Rota–McLarty v. Santander Consumer USA, Inc.

• Decision Date: 28 November 2012
• Docket Number: No. 11–1597.,11–1597.
• Citation: 700 F.3d 690
• Parties: Antonia ROTA–McLARTY, Plaintiff–Appellee, v. SANTANDER CONSUMER USA, INCORPORATED, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

700 F.3d 690

Antonia ROTA–McLARTY, Plaintiff–Appellee,

v.SANTANDER CONSUMER USA, INCORPORATED, Defendant–Appellant.

No. 11–1597.

United States Court of Appeals, Fourth Circuit.

Argued: Sept. 20, 2012.

Decided: Nov. 28, 2012.

ARGUED:John A. Houlihan, Edwards Wildman Palmer, LLP, Boston, Massachusetts, for Appellant. Thomas Joseph Minton, Goldman & Minton, PC, Baltimore, Maryland, for Appellee. ON BRIEF:Thomas H. Wintner, Edwards Angell Palmer & Dodge, LLP, Boston, Massachusetts, for Appellant. Bernard T. Kennedy, The Kennedy Law Firm, Edgewater, Maryland, for Appellee.

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 opinion, in which Judge SHEDD and Judge CAIN joined.

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.¹ While finding that an enforceable arbitration agreement encompassing Rota–McLarty's claims existed, the district court nevertheless concluded that Santander had waived its right to enforce arbitration by its delay. After assuring ourselves of jurisdiction, we conclude the record does not support the district court's finding of waiver. We therefore reverse and remand with directions 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 from Easterns Automotive Group (“Easterns”) in Rockville, Maryland. In completing that transaction, Rota–McLarty executed 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 procedures. 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 outstanding 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 discovery 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 Easterns's deposition and sought production of various documents. 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 proceedings 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, 176 L.Ed.2d 605 (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.³

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 Santander'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 disagrees, 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, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009); see also28 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 exercise appellate jurisdiction if the order falls within an exception to the final judgment rule established by the FAA.

The FAA provides for appeals from, inter alia, orders “refusing 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 arbitration 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 appeal rules, whereby “an order that favors litigation over arbitration ... is immediately appealable, even if interlocutory 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 interstate commerce to which the FAA applies. ⁶ 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' agreement 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 also13D Wright, Miller, & Cooper, Federal Practice and Procedure § 3569 (2008), where “commerce” means “commerce among the several 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. Dobson, 513 U.S. 265, 273–77, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). Moreover, the term “evidencing a transaction” requires only that the transaction in fact involved interstate commerce, not that the parties contemplated it as such at the time of the agreement. Id. at 281, 115 S.Ct. 834.

The district court's analysis of whether the underlying transaction is solely intrastate in nature consists of one sentence: “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 sufficient 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.”...