Howard v. King's Crossing, Inc. , 264 F. App'x 345 ( 2008 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-1969
MONIQUE P. HOWARD,
Plaintiff - Appellee,
versus
KING’S CROSSING, INCORPORATED; ROSEPARK, LLC;
ERIC FEDEWA,
Defendants - Appellants,
and
COUNCIL OF UNIT OWNERS OF KING’S CROSSING
CONDOMINIUM, INCORPORATED,
Defendant.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Alexander Williams, Jr., District Judge.
(8:04-cv-02966-AW)
Submitted: January 14, 2008 Decided: February 19, 2008
Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and Liam
O’GRADY, United States District Judge for the Eastern District of
Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
Neil S. Hyman, SELZER, GURVITCH, RABIN & OBECNY, CHTD., Bethesda,
Maryland, for Appellants. Cheryl Chapman Henderson, College Park,
Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Monique Howard brought this action under Maryland law,
alleging various contract and tort claims arising from her purchase
of a condominium from King’s Crossing, Inc. (“King’s”). Defendants
King’s; Rosepark, LLC; and Eric Fedewa (collectively “Defendants”)
removed the case to federal court and moved to dismiss or to stay
based on the arbitration clause contained in the condominium’s
sales agreement. The district court denied the motion, concluding
that the arbitration clause failed for want of consideration and
for unconscionability, and Defendants now appeal.1 Finding no
error, we affirm.
Defendants first contend that the district court erred by
considering the validity of the arbitration clause rather than by
leaving this question to the arbitrator. Defendants’ argument is
foreclosed by the Supreme Court’s decision in Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). There, the Court
held that challenges to the validity of a contract as a whole must
be considered in the first instance by an arbitrator, while
challenges to an arbitration clause or agreement can be considered
by the courts. Id. at 449. Although Howard’s complaint challenges
the validity of the sales agreement as a whole, her response to
Defendants’ motion to dismiss/stay asserts that the arbitration
1
The district court’s order is immediately appealable under 9
U.S.C. § 16.
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clause is invalid for reasons distinct from those raised in the
complaint. The issue before the district court, therefore, was the
validity of the arbitration clause, and under Buckeye the court was
empowered to determine this issue in the first instance.
Defendants next argue that the district court erred by
concluding that the arbitration clause failed for want of
consideration and for unconscionability. Again, case law
forecloses Defendants’ position. We summarized the applicable
Maryland law in Hill v. Peoplesoft USA, Inc., 412 F.3d 540, 543
(4th Cir. 2005), as follows:
Because this case involves the question of whether the
Arbitration Agreement was a valid contract, we turn to
Maryland law. . . . Under Maryland law, to be binding and
enforceable, an arbitration agreement must be a valid
contract. Cheek v. United Healthcare of Mid-Atlantic,
Inc., 835 A.2d 656, 661 (Md. 2003). . . . [T]o be binding
and enforceable, a contract must be supported by
consideration. Id. at 661. A “promise becomes
consideration for another promise only when it
constitutes a binding obligation.” Id. Unlike a binding
obligation, an “‘illusory promise’ appears to be a
promise, but it does not actually bind or obligate the
promisor to anything.” Id. at 662. Because an illusory
promise is not binding on the promisor, an illusory
promise cannot constitute consideration. Id.In Hill, we found that both parties had promised to arbitrate all
of their disputes except for a few enumerated exceptions. We
therefore concluded that the arbitration agreement was supported by
mutual consideration in the form of binding mutual promises to
arbitrate. In contrast, in Cheek, the Maryland Court of Appeals
examined an arbitration agreement in which both parties promised to
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arbitrate their disputes but in which one party reserved the right
to modify or revoke the agreement at any time. The Cheek court
held that the right to modify or revoke the arbitration agreement
rendered the party’s promise to arbitrate illusory; and because
there was no valid promise, the arbitration agreement failed for
want of consideration.
We believe the arbitration clause in this case similarly
fails. In the sales agreement, Howard agreed to arbitrate her
disputes against Defendants and to waive any right to proceed in a
court of law. Defendants, on the other hand, made no corresponding
promise. Rather, they reserved the right to seek specific
performance of the agreement in any court of competent jurisdiction
and/or to sue Howard for damages. Defendants’ “promise” is not
merely illusory, it is nonexistent. Under Cheek, the arbitration
clause clearly fails for want of mutual consideration.2
Accordingly, we affirm the denial of Defendants’ motion to
dismiss/stay. We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials before
the court and argument would not aid the decisional process.
AFFIRMED
2
We do not reach the question of whether the arbitration
clause is unconscionable.
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