Rum v. DARCARS of New Carrollton, Inc.

Filing 11

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 7/10/12. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
DEBRA A. RUM
:
v.

:

Civil Action No. DKC 12-0366

:
DARCARS OF NEW CARROLLTON, INC.
:
MEMORANDUM OPINION
Presently pending and ready for review in this employment
discrimination
alternative,

case
to

is

stay

the
action

“motion

to

pending

dismiss

or,

arbitration”

filed

Defendant DARCARS of New Carrollton, Inc. (“DARCARS”).
4).

in

the
by

(ECF No.

The issues have been fully briefed, and the court now

rules, no hearing deemed necessary.

Local Rule 105.6.

For the

following reasons, the motion will be granted.
I.

Background
A.

Factual Background

Plaintiff Debra A. Rum alleges the following facts in the
amended complaint.
woman.

Ms. Rum is over forty-years old and is a

In March 2003, she was hired as an assistant service

manager/service

advisor

at

DARCARS’s

automobile

dealership

located in New Carrollton, Maryland.

For the dealership to

maintain

manufacturer,

“high

star

status”

with

the

Ms.

Rum

maintained certification as a service manager/service advisor.
(ECF

No.

2

¶

9).

On

top

of

a

base

salary,

she

received

commissions, which were earned based on individual labor and
part sales, as well as a percentage of the total labor sales for
the service department.
In the fall of 2008, DARCARS hired two men — both of whom
were

younger

managers/service
experience
advisor.

or

than

Ms.

advisors.
was

Rum

—

Neither

certified

as

as

assistant

man
a

had

prior

service

service
dealership

manager/service

In November of that year, Ms. Rum learned that the two

men were paid a higher base salary and earned commissions at a
higher rate than she did.

Ms. Rum complained to her direct

supervisor about this pay differential.

She followed up about

her complaint on a weekly basis with other management personnel,
but she was told repeatedly that “the matter was under review.”
(Id. ¶ 14).
she

was

In January 2009, Ms. Rum informed management that

being

discriminated

against

and

subjected to a hostile work environment.

that

she

was

being

About two weeks later,

DARCARS retroactively paid Ms. Rum the difference between the
base salaries and the commission rates back to the time the two
male employees began their employment.
On January 19, 2010, three managers held a meeting with Ms.
Rum at which they informed her that a customer, whom they did
not

identify,

had

accused

her

of

“offering

customer’s vehicle for cash on the side.”
managers

demanded

that

Ms.

Rum
2

provide

to

repair

(Id. ¶ 18).
the

names

of

the
The
all

individuals
regarding

involved
vehicle

in

this

repairs.

violation
Ms.

Rum

of

DARCARS’s

repeatedly

policy

denied

the

allegations, but one of the managers used “an aggressive and
intimidating tone” with her.

(Id. ¶ 19).1

She ultimately stated

that she had her personal vehicles repaired at the dealership.
These repairs were in compliance with DARCARS’s policy regarding
such repairs.

Nevertheless, as a result of the meeting, Ms. Rum

was placed on administrative leave.
terminated

for

dealership.

having

her

personal

Two days later, she was
vehicles

repaired

at

the

The managers met with other employees to inform

them that Ms. Rum would not be working there anymore.
Ms. Rum has been unable to obtain comparable employment
since

her

termination,

dealerships

that

she

in
was

part,

because

terminated

DARCARS

for

told

violation

of

other
its

policies and practices.
B.

Procedural Background

On December 22, 2011, Ms. Rum filed a complaint against
DARCARS

in

Maryland.

the

Circuit

Court

for

Prince

George’s

County,

One week later, she amended the complaint.

After

service, DARCARS timely removed to this court on the basis of
federal

question

jurisdiction.

(ECF

complaint contains seven counts:

1

No.

1).

The

(1) intentional infliction of

DARCARS did not follow up with any male
regarding the alleged vehicle repair side business.
3

amended

mechanics

emotional

distress,

(2)

disparate

treatment

in

violation

of

Title VII of the Civil Rights Act of 1964 (“Title VII”), the Age
Discrimination in Employment Act (“ADEA”), and the Equal Pay
Act, (3) retaliation in violation of the same federal statutes,
(4)

violation

of

Prince

George’s

County

Code

Division

12,

Subdivision 7, (5) vicarious liability, (6) negligence, and (7)
breach of contract.
On

February

6,

2012,

DARCARS

filed

the

pending

motion.

(ECF No. 4).

Although DARCARS styles its motion as a “motion to

dismiss

in

or,

the

alternative,

to

stay

action

pending

arbitration,” it is, in effect, a motion to compel arbitration.
Ms. Rum filed opposition papers on February 29, 2012.

(ECF No.

9).

DARCARS replied on March 19, 2012.

(ECF No. 10).

II.

Applicability of the Federal Arbitration Act (“FAA”)
DARCARS and Ms. Rum disagree whether the FAA applies to the

employment contract between the parties (“the Agreement”).
FAA provides:
A written provision in any . . . 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, or an agreement
in writing to submit to arbitration an
existing controversy arising out of such a
contract, transaction, or refusal, shall be
valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in
equity for the revocation of any contract.

4

The

9 U.S.C. § 2.

As defined in the FAA, the term commerce

means commerce among the several States or
with foreign nations, or in any Territory of
the United States or in the District of
Columbia, or between any such Territory and
another, or between any such Territory and
any State or foreign nation, or between the
District of Columbia and any State or
Territory or foreign nation, but nothing
herein contained shall apply to contracts of
employment of seamen, railroad employees, or
any other class of workers engaged in
foreign or interstate commerce.
9 U.S.C. § 1.

Therefore, “[b]efore the [FAA] becomes applicable

[to an arbitration agreement], two findings must be made:

(1)

there was an agreement in writing providing for arbitration and
(2) the contract evidences a transaction involving interstate
commerce.”

Am. Home Assurance Co. v. Vecco Concrete Constr. Co.

of Va., 629 F.2d 961, 963 (4th Cir. 1980).2
As to the first prong, DARCARS attached to its motion a
copy of the Agreement.

(ECF No. 4-1).3

Ms. Rum does not dispute

2

The United States Supreme Court has explained that for a
contract to “evidenc[e] a transaction involving [interstate]
commerce” as required by the FAA, the transaction need only have
involved interstate commerce “in fact.”
See Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 277-78 (1995).
The
contract need not have “contemplated” interstate activity.
Id.
Thus, the Court rejected the notion that a contract evidences a
transaction involving interstate commerce only when there is an
explicit “reference to interstate commerce in the document.”
See id. at 278.
3

The Agreement, which Ms. Rum signed on March 16, 2004,
states that she is an at-will employee.
(ECF No. 4-1).
With
5

the authenticity of the Agreement or that the Agreement provides

respect to arbitration and incorporation, it reads, in pertinent
part:
Except for exclusively monetary claims
of less tha[n] $5000, any dispute or
controversy
(including
the
question
of
whether
the
dispute
or
controversy
is
subject
to
arbitration)
which
would
otherwise require or allow res[or]t to any
court
or
other
governmental
dispu[t]e
resolution forum, between the employee and
the company (or its owners, employees,
agents, directors, and officers, and parties
affiliated with its employee benefit and
health plans) arising from, related to, or
having
any
relationship
or
connection
whatsoever with law, equity, or otherwise,
specifically including but not limited to
any and all matters arising under the
constitution of the United States or of any
state, . . . Title VII of the Civil Rights
Act of 1964, . . . the Equal Pay Act, . . .
similar state and local status regulations,
and ordinances, as well as any other
federal, state, or local personal injury,
civil rights, or employment related law,
regulations, rules or theories (except for
worker’s compensation claims which shall not
be subject to these procedures) shall be
submitted to, and determined by, binding
arbitration under the Federal Arbitration
Act . . . .
This is the exclusive procedure for
remedy
for
any
dispute
or
controversy
covered.
This is the entire understanding
between
the
Company
and
employee
reg[]ardin[g] employment and reasons for
termination of employment.
There is no
contract concerning employment between the
Company and the Employee.
(Id.).
6

for

arbitration.

As

to

the

second

prong,

however,

Ms.

Rum

challenges the Agreement’s relationship to interstate commerce.
(See ECF No. 9-1, at 2-3).

Regarding the burden of proving this

second prong, the United States Court of Appeals for the Fourth
Circuit has held that the FAA
does not require proof by affidavit or other
specific evidence of the nexus to interstate
commerce.
Where . . . the party seeking
arbitration alleges that the transaction is
within the scope of the Act, and the party
opposing application of the Act does not
come
forward
with
evidence
to
rebut
jurisdiction under the federal statute, we
do not read into the Act a requirement of
further proof by the party invoking the
federal law.
Maxum Founds., Inc. v. Salus Corp., 779 F.2d 974, 978 n.4 (4th
Cir. 1985); see also Jih v. Long & Foster Real Estate, Inc., 800
F.Supp. 312, 316 (D.Md. 1992) (“[O]nce one party asserts that
the transaction is within the scope of the Act, the burden is
upon the other party to come forward with evidence to rebut
jurisdiction under the federal statute.” (citing Maxum Founds.,
Inc., 779 F.2d at 978 n.4)).
Here, DARCARS’s motion clearly asserts that the FAA applies
to the Agreement.

Not only does the motion explicitly reference

the FAA (ECF No. 4 ¶ 5), it also refers to and attaches the
Agreement, which by its own terms states that “any dispute or
controversy . . . shall by submitted to, and determined by,
binding arbitration under the Federal Arbitration Act” (ECF No.
7

4-1) (emphasis added).
evidence

to

rebut

The burden is thus on Ms. Rum to proffer

the

Agreement’s

connection

to

interstate

commerce.
Ms.

Rum’s

amended

complaint

contains

claims

under

three

federal statutes, including Title VII and the ADEA, which only
apply to an employer engaged in commerce.

See 42 U.S.C. §

2000e(b), (g), (h) (Title VII); 29 U.S.C. § 630(b), (g), (h)
(ADEA).
engaged

The third, the Equal Pay Act, applies to employees
in

commerce.

See

29

U.S.C.

§§

203,

206(d).

By

asserting those claims, then, Ms. Rum in effect concedes the
interstate nexus for her employment.

The amended complaint also

alleges that her compensation depended in part on commissions
based on her own labor and part sales, as well as a percentage
of

the

total

labor

sales

for

the

service

department.

Her

affidavit establishes at most that she is a resident of Maryland
and that she was employed and signed relevant documents only in
Maryland.
actual

(ECF No. 9-2 ¶¶ 2-3).

job

responsibilities

She does not state that her

were

confined

to

intrastate

activities nor does she prove that her employment at DARCARS’s
was limited to the state’s borders.
In its reply, DARCARS further alleges the following:
DARCARS is in the business of selling and
servicing automobiles, a good that travels
and “flows” through interstate commerce.
DARCARS
sells
vehicles
and
parts
to
customers from multiple states and the
8

District of Columbia.
[Ms.] Rum was hired
as an Assistant Service Manager/Service
Advisor
for
DARCARS.
[Ms.]
Rum’s
compensation for her employment was based on
labor sales and part7 sales — services which
were provided to customers, from multiple
states, for automobiles that travel in
interstate commerce.
________________
7
Car parts are manufactured and shipped from
throughout the United States.
Furthermore,
the
cars
sold
at
DARCARS
are
not
manufactured
here
in
Maryland,
but
in
several other states and countries, and then
shipped to Maryland for sale.
(ECF No. 10, at 6).

Ms. Rum does not challenge these additional

allegations, which she could have done via surreply.

See Local

Rule 105.2.a (permitting surreply after obtaining leave of the
court).
This record, then, shows that DARCARS has established that
the

Agreement

commerce.
principle

evidences

a

transaction

involving

interstate

This finding is not inconsistent with the general
that,

“[e]mployment

contracts,

except

for

those

covering workers engaged in transportation, are covered by the
FAA.”

E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289 (2001);

see also Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 369 (4th
Cir. 2012) (“‘[A] contract evidencing a transaction involving
commerce’

includes

an

employment

contract.”

(quoting

City Stores, Inc. v. Adams, 532 U.S. 105, 113 (2001)).
the

issue

of

the

applicability

of

the

FAA

to

an

Circuit
Although

employment

contract was not specifically challenged as it is here, the FAA
9

has

been

repeatedly

applied

to

employment

contracts

in

this

circuit.

See, e.g., Am. Gen. Life & Accident Ins. Co. v. Wood,

429

83,

F.3d

87

(4th

Cir.

2005);

Murray

v.

United

Food

&

Commercial Workers Int’l Union, Local 400, 289 F.3d 297, 301 (4th
Cir. 2002); Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 93637 (4th Cir. 1999).
III. Consideration
Ms. Rum also contends that the agreement is not enforceable
due to a failure of consideration.

In deciding a motion to

compel arbitration, district courts must “engage in a limited
review to ensure that the dispute is arbitrable — i.e., that a
valid agreement to arbitrate exists between the parties and that
the specific dispute falls within the substantive scope of that
agreement.”

Hooters of Am., Inc., 173 F.3d at 938 (internal

quotation marks omitted).

In so doing, courts apply “ordinary

state-law principles that govern the formation of contracts.”
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
Under Maryland contract law, a legally binding agreement
must be supported by sufficient consideration.

Cheek v. United

Healthcare of the Mid–Atl., Inc., 378 Md. 139, 147 (2003).

A

promise may become consideration for another promise only when
it

constitutes

a

binding

obligation.

Id.

at

148.

When

a

promise is composed of words in a promissory form that do not
actually

bind

or

obligate

the
10

promisor

to

do

anything,

the

promise

is

said

consideration.

to

be

“illusory”

and

does

not

constitute

Id. at 148–49.

Ms. Rum argues that the Agreement lacked consideration and
was illusory.

(See ECF No. 9-1, at 4).

Citing Cheek, she

contends that an “arbitration agreement [is] illusory [if] the
employer reserve[s] the right to rescind, to alter or amend the
arbitration agreement in its employee’s handbook.”

(Id.).

She

states that
despite
the
language
of
the
alleged
arbitration agreement between the parties,
[she] does not know whether the employee
packet she was provided, which contained an
employee handbook, at the time she was hired
contained additional information related to
any policies [DARCARS] had with respect to
arbitration beyond the alleged arbitration
agreement.
(Id.).

As a result, Ms. Rum argues that she needs discovery in

part to ascertain the validity of the arbitration agreement.
(Id. at 5).
Ms. Rum misconstrues the holding in Cheek, however, as the
Court

of

conclusion.

Appeals

an

Maryland

did

not

reach

such

a

broad

In Cheek, the plaintiff received a copy of the

defendant-employer’s
signed

of

handbook

acknowledgment

on
form

his

first

day

indicating

of

that

work

and

he

had

“‘specifically received and reviewed,’ among other things, an
‘Internal

Dispute

Resolution/Employment

Arbitration

Policy’”

summarized in the handbook, and that he “agree[d] to submit all
11

employment-related

disputes

.

.

.

to

employer’s] policy.” 378 Md. at 143.

arbitration

under

[the

The arbitration policy

itself gave the employer the right to “alter, amend, modify, or
revoke the [policy] at its sole and absolute discretion at any
time with or without notice.”

Id. at 142–43.

The Court of

Appeals observed that “the plain and unambiguous language of
[this] clause” allowed the employer “to revoke the Employment
Arbitration Policy even after arbitration is invoked, and even
after

a

decision

is

rendered,

because

‘revoke’ the Policy ‘at any time.’”

[the

employer]

Id. at 149.

can

Under those

circumstances, the court determined, the employer’s “‘promise’
to

arbitrate

employment

disputes

therefore, no real promise at all.”

is

entirely

illusory,

and

Id.

Thus, in Cheek, while the arbitration policy at issue was
contained in the employee handbook itself, the court did not
hold that there is anything special about an employee handbook
requiring a separate review of that document to see whether an
arbitration agreement is illusory.
precisely the opposite conclusion:

In fact, Cheek stands for
rather than look at outside

documents, such as an employee handbook, the court must limit
its search for supporting consideration to the four corners of
the Agreement itself.

As the Fourth Circuit explained:

[T]he reservation of rights in Cheek
was contained in the arbitration policy.
Looking
at
the
four
corners
of
the
12

arbitration policy in Cheek, the court
understandably concluded that the policy
contained an illusory promise.
In the
instant case, by contrast, looking at the
four corners of the separate Arbitration
Agreement, the agreement contains no such
illusory promise.
To be sure, it is only
when we are asked to look beyond the four
corners of the Arbitration Agreement . . . —
something Cheek tells us we are not allowed
to do — that [the plaintiff’s] argument
finds its support.
In sum, the district court simply was
not at liberty to go beyond the language of
the Arbitration Agreement in determining
whether the agreement contained an illusory
promise.
When one examines the language of
the Arbitration Agreement itself, only one
conclusion is tenable — the agreement is
binding and enforceable.
Hill v. Peoplesoft USA, Inc., 412 F.3d 540, 544 (4th Cir. 2005)
(internal citation omitted).
In

this

case

as

well,

the

search

for

supporting

consideration is limited to the Agreement’s four corners as Hill
and Cheek instruct.4
that

there

is

an

Accordingly, despite Ms. Rum’s assertion

employee

handbook

or

that

there

are

other

documents that might contain language that could possibly render
the

arbitration

extrinsic

provision

evidence

has

no

in

the

bearing

4

Agreement
on

whether

illusory,
the

such

Agreement

Moreover, the Agreement specifically disclaims any
reference to or reliance on outside documents. (See ECF No. 4-1
(“This is the exclusive procedure for remedy for any dispute or
controversy covered.
This is the entire understanding between
the Company and employee reg[]ardin[g] employment and reasons
for termination of employment. There is no contract concerning
employment between the Company and the Employee.”)).
13

itself evidences sufficient consideration.

To that end, the

Agreement does impose mutual obligations on Ms. Rum and DARCARS.
Most

notably,

it

requires

that

“any

dispute

or

controversy

(including the question of whether the dispute or controversy is
subject to arbitration) . . . be submitted to, and determined
by,

binding

“[M]utual

arbitration.”

promises

enforceable

to

contract[,

(ECF

No.

arbitrate
i.e.,]

4-1)

act

each

(emphasis

as

an

party

added).

independently

has

promised

to

arbitrate disputes arising from an underlying contract, and each
promise provides consideration for the other.”

Cheek, 378 Md.

at 153 (internal quotations and citations omitted); see also
O’Neil v. Hilton Head Hosp., 115 F.3d 272, 275 (4th Cir. 1997)
(“A

mutual

promise

to

arbitrate

constitutes

consideration for [an] arbitration agreement.”).
parties

mutually

provision,

the

agreed

to

Agreement

be

bound

was

by

sufficient
Because the

the

supported

arbitration

by

adequate

consideration.
IV.

Stay or Dismissal
When an issue in a judicial proceeding is referable to

arbitration, the FAA requires the court, upon the motion of a
party, to stay the proceedings until that issue is arbitrated.
9

U.S.C.

§

3;

see

Waffle

House,

Inc.,

534

U.S.

at

289.

“[D]ismissal is a proper remedy,” however, “when all of the
issues presented in a lawsuit are arbitrable.”
14

Choice Hotels

Int’l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709–10
(4th Cir. 2001).
Ms.

Rum

argues

that

if

arbitration

is

compelled,

instant action should merely be stayed, not dismissed.
No. 9-1, at 5).

the

(See ECF

She contends that Count Seven of the amended

complaint, the breach of contract claim, is not covered by the
Agreement.

Though left unsaid, the inference appears to be that

the matter should not be dismissed because Ms. Rum’s claims are
not all arbitrable.
Despite having held that “questions of arbitrability” are
generally

appropriate

for

courts,

see

Howsam

v.

Dean

Witter

Reynolds, Inc., 537 U.S. 79, 84 (2002), the Supreme Court has
also

held

determine

that

the

issues

unmistakably

parties
of

provide”

may

agree

arbitrability
so,

see

AT&T

to
if

have
they

Techs.,

Workers of Am., 475 U.S. 643, 649 (1986).

an

arbitrator

“clearly

Inc.

v.

and

Comm’ns

Here, questions of

arbitrability are expressly within the purview of the Agreement.
(See

ECF

No.

4-1

(applying

to

“any

dispute

or

controversy

(including the question of whether the dispute or controversy is
subject to arbitration)” (emphasis added))).

Thus, whether any

of Ms. Rum’s claims — including the breach of contract claim —
are arbitrable is for the arbitrator to decide.

Accordingly, it

is not yet clear that “all of the issues presented in a lawsuit
are arbitrable,” see Choice Hotels Int’l, Inc., 252 F.3d at 709–
15

10, and the court will stay the action rather than dismiss it
while the arbitrator makes that determination.
V.

Conclusion
For the foregoing reasons, the motion to compel arbitration

filed by Defendant DARCARS of New Carrollton, Inc., will be
granted.

A separate order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

16