into is not enforceable under the FAA. We disagree.
The FAA declares, with exceptions not relevant here, that
[a] written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, . . . shall be valid, irrevocable, and enforceable.
The “written arbitration agreement” that is necessary to bring an agreement within the FAA‘s scope is an “actual document—the physical embodiment of the underlying legal obligations” and need not include any written assent to those obligations. Seawright v. American Gen. Fin. Servs., Inc., 507 F.3d 967, 978-79 & nn. 5-7 (6th Cir.2007) (holding that FAA‘s writing requirement was satisfied when pamphlet distributed to employees contained arbitration provision and stated that an employee‘s continuing employment would constitute acceptance of the procedures); see In re Cotton Yarn Antitrust Litig., 505 F.3d 274, 281 n. 5 (4th Cir.2007) (holding that when agreement to arbitrate was incorporated under the UCC into terms of oral contracts because it was established that arbitration is a usage of trade, and subsequent written confirmations containing the details of the arbitration terms became part of the contract by operation of law, the confirmations satisfied the FAA‘s writing requirement); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1369 (11th Cir.2005) (holding FAA‘s writing requirement was satisfied when, “[a]lthough the employees’ acceptance was by continuing their employment and was not in writing, all material terms—including the manner of acceptance—were set forth in the written” dispute resolution policy); International Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 416 (4th Cir.2000) (“While a contract cannot bind parties to arbitrate disputes they have not agreed to arbitrate, it does not follow that under the Federal Arbitration Act an obligation to arbitrate attaches only to one who has personally signed the written arbitration provision. Rather, a party can agree to submit to arbitration by means other than personally signing a contract containing an arbitration clause.” (alterations & internal quotation marks omitted)); Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir.1960) (“[T]he [FAA] contains no built-in Statute of Frauds pro-
III.
In sum, because we conclude that the district court correctly enforced the parties’ arbitration agreement, we affirm the district court order dismissing Galloway‘s action.
AFFIRMED
WYNN, Circuit Judge, dissenting:
The question at the heart of this appeal is whether the parties formed a written agreement to arbitrate. Santander says yes, pointing to a (problematic) amendment document with an arbitration clause; Galloway says no, declaring that the operative modification contract was never re-duced to writing. In short, the parties dispute a material fact: whether they entered into a written agreement to submit disputes to arbitration. It therefore cannot accurately be said that “[t]he pertinent facts in this case are undisputed.” Ante at 81. A jury—not a court—should resolve this dispute. Accordingly, I dissent.
I.
Galloway, a Maryland consumer, bought a car in 2007, and her loan was initially assigned to CitiFinancial. Under the financing contract, Galloway was required to make 72 monthly payments of $487.46. J.A. 19. The original contract contained no arbitration provision. It did, however, include a provision requiring changes to be in writing and signed to be binding: ”Any change to this contract must be in writing and we must sign it. No oral changes are binding.” J.A. 20 (emphasis added). No one disputes the original contract‘s validity.
The same cannot be said of a purported amendment to the agreement dating to 2008: The dispute surrounding its validity is at the center of this appeal. Galloway contacted CitiFinancial and requested that her monthly payments be reduced. In response, CitiFinancial sent Galloway a fax letter and an “Amendment Agreement” and instructed her to sign the “Amendment Agreement” and return it to CitiFinancial for “review, approval and consideration.” J.A. 25. The “Amendment Agreement” proposed monthly payments of $365.57 and included an arbitration provision. J.A. 26.
Galloway signed the Amendment Agreement and faxed it back to CitiFinancial. But CitiFinancial never signed the Amendment Agreement. And for months, Galloway made, and CitiFinancial, and later its assignee Santander, the defendant here,
Ultimately, Galloway failed to make her monthly payments, and Santander repossessed and sold her car. Galloway sued in Maryland state court, alleging that Santander failed to give notice as required under the Credit Grantor Closed End Credit Provisions of the Maryland Credit Deregulation Act. Galloway also declared in an affidavit that CitiFinancial “told me that the paperwork provided to me was not pre-approved . . . and that someone within CitiFinancial would have to approve my request before it became effective.” J.A. 16 (emphasis added).
Galloway further declared, under penalty of perjury, that ”CitiFinancial did not accept the terms of the executed Amendment Agreement” and that ”[t]he agreement between myself and CitiFinancial . . . which lowered my payments to $366.43 each month was not evidenced by a writing.” J.A. 17 (emphasis added).1 Santander proffered no evidence affirmatively refuting Galloway‘s statements, instead declaring thаt it had simply “relied upon the accuracy of the [original financing contract] and the Amendment Agreement.” J.A. 31.
Santander removed the case to federal court and then moved to compel arbitration. The district court granted the motion, holding that a written arbitration agreement existed.
II.
Where a party “show[s] genuine issues of material fact regarding the existence of an agreement to arbitrate,” a standard we have likened to “the burden on summary judgment,” that party is entitled to a jury trial on the issue. Chorley Enters., 807 F.3d at 564. And we review a district court‘s judgment compelling arbitration de novo. Santoro, 748 F.3d at 220.
In my view, this case presents a straightforward factual dispute entitling Galloway to a jury trial. Galloway contends that the amendment to the original contract was not reduced to writing. Evidence supporting Galloway‘s version of the facts includes: (1) her sworn statement, including her averment that “[t]he agreement between myself and CitiFinancial . . . which lowered my payments to $366.43 each month was not evidenced by a writing,” J.A. 17; (2) the fact that the actual amount of Galloway‘s lowered payments differed from the amount stated in the purported Amendment Agreement; (3) Santander‘s admission in its declaration that it simply relied on the accuracy of the documents; (4) the fact that the original contract clearly contemplated non-written amendments—because it stated that only written and signed amendments would be binding; and (5) the fact that CitiFinancial never signed the Amendment Agreement as required under the original contract.
Santander, by contrast, cоntends that in sending Galloway the Amendment Agreement—which required “review, approval and consideration” by CitiFinancial, J.A. 25—CitiFinancial made Galloway an offer, which she accepted when she faxed the signed document back. Santander also argues, for example, that the difference in amount between the payments Galloway actually made and the payments she was
Instead, this is a classic case of he said/she said. Galloway claims that the parties’ ultimate agreement to lower her monthly payments was never reduced to writing. Santander claims that the Amendment Agreement document constitutes the operative agreement to reduce payments. Without doubt, what the parties agreed to—and whether it is memorialized by a writing—is material. It is plainly disputed. And it is a question for the jury, not the courts.
III.
Where a party “show[s] genuine issues of material fact regarding the existence of an agreement to arbitrate,” that party is entitled to a jury trial. Chorley Enters., 807 F.3d at 564. In my view, Galloway has done just that—shown a material fact in dispute. She is entitled to have a jury decide the dispute. With much respect to my colleagues in the majority, I therefore dissent.