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Galloway v. Santander Consumer USA, Inc.

United States Court of Appeals, Fourth Circuit

April 8, 2016

JACQUELINE GALLOWAY, on her own behalf and on behalf of all others similarly situated, Plaintiff - Appellant,
SANTANDER CONSUMER USA, INC., Defendant - Appellee

         Argued January 28, 2016.

          Appeal from the United States District Court for the District of Maryland, at Baltimore. (1:13-cv-03240-CCB). Catherine C. Blake, Chief District Judge.


         Cory Lev Zajdel, Z LAW, LLC, Reisterstown, Maryland, for Appellant.

         Robert John Brener, LECLAIRRYAN, Newark, New Jersey, for Appellee.

         ON BRIEF:

         Michael von Diezelski, LECLAIRRYAN, Annapolis, Maryland, for Appellee.

         Before TRAXLER, Chief Judge, and AGEE and WYNN, Circuit Judges. 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 Md. Code, Comm. Law § § 12-1001, et seq. Finding no error, we affirm.


         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 to this contract must be in writing and we must sign it." J.A. 20. 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 approval 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.

         In December 2011, CitiFinancial assigned the security interest in Galloway's vehicle to Santander Consumer USA, Inc. After Galloway fell behind on her payments, Santander repossessed her car, sold it, and, after failing in its attempts to collect the outstanding deficiency, waived the deficiency.

         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 court. Santander also filed a motion to compel arbitration and stay federal district court proceedings under the Federal Arbitration Act (" FAA" ), 9 U.S.C. § § 1 et seq., claiming Galloway had previously agreed to arbitrate any disputes concerning her loan. Galloway denied that the parties had an agreement to arbitrate and alternatively claimed that any arbitration agreement was unenforceable under the FAA because it was not in writing. Galloway also moved to amend her complaint, and Santander opposed the motion on the basis that amendment would be futile.

         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 was 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 reducing 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 waived 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 FAA.[2] See Id. at *3 n.4. On that basis, the court initially granted Santander's motion to compel arbitration and stayed the case pursuant to 9 U.S.C. § 3. See Id. at *5. However, on reconsideration, the court, citing Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001), entered a final judgment dismissing the case so as to allow Galloway to pursue an immediate appeal.


          " 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 ...

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