Rutledge v. Santander Consumer USA Inc et al
OPINION and ORDER granting in part and denying in part 34 Motion to Compel; granting in part and denying in part 34 Motion to Dismiss; granting in part and denying in part 13 Motion to Compel; finding as moot 14 Mo tion to Stay; granting in part and denying in part 13 Motion to Dismiss; granting in part and denying in part 31 Motion to Dismiss; granting in part and denying in part 31 Motion to Compel; granting in part and denying in part 31 Motion to Stay. The case is STAYED pending arbitration of Plaintiff's claims. Signed by Honorable Donald C Coggins, Jr on 7/14/21.(alew, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
Santander Consumer USA Inc.,
Mid Atlantic Asset Recovery LLC,
and PAR Inc.,
C/A No. 6:20-cv-04214-DCC
OPINION AND ORDER
This matter is before the Court on Motions to Compel Arbitration and to Dismiss
filed by Defendants Santander Consumer USA Inc. (“Santander”), Mid Atlantic Asset
Recovery LLC (“Mid Atlantic”), and PAR Inc. (“PAR”), respectively. ECF Nos. 13, 31, 34.
On May 6, 2014, Plaintiff entered into a loan agreement (titled “Retail Installment
Sale Contract”) with Koons Automotive, Inc., (“Koons Automotive”) for the purchase of a
personal vehicle. ECF Nos. 10 at ¶ 6, 13-2 at 5–6. Koons Automotive immediately
assigned its interest in the contract, without recourse, to Defendant Santander. ECF No.
13-2 at 5. The Retail Installment Sales Contract (“RISC”) provided for repossession in
the case of default. Id. at 6. It also included the following:
PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS
EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE
BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY
IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT
TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS
MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US
INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY
CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.
DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE
GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER
RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE
AVAILABLE IN ARBITRATION.
Any claim or dispute, whether in contract, tort, statute or otherwise
(including the interpretation and scope of this Arbitration Clause, and the
arbitrability of the claim or dispute), between you and us or our employees,
agents, successors or assigns, which arises out of or relates to your credit
application, purchase or condition of this vehicle, this contract or any
resulting transaction or relationship (including any such relationship with
third parties who do not sign this contract) shall, at your or our election, be
resolved by neutral, binding arbitration and not by a court action. If federal
law provides that a claim or dispute is not subject to binding arbitration, this
Arbitration Clause shall not apply to such claim or dispute.
ECF No. 13-2 at 6. Pursuant to the arbitration clause, Plaintiff was permitted to choose
between the National Arbitration Forum (“NAF”), the American Arbitration Association
(“AAA”), “or any other organization . . . subject to [the Seller’s] approval.” Id.
Plaintiff alleges that in July 2018, Defendant Santander placed the loan account in
collection status and entered into a contractual agreement with Defendant PAR to employ
a local repossession company. ECF No. 10 at ¶ 9. Defendant PAR, in turn, contracted
with Defendant Mid Atlantic to effect the repossession of Plaintiff’s vehicle. Id. On or
about July 19, 2019, Plaintiff paid the remaining balance in full and Santander released
the lien on the vehicle shortly thereafter. Id. at 14. Plaintiff alleges, however, that
repossession was nevertheless unlawfully attempted between October 31, 2019, and
January 4, 2020. Id. ¶ 14. Plaintiff now brings six claims against Defendants based on
their repossession attempts.
On January 14, 2021, Defendant Santander moved to compel arbitration and
dismiss all claims against it based on the arbitration clause of the RISC. ECF No. 13.
Defendants Mid Atlantic and PAR subsequently filed their own motions to compel
arbitration. ECF No. 31, 34. All three motions are now before the Court.
The Federal Arbitration Act (“FAA”) establishes a “strong federal public policy in
favor of enforcing arbitration agreements” and is designed to “ensure judicial enforcement
of privately made agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S.
213, 217, 219 (1985). The FAA was enacted “in 1925 in order ‘to reverse the longstanding
judicial hostility to arbitration agreements that had existed at English common law and
had been adopted by American courts, and to place arbitration agreements on the same
footing as other contracts.’” Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 639
(4th Cir. 2002) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)).
“Underlying this policy is Congress’s view that arbitration constitutes a more efficient
dispute resolution process than litigation.” Adkins v. Labor Ready, Inc., 303 F.3d 496,
500 (4th Cir. 2002) (citation omitted).
The FAA provides that arbitration clauses in contracts involving interstate
commerce “shall be valid, irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Under the FAA, a
district court must compel arbitration and stay court proceedings if the parties have
agreed to arbitrate their dispute. Id. §§ 2, 3. But, if the validity of the arbitration agreement
is in issue, a district court must first decide if the arbitration clause is enforceable against
the parties. Id. § 4. “[A]s a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration.” Drews Distrib., Inc. v. Silicon
Gaming, Inc., 245 F.3d 347, 349 (4th Cir. 2001) (quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983)).
A party seeking to compel arbitration must do so by establishing the following four
elements: (1) the existence of a dispute between the parties; (2) a written agreement that
includes an arbitration provision purporting to cover the dispute; (3) the relationship of the
transaction, as evidenced by the agreement, to interstate or foreign commerce; and (4)
the failure, neglect, or refusal of a party to arbitrate the dispute. Am. Gen. Life & Accident
Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005); see also Whiteside v. Teltech Corp.,
940 F.2d 99, 102 (4th Cir. 1991); Energy Absorption Sys. v. Carsonite Int'l, 377 F. Supp.
2d 501, 504 (D.S.C. 2005). “[E]ven though arbitration has a favored place, there still must
be an underlying agreement between the parties to arbitrate.” Adkins, 303 F.3d at 501
(internal quotations and citation omitted). “Whether a party agreed to arbitrate a particular
dispute is a question of state law governing contract formation.” Id. (citing First Options
of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). “[T]he party resisting arbitration bears
the burden of proving that the claims at issue are unsuitable for arbitration.” Green Tree
Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 81 (2000). Where a valid arbitration agreement
exists and covers the claims at issue, this Court has “no choice but to grant a motion to
compel arbitration.” Adkins, 303 F.3d at 500 (4th Cir. 2002).
Arbitration of Claims Against Defendant Santander
Defendant Santander, as assignee of Koons Automotive’s interest in the RISC,
moves to compel arbitration of all claims against it pursuant to the arbitration clause.
Plaintiff opposes arbitration on the basis that (1) the arbitration clause is unconscionable
and therefore invalid, and (2) the claims at issue are outside its scope. 1
Ordinarily, the question of arbitrability is decided by the court. Peabody Holding
Co., LLC v. UMW, 665 F.3d 96, 102 (4th Cir. 2012) (quoting AT&T Techs., Inc. v.
Commc’ns Workers of Am., 475 U.S. 643, 649 (1986)). However, it is well-established
that parties “can agree to arbitrate arbitrability,” so long as their agreement “clearly and
unmistakably” delegates the arbitrability question to the arbitrator. Id. (citation omitted).
Under these circumstances, “a court possesses no power to decide the arbitrability issue
. . . even if the court thinks that the argument that the arbitration agreement applies to a
particular dispute is wholly groundless.” Harry Schein, Inc. v. Archer & White Sales, Inc.,
139 S. Ct. 524, 529 (2019). Moreover, “[t]he Supreme Court has concluded that when a
litigant specifically challenges the enforceability of an arbitration agreement with a
delegation clause, the challenge must be submitted to the arbitrator unless the plaintiff
has lodged a specific objection to the delegation clause.” Gibbs v. Sequoia Capital
The Court finds as a threshold matter that (1) there is a dispute between the
parties, (2) the transaction is related to interstate commerce, and (3) Plaintiff has refused
to arbitrate the dispute. See Am. Gen. Life, 429 F.3d at 87. To the extent Plaintiff disputes
the final element—the existence of a written contract between Plaintiff and Santander that
includes an arbitration provision purporting to cover the dispute—his arguments will be
fully addressed herein.
Operations, LLC, 966 F.3d 286, 291 (4th Cir. 2020) (citing Rent-A-Center, W., Inc. v.
Jackson, 561 U.S. 63, 68–69 (2010)). This requires, at the least, a specific reference to
the delegation clause. Id. (quoting MacDonald v. CashCall, Inc., 883 F.3d 220, 226 (8th
The RISC signed by Plaintiff contains a delegation clause, providing that “the
interpretation and scope of this Arbitration Clause, and the arbitrability of the claim or
dispute . . . shall . . . be resolved by neutral, binding arbitration.” ECF No. 13-2 at 6.
Plaintiff’s brief makes no specific reference to the delegation clause; rather, his
unconscionability arguments are directed at the arbitration clause as a whole. See
generally ECF No. 18. Because Plaintiff has not “lodged a specific objection to the
delegation clause,” the Court must enforce it as written. Gibbs, 966 F.3d 286. This
precludes judicial review of the scope of the arbitration agreement.
However, unlike many of the delegation clauses addressed in the case law, the
RISC does not specifically provide for arbitration of the “validity” or “enforceability” of the
arbitration clause. ECF No. 13-2 at 6; c.f. Gibbs, 966 F.3d at 290 (“Each of the arbitration
agreements contained a delegation clause stipulating that the parties would arbitrate ‘any
issue concerning the validity, enforceability, or scope of this Agreement or this Agreement
to Arbitrate.’”). Therefore, the Court finds that the threshold question of whether the
arbitration agreement is valid and enforceable has not been clearly and unmistakably
delegated to the arbitrator. 2 See Sydnor v. Conseco Fin. Servicing Corp., 252 F.3d 302,
Arguably, the validity of the arbitration agreement may be encompassed by the
delegation of “the arbitrability of the claim or dispute.” ECF No. 13-2 at 6. However, the
Court does not find that the determination of the agreement’s validity has been “clearly
and unmistakably” delegated to the arbitrator. Peabody Holding Co., 665 F.3d at 102
305 (4th Cir. 2001) (“[F]ederal courts must first decide whether the parties entered into
an agreement to arbitrate their disputes.”).
Before granting Santander’s request to
compel arbitration, the Court must address Plaintiff’s assertion that the arbitration
agreement is unconscionable.
A court may find an arbitration agreement unconscionable in “limited situations.”
Id. at 306 (citing Hooters of America v. Phillips, 173 F.3d 933 (4th Cir. 1999)). The text
of the FAA provides that “an arbitration agreement in writing ‘shall be . . . enforceable,
save upon such grounds as exist at law or in equity for the revocation of any contract.”
GE Energy Power Conversion Fr. SAS, Corp. v. Outokumpu Stainless USA, LLC, 140 S.
Ct. 1637, 1643 (2020) (quoting 9 U.S.C. § 2). Therefore, “[i]n determining whether the
parties executed a valid agreement to arbitrate, courts generally apply ordinary state-law
principles that govern the formation of contracts.” Sydnor, 252 F.3d at 305; see also Am.
Gen. Life, 429 F.3d at 88 (applying West Virginia law to determine whether arbitration
agreement was unconscionable).
A federal court sitting in diversity applies the choice-of-law rules of the forum state.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–97 (1941). The RISC contains
a choice-of-law provision selecting Virginia law. ECF No. 13-2 at 6. Plaintiff has not
objected to the choice-of-law provision, and the application of Virginia law appears to be
in accordance with South Carolina choice-of-law principles. See KJ Appliance Ctr., LLC
v. BSH Home Appliances Corp., C/A No. 2:19-cv-795-RMG, 2020 WL 219600, at *3
(D.S.C. Jan. 15, 2020) (explaining that South Carolina law honors contractual choice-of-
law provisions except where doing so would contravene its public policy). Accordingly,
the Court applies Virginia law to the unconscionability analysis. 3
“[T]he Fourth Circuit has explained that, under Virginia law, ‘[u]nconscionability is
a narrow doctrine whereby the challenged contract must be one which no reasonable
person would enter into, and the inequality must be so gross as to shock the conscience.’”
Green v. Kline Chevrolet Sales Corp., 2019 WL 3728266, at *6 (E.D. Va. Aug. 7, 2019)
(quoting Sydnor, 252 F.3d at 305).
A party seeking to invalidate a contract must
demonstrate both substantive and procedural unconscionability. Lee v. Fairfax Cnty. Sch.
Bd., 621 F. App’x 761, 763 (4th Cir. 2015) (citing Chaplain v. Chaplain, 628 S.E.2d 108,
113 (Va. Ct. App. 2009)). A contract is substantively unconscionable if it is one that “no
man in his senses and not under delusion would make on the one hand, and . . . no
honest and fair man would accept on the other.” Galloway v. Priority Imps. Richmond,
LLC, 426 F. Supp. 3d 236, 244 (E.D. Va. 2019) (quoting Chaplain, 628 S.E.2d at 113);
see also Lee, 621 F. App’x at 763 (substantive unconscionability “requires a gross
disparity in the value exchanged”) (citation omitted).
“involves an absence of meaningful choice on the part of one of the parties.” Galloway,
426 F. Supp. 3d at 244 (quoting Carlson v. Gen. Motors Corp., 883 F. 2d 287, 292–93
(4th Cir. 1989)). This may be shown by “concealments, misrepresentations, undue
advantage, oppressions on the part of one who obtains the benefit, or ignorance,
weakness of mind, sickness, old age, incapacity, pecuniary necessities, and the like.”
Lee, 621 F. App’x at 763 (quoting Chaplain, 628 S.E.2d at 113–14).
The Court notes, however, that it would reach the same result by applying South
Plaintiff first argues that the RISC is procedurally unconscionable because it “falls
squarely under” the analysis of the Supreme Court of South Carolina in Simpson v. MSA
of Myrtle Beach, Inc., 644 S.E.2d 663 (S.C. 2007). ECF No. 18 at 5. Although, as
explained above, the RISC is not properly analyzed under South Carolina,
unconscionability doctrine in the two states is substantially similar and the Court will
consider Simpson in relation to the present case. There, the principal basis for a finding
of procedural unconscionability was the “inconspicuous nature of the arbitration clause in
light of its consequences.” 644 S.E.2d at 670. Specifically,
While certain phrases within other provisions of the additional terms and
conditions were printed in all capital letters, the arbitration clause in its
entirety was written in the standard small print, and embedded in paragraph
ten (10) of sixteen (16) total paragraphs included on the page.
The undersigned does not necessarily disagree with Plaintiff’s assertion that the
RISC is a contract of adhesion. However, the additional factors that led to a finding of
procedural unconscionability in Simpson are not present here. 4 The arbitration clause of
the RISC appeared conspicuously at the end of the second (and final) page, was clearly
separated from the preceding paragraph, and was marked in bold, all-capital letters:
“ARBITRATION CLAUSE / PLEASE REVIEW – IMPORTANT – AFFECTS YOUR
LEGAL RIGHTS.” ECF No. 13-2 at 6. On the first page, just above the signature line, it
The Court notes in passing, although this argument was not advanced by Plaintiff,
that the factors supporting a finding of substantive unconscionability in Simpson are even
more starkly distinguishable from the present case. See 644 S.E.2d at 670–73 (finding,
inter alia, that the arbitration clause prevented Simpson from receiving mandatory
statutory remedies and permitted the Dealer to bring a judicial proceeding in complete
disregard of pending consumer claims requiring arbitration).
You agree to the terms of this contract. You confirm that before you
signed this contract, we gave it to you, and you were free to take it and
review it. You acknowledge that you have read both sides of this
contract, including the arbitration clause on the reverse side, before
signing below. You confirm that you received a completely filled-in
copy when you signed it.
Id. at 5. In short, under the circumstances, it is difficult to imagine what more Koons
Automotive could have done to make the arbitration clause conspicuous and to
emphasize its legal significance. See, e.g., Prosper v. Am. Credit Acceptance, LLC, C/A
No. 7:15-cv-01581-HMH, 2015 WL 13310148, at *4 (D.S.C. Aug. 17, 2015) (finding
arbitration clause sufficiently conspicuous where the contract provided in bold lettering
above the signature line: “You acknowledge that you have read both sides of this contract,
including the arbitration clause on the reverse side, before signing below.”). The Court
consequently finds no procedural unconscionability.
Second, Plaintiff contends the arbitration clause was substantively unconscionable
because “[n]o reasonable person would agree to arbitration of any and all claims in
perpetuity, especially those arising after both parties had fully performed their contractual
duties.” ECF No. 18 at 5. This appears to be a strawman argument. A clause providing
for arbitration of any and all claims in perpetuity might well be unreasonable and therefore
unconscionable, but such a clause is not at issue here. 5 By its clear terms, the arbitration
clause covers only those claims that “arise out of or relate to your credit application,
purchase or condition of this vehicle, this contract or any resulting transaction or
To the extent Plaintiff argues that Defendant Santander’s “position” on the
meaning of the clause “renders the clause unconscionable,” ECF No. 18 at 6, Plaintiff’s
argument is likewise rejected. Unconscionability depends on the actual meaning and
import of the clause, not on what one party believes it to mean.
relationship (including any such relationship with third parties who do not sign this
contract).” ECF No. 13-2 at 6. In sum, it is substantively limited to claims with a
reasonable relationship to the RISC and Plaintiff’s vehicle purchase. There is nothing
unconscionable about its scope.
Third, Plaintiff argues that the arbitration clause is substantively and procedurally
unconscionable because of its reference to an “unknown third document” that Plaintiff
was not permitted to review. ECF No. 18 at 6–7, 11–12. This argument is based on the
contractual clause that reads: “Seller assigns its interest to Santander Consumer USA
(Assignee) under the terms of Seller’s agreement(s) with Assignee.” ECF No. 13-2 at 5.
Plaintiff asserts that there was no “meeting of the minds” because he was not presented,
at signing, with the agreement specifying the terms of Koons Automotive’s agreement
He further contends that the Court cannot decide the validity and
enforceability of the arbitration clause without seeing the agreement between Koons
Automotive and Santander and determining “what rights, restrictions and limitations
related to the assignment the agreement contains.” ECF No. 18 at 12.
Plaintiff provides no legal authority for these assertions and this Court is aware of
none. On the contrary, the terms on which Koons Automotive agreed to assign its interest
in the RISC to Santander appear irrelevant to the disposition or arbitrability of Plaintiff’s
claims. The RISC plainly states that Koons Automotive’s interest in the contract is
assigned to Santander Consumer USA. More was not required to enable Defendant
Santander to enforce the contract against Plaintiff.
The terms that govern Koons
Automotive’s relationship with Santander were not, as Plaintiff argues, “part of the
contractual agreement” between Plaintiff and Koons Automotive, and they have no effect
on Plaintiff’s rights thereunder. 6
ECF No. 18 at 12.
The Court therefore finds no
unconscionability—either procedural or substantive—on this basis.
Finally, Plaintiff argues that the arbitration clause is unconscionable because both
the NAF and the AAA were illusory forums at the time the contract was signed. ECF No.
18 at 12–14. The parties agree that the NAF no longer hears consumer matters and is
therefore an unavailable forum for arbitration. However, the AAA is listed as an alternative
forum and is apparently available to hear the present dispute. 7 Plaintiff asserts that the
AAA is nonetheless an illusory forum because (1) the arbitration clause in the RISC is not
found in the AAA Consumer Clause registry, (2) the AAA will not allow Santander to
request review of an arbitration agreement “on behalf of another business,” and (3) the
arbitration clause fails AAA’s Consumer Due Process requirements because it permits
parties to “request a new arbitration under the rules of the arbitration organization by a
three-arbitrator panel” if the award is $0 or exceeds $100,000, or includes injunctive relief.
ECF No. 13-2 at 6.
Plaintiff’s first point is easily disposed of. Nothing in the case law or the AAA rules
requires a party enforcing an arbitration agreement to register prior to filing a demand for
arbitration. See Edmondson v. Lilliston Ford Inc., 722 F. App’x 251, 254 (3d Cir. 2018)
(“[T]he Rules make clear that failure to register prior to the filing of a demand for arbitration
Plaintiff also references the provision of the RISC stating that “[u]pon assignment
of this contract: (i) only this contract and addenda to this contract comprise the entire
agreement between you and the assignee relating to this contract[.]” ECF No. 13-2 at 5.
Nothing in this provision or the pleadings suggests that an addendum to the contract
In addition, the agreement provides that Plaintiff may select his own arbitrator
subject to the Seller’s approval. ECF No. 13-2 at 6. Plaintiff has not argued that this
clause represents an illusory option.
is of no moment; rather, the AAA will administer the arbitration once the business pays
the review and registry fees.”). Likewise, the undersigned sees no reason to believe—
and Plaintiff cites no rule or law to the contrary—that the AAA will bar arbitration by
Defendant Santander as assignee to Koons Automotive’s interest in the contract. As for
the contractual provision allowing requests for a new arbitration depending on the amount
of award, Plaintiff does not identify or explain which AAA Consumer Due Process
requirement 8 would be violated.
Courts that have considered similar or identical
provisions have not generally found them unconscionable.
See, e.g., Montoya v.
Comcast Corp., 2016 WL 5340651, at *8 (E.D. Cal. Sept. 22, 2016) (upholding appeal
provision for awards exceeding $75,000); Williams v. TCF Nat’l Bank, 2013 WL 708123,
at *12 (N.D. Ill. Feb. 26, 2013) (upholding appeal provision for awards exceeding
$100,000, to be heard by a three-arbitrator panel); Sanchez v. Valencia Holding Co., LLC,
353 P.3d 741, 751–53 (Cal. 2015) (upholding provision that an arbitrator's award “shall
be final and binding on all parties, except that in the event the arbitrator's award for a
party is $ 0 or against a party is in excess of $ 100,000, or includes an award of injunctive
relief against a party, that party may request a new arbitration under the rules of the
arbitration organization by a three-arbitrator panel.”).
In the absence of persuasive
authority or argument to support Plaintiff’s assertion, the Court finds no unconscionability
on the basis of the appeal provision.
The Court assumes that Plaintiff is referring to the AAA Consumer Due Process
Protocol Statement of Principles, available at https://www.adr.org. However, Plaintiff
does not identify which principle would be offended by the contractual provision at issue.
The Court therefore finds that the arbitration clause is enforceable and valid. In
the absence of a specific challenge to the delegation clause, as explained above, the
Court is without power to determine the scope of the arbitration clause or the arbitrability
of Plaintiff’s claims. Accordingly, the Court does not consider Plaintiff’s argument that his
claims fall outside the scope of the arbitration clause. 9
Arbitration of Claims Against Defendants Mid Atlantic and PAR
Having determined that Plaintiff’s claims are arbitrable against Defendant
Santander, the Court turns to whether Defendants Mid Atlantic and PAR, who are neither
signatories nor assignees to the RISC, may compel arbitration. The Court finds that they
“It is well-established . . . that a nonsignatory to an arbitration clause may, in certain
situations, compel a signatory to the clause to arbitrate the signatory’s claims against the
nonsignatory despite the fact that the signatory and nonsignatory lack an agreement to
arbitrate.” Am. Bankers Ins. Group v. Long, 453 F.3d 623, 627 (4th Cir. 2006). The
doctrine of equitable estoppel permits a nonsignatory to compel arbitration in two different
First, equitable estoppel applies when the signatory to a written agreement
containing an arbitration clause must rely on the terms of the written
agreement in asserting its claims against the nonsignatory. When each of
a signatory’s claims against a nonsignatory makes reference to or
presumes the existence of the written agreement, the signatory’s claims
arise out of and relate directly to the written agreement, and arbitration is
appropriate. Second, application of equitable estoppel is warranted when
However, the Court would have no difficulty finding that Plaintiff’s claims fall
squarely within the scope of the arbitration agreement as the alleged attempts to
repossess Plaintiff’s vehicle, whether lawful or not, clearly “arise out of or relate to [the]
purchase or condition of this vehicle, this contract, or any resulting transaction or
relationship.” ECF No. 13-2 at 6.
the signatory to the contract containing the arbitration clause raises
allegations of substantially interdependent and concerted misconduct by
both the non-signatory and one or more of the signatories to the contract.
Otherwise, the arbitration proceedings between the two signatories would
be rendered meaningless and the federal policy in favor of arbitration
Brantley v. Republic Mortg. Ins. Co., 424 F.3d 392, 395–96 (4th Cir. 2005) (quoting MS
Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999)) (internal quotation
marks and alterations omitted).
In the present case, both circumstances exist. First, Plaintiff’s claims against Mid
Atlantic and PAR rely on the terms of the RISC. Plaintiff’s allegation that Mid Atlantic and
PAR wrongfully attempted to repossess his vehicle are wholly dependent on the contract
terms, i.e., that the vehicle was in fact paid off. Indeed, the first factual allegation of the
Amended Complaint is as follows: “On or about May 6, 2014, Plaintiff entered into a retail
installment sale contract with Koons Automotive, Inc. for the purchase of a personal
vehicle.” ECF No. 10 ¶ 6. The Court finds that Plaintiff’s causes of action are inextricably
intertwined with the terms of the RISC, making enforcement of the arbitration clause by
Defendants Mid Atlantic and PAR appropriate.
Second, Plaintiff clearly “raises allegations of substantially interdependent and
concerted misconduct by both the non-signatory and one or more of the signatories to the
contract.” Brantley, 424 F.3d at 395–96. The alleged misconduct by Mid Atlantic and
PAR (attempting, wrongfully, to repossess Plaintiff’s car) is inseparable from the alleged
misconduct by Santander. Indeed, Plaintiff alleges that Mid Atlantic and PAR were acting
on Santander’s behalf. Nevertheless, Plaintiff argues that the test is unsatisfied because
Santander is not a signatory to the agreement. But under either Virginia or South Carolina
law, Santander is for all practical purposes a signatory to the contract as a result of the
assignment of Koons Automotive’s interest. See Sanders v. Savannah Highway Auto.
Co., 852 S.E.2d 744, 746–47 (S.C. Ct. App. Oct. 21, 2020) (finding that where a car
dealership assigned its interest in the RISC to Santander, Santander acquired the
dealership’s right to compel arbitration); Union Recovery Ltd. Pshp. v. Horton, 477 S.E.2d
521, 523 (Va. 1996) (“It is well established law in Virginia that an assignee obtains his
rights from the assignor, and, thus, he is said to ‘stand in the shoes’ of the assignor when
pursuing an action on the contract or instrument assigned.”) (citation omitted); DuPont
de-Bie v. Vredenburgh, 490 F.2d 1057, 1061 (4th Cir. 1974) (“The principle is well settled
that a valid assignment operates to pass the whole right of the assignor, and that
thereafter the assignee stands in the place of the assignor, possessing all rights or
remedies available to the assignor.”). In short, there is no functional difference in this
context between signatory and assignee.
The Court finds that the arbitration between Plaintiff and Defendant Santander
“would be rendered meaningless and the federal policy in favor of arbitration effectively
thwarted” if the claims against Mid Atlantic and PAR go forward for judicial determination.
Brantley, 424 F.3d at 395–96. Therefore, the motions of Defendants Mid Atlantic and
PAR to compel arbitration are granted.
Disposition of Claims
The final question before this Court is the proper disposition of Plaintiff’s claims.
Defendants seek dismissal, while Plaintiff requests that the Court retain jurisdiction and
stay the case. The Fourth Circuit has held that “notwithstanding the terms of [9 U.S.C.]
§ 3 . . . dismissal is a proper remedy when all of the issues presented in a lawsuit are
arbitrable.” Choice Hotels Int’l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709–
10 (4th Cir. 2001) (citation omitted); see also Greenville Hosp. Sys. v. Employee Welfare
Benefit Plan, 628 F. App’x 842, 845–46 (4th Cir. 2015) (“If a court determines . . . that all
of the issues presented are arbitrable, then it may dismiss the case, as the district court
did here.”). 10 However, nothing in the case law or statutory scheme requires dismissal.
Therefore, in the Court’s discretion, Defendants’ request for dismissal is denied.
For the reasons set forth above, Defendants’ Motions to Compel Arbitration and to
Dismiss [13, 31, 34] are GRANTED IN PART and DENIED IN PART and the case is
STAYED pending arbitration of Plaintiff’s claims. Defendant Santander’s Motion to Stay
Discovery Pending Resolution of Motion to Compel Arbitration and to Dismiss  is
FOUND AS MOOT.
IT IS SO ORDERED.
s/ Donald C. Coggins, Jr.
United States District Judge
July 14, 2021
Spartanburg, South Carolina
In a subsequent opinion, the Fourth Circuit noted a circuit split and “some
tension” among its own decisions regarding the propriety of dismissal. Aggarao v. MOL
Ship Mgmt. Co., Ltd., 675 F.3d 355, 376 n.18 (4th Cir. 2012). The court found it
unnecessary to resolve the disagreement because not all issues were subject to
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