Jacqueline Galloway v. Santander Consumer USA, Inc
819 F.3d 79 (2016)
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Rule of Law:
A party's conduct, such as performance under slightly modified terms, can constitute acceptance of a written contract modification, thereby binding the party to a written arbitration clause contained within it. The Federal Arbitration Act's requirement for a 'written provision' is satisfied if the arbitration clause itself is in writing, even if assent to the contract was manifested through conduct rather than a signature.
Facts:
- In March 2007, Jacqueline Galloway financed a vehicle purchase through a retail installment contract (RISC).
- The RISC contained a clause stating that any changes to the contract must be in a writing signed by the lender.
- Sometime before October 2008, Galloway contacted the lender, CitiFinancial Auto, Ltd., to request a reduction in her monthly payments.
- CitiFinancial sent Galloway a proposed 'Amended Agreement' which reduced the monthly payment from $487.46 to $365.57 and included a new arbitration clause. The cover letter stated the document was for 'review, approval and consideration' after Galloway signed and returned it.
- On November 12, 2008, Galloway signed the Amended Agreement and faxed it back to CitiFinancial.
- CitiFinancial never signed or returned the Amended Agreement to Galloway.
- Shortly thereafter, CitiFinancial lowered Galloway's monthly payment to $366.43, an amount 86 cents more than specified in the Amended Agreement.
- Galloway began making payments of $366.43 in December 2008 and continued to do so for several years.
- In 2011, CitiFinancial assigned the loan to Santander Consumer USA, Inc., who later repossessed Galloway's vehicle after she fell behind on payments.
Procedural Posture:
- Jacqueline Galloway sued Santander Consumer USA, Inc. in a Maryland state court for breach of contract and violation of state credit law.
- Santander removed the action to the U.S. District Court for the District of Maryland.
- Santander filed a motion to compel arbitration and stay the proceedings, arguing that the Amended Agreement contained a valid arbitration clause.
- The district court granted Santander's motion, concluding as a matter of law that the parties had formed a binding agreement to arbitrate.
- Upon reconsideration, the district court dismissed the case to permit an immediate appeal of its order compelling arbitration.
- Galloway (appellant) appealed the dismissal to the U.S. Court of Appeals for the Fourth Circuit.
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Issue:
Does a party's performance, such as making payments under slightly modified terms, constitute acceptance of a written amended contract, thereby making its written arbitration clause enforceable under the Federal Arbitration Act, even if the other party never signed the agreement?
Opinions:
Majority - Traxler, Chief Judge
Yes, a party's performance under slightly modified terms constitutes acceptance of a written amended contract, making its arbitration clause enforceable. Galloway's act of signing and returning the Amended Agreement was an offer. CitiFinancial's subsequent lowering of her payment to a slightly different amount ($366.43) was a counteroffer. Galloway accepted this counteroffer through her conduct—making payments in the new amount for several years without objection. This conduct demonstrated mutual assent to the terms of the Amended Agreement as slightly modified, including the arbitration clause. The original contract's requirement for a signed writing was waived by the parties' course of performance. The FAA's writing requirement is satisfied because the arbitration provision itself was in writing; the acceptance of that provision does not need to be in writing and can be demonstrated by conduct.
Dissenting - Wynn, Circuit Judge
No, a genuine issue of material fact exists as to whether the parties formed a written agreement to arbitrate, which should be decided by a jury. This is a classic 'he said/she said' dispute. Galloway declared under oath that the operative agreement that lowered her payments was not in writing. Evidence supporting her position includes the fact that CitiFinancial never signed the Amended Agreement as required by the original contract, and the actual payment amount differed from what was written in the proposal. Because there is a factual dispute about whether the parties' agreement was memorialized in the written Amended Agreement or was a separate, non-written agreement, the court cannot compel arbitration as a matter of law. The question of whether a written arbitration agreement exists should be resolved by a jury.
Analysis:
This decision reinforces the principle that contract formation is judged by objective manifestations of assent, including conduct, rather than strict adherence to formalities like signatures. It clarifies that for purposes of the Federal Arbitration Act (FAA), the 'writing' requirement applies to the arbitration provision itself, not the method of acceptance. This lowers the evidentiary burden for parties seeking to compel arbitration, as they can point to a party's performance consistent with a written proposal to enforce an arbitration clause within it. The ruling makes it more difficult for parties to escape arbitration clauses by arguing that technical contract requirements, such as a signature or a perfect mirror-image acceptance, were not met, as long as their actions indicated they were operating under the new agreement.
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