PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ANTONIA ROTA-MCLARTY, 

Plaintiff-Appellee,

v.  No. 11-1597

SANTANDER CONSUMER USA,

INCORPORATED,

Defendant-Appellant. 

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

William D. Quarles, Jr., District Judge.

(1:10-cv-00908-WDQ)

Argued: September 20, 2012

Decided: November 28, 2012

Before SHEDD and DUNCAN, Circuit Judges, and

Timothy M. CAIN, United States District Judge for the

District of South Carolina, sitting by designation.

Reversed by published opinion. Judge Duncan wrote the opinion, in which Judge Shedd and Judge Cain joined.
COUNSEL

ARGUED: John A. Houlihan, EDWARDS WILDMAN

PALMER, LLP, Boston, Massachusetts, for Appellant.

Thomas Joseph Minton, GOLDMAN & MINTON, PC, Baltimore, Maryland, for Appellee. ON BRIEF: Thomas H. Wintner, EDWARDS ANGELL PALMER & DODGE, LLP,

Boston, Massachusetts, for Appellant. Bernard T. Kennedy,

THE KENNEDY LAW FIRM, Edgewater, Maryland, for

Appellee.

OPINION

DUNCAN, Circuit Judge:

Santander Consumer USA ("Santander") appeals from the

district court’s order denying its motion to compel arbitration

and stay court proceedings of Antonia Rota-McLarty’s

("Rota-McLarty") claims against it.1 While finding that an

enforceable arbitration agreement encompassing RotaMcLarty’s claims existed, the district court nevertheless concluded that Santander had waived its right to enforce arbitration by its delay. After assuring ourselves of jurisdiction, we

conclude the record does not support the district court’s finding of waiver. We therefore reverse and remand with directions to refer the claims to arbitration.

I.

The relevant facts are few and undisputed. On July 5, 2007,

Rota-McLarty, a Maryland resident, purchased a used car

1Rota-McLarty originally brought her claims against Drive Financial

Services ("Drive"), a Texas corporation which no longer exists. Santander,

an Illinois corporation with its principal place of business in Texas, is the

successor by mergers to Drive, and has taken its place in the litigation. For

simplicity, we refer to the lender solely as Santander. 

2 ROTA-MCLARTY v. SANTANDER CONSUMER USA
from Easterns Automotive Group ("Easterns") in Rockville,

Maryland. In completing that transaction, Rota-McLarty executed two contracts with Easterns. The first was a Buyer’s

Order, which provides the terms of the sale and contains an

agreement to arbitrate disputes.

The second was a Retail Installment Sale Contract

("RISC"), which does not contain an arbitration provision.

The RISC provides the financing terms for Rota-McLarty’s

loan and information about repossession rights and procedures. Additionally, the RISC contains an integration clause,

which states: "This contract contains the entire agreement

between you and us relating to this contract. Any change to

this contract must be in writing and we must sign it. No oral

changes are binding." J.A. 19. Santander pre-approved the

financing terms, and Easterns assigned the RISC to Santander

immediately after the sale.

Rota-McLarty returned the car, which she claimed was

defective, to Easterns’s lot in Maryland, having never made

a payment on her loan. Santander sought collection of the outstanding debt after repossessing and selling the car at a loss.

II.

Rota-McLarty filed a putative class action in state court

against Santander on March 9, 2010, alleging violations of

various Maryland consumer protection laws for undisclosed

finance charges and other unfair business practices. On April

13, 2010, Santander removed the complaint to federal court

on the basis of diversity. Santander filed an answer the next

day, and within a month the parties had agreed on a bifurcated

discovery schedule, whereby the first stage would focus on

the issue of hidden finance charges, with class and other discovery to follow. During the brief discovery period that

ensued, Santander took Rota-McLarty’s deposition on both

stage one and stage two issues, and Rota-McLarty took Easterns’s deposition and sought production of various docuROTA-MCLARTY v. SANTANDER CONSUMER USA 3
ments. One such document was a letter Easterns had received

from Santander in 2007, detailing the terms of the RISC

assignment, which Rota-McLarty asserts supports her hidden

finance charge allegations.2

On September 30, 2010, Santander moved to compel nonclass arbitration of Rota-McLarty’s claims and to stay the proceedings in federal court. Santander claimed the delay in

seeking arbitration was caused by uncertainty in the law

regarding whether it would be forced into class arbitration,

which was clarified by the Supreme Court’s decision in StoltNielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. ___, 130

S.Ct. 1758, 1775 (2010) ("[A] party may not be compelled

under the FAA to submit to class arbitration unless there is a

contractual basis for concluding that the party agreed to do

so."). Santander waited longer, until a district court had

applied Stolt-Nielsen in the consumer context, to file its motion.3

In denying Santander’s motion, the district court deemed

the underlying transaction purely intrastate in nature, and

applied the Maryland Uniform Arbitration Act (the

"MUAA"), Md. Code Ann., Cts. & Jud. Proc. §§ 3-201 et

seq., rather than the Federal Arbitration Act (the "FAA"), 9

U.S.C. §§ 1-14. Concluding that the Buyer’s Order and RISC

must be read together despite an integration provision in the

latter, the court found there was an enforceable arbitration

agreement between Rota-McLarty and Santander, which

encompassed her claims. Nonetheless, the court denied San2

In the letter, Santander states it is sending a check to Easterns for RotaMcLarty’s RISC for $15,143.07, even though the total "amount purchased" was $19,261.00. J.A. 109. Rota-McLarty argues this amount

reveals a hidden finance charge, but Santander disagrees, asserting that the

disparity represents an "acquisition fee" that need not be disclosed under

Maryland law and, further, had already been produced by Santander in

discovery. 

3Specifically, Santander relied on Jock v. Sterling Jewelers, Inc., 725 F.

Supp. 2d 444, 450 (S.D.N.Y. 2010), which was later reversed, 646 F.3d

113 (2d Cir. 2011). 

4 ROTA-MCLARTY v. SANTANDER CONSUMER USA
tander’s motion on grounds that Santander had waived its

right to compel arbitration through unjustified delay and by

having participated significantly in discovery. Santander now

appeals.

III.

Santander argues that the district court erred in failing to

apply the FAA and in finding waiver. Rota-McLarty disagrees, and also contests the district court’s conclusion that a

binding arbitration agreement existed between the parties.

Before turning to the merits, however, we must first assure

ourselves of our jurisdiction over this appeal.

A.

Courts of appeal ordinarily may review only final decisions

of district courts. Wheeling Hosp., Inc. v. Health Plan of the

Upper Ohio Valley, Inc., 683 F.3d 577, 584 (4th Cir. 2012);

Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 627 (2009);

see also 28 U.S.C. § 1291. Although the district court’s order

denying Santander’s motion to compel arbitration and stay

proceedings is not a final decision, we may nevertheless exercise appellate jurisdiction if the order falls within an exception to the final judgment rule established by the FAA.

The FAA provides for appeals from, inter alia, orders "refusing a stay of any action under section 3 of this title,"4

 or

"denying a petition under section 4 of this title5 to order arbitration to proceed." 9 U.S.C. § 16(a)(1)(A)-(B). Congress’s

purpose in creating appellate jurisdiction for these orders was

to effectuate a "strong policy favoring arbitration" through

4Section 3 of the FAA allows the district court to stay proceedings

pending arbitration, upon application of one of the parties. See 9 U.S.C.

§ 3. 

5Section 4 allows a party to petition the district court for an order directing arbitration to proceed pursuant to an agreement. See 9 U.S.C. § 4. 

ROTA-MCLARTY v. SANTANDER CONSUMER USA 5
appeal rules, whereby "an order that favors litigation over

arbitration . . . is immediately appealable, even if interlocutory in nature." Stedor Enters., Ltd. v. Armtex, Inc., 947 F.2d

727, 730 (4th Cir. 1991).

Here, our determination of whether the district court’s

order falls within an exception comprises two steps. We must

first decide whether the transaction is one that involves interstate commerce to which the FAA applies.6

 If so, we then

examine whether Santander’s motion did, in fact, adequately

invoke §§ 3 or 4, thus giving us appellate jurisdiction under

§ 16 of the FAA.

1.

Turning first to the question of whether the parties’ agreement falls within the scope of the FAA, we note that the reach

of the statute is broad. It operates to enforce an arbitration

provision included in "a contract evidencing a transaction

involving commerce." 9 U.S.C. § 2; see also 13D Wright,

Miller, & Cooper, Federal Practice and Procedure § 3569

(2008), where "commerce" means "commerce among the several States," 9 U.S.C. § 2. The Supreme Court has interpreted

this provision as exercising the full scope of Congress’s

commerce-clause power. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273-77 (1995). Moreover, the term "evidencing a transaction" requires only that the transaction in

fact involved interstate commerce, not that the parties contemplated it as such at the time of the agreement. Id. at 281.

6Application of the FAA requires demonstration of four elements: "(1)

the existence of a dispute between the parties, (2) a written agreement that

includes an arbitration provision which purports to cover the dispute, (3)

the relationship of the transaction, which is evidenced by the agreement,

to interstate or foreign commerce, and (4) the failure, neglect or refusal of

the defendant to arbitrate the dispute." Whiteside v. Teltech Corp., 940

F.2d 99, 102 (4th Cir. 1991); see also Adkins v. Labor Ready, Inc., 303

F.3d 496, 500-01 (4th Cir. 2002). Because only the third element is in dispute here, we omit discussion of the others. 

6 ROTA-MCLARTY v. SANTANDER CONSUMER USA
The district court’s analysis of whether the underlying

transaction is solely intrastate in nature consists of one sentence: "There is no indication that Rota-McLarty’s transaction

involved interstate commerce, and the parties agree that

Maryland law governs their relationship." J.A. 129. We are

constrained to disagree.

The underlying transaction here is simply a consumer credit

arrangement between a citizen of one state and a financing

company in another. Although diversity of citizenship—or

lack thereof—is not by itself enough to determine the nature

of a transaction, see Maxum Founds., Inc. v. Salus Corp., 779

F.2d 974, 978 n.4 (4th Cir. 1985) ("[T]he mere circumstance

of diversity of citizenship between [the parties] is not sufficient to command the application of the [FAA]."), we need

not rely solely on it here. The financing, which originated

from a foreign state, was integral to Rota-McLarty’s purchase

of the used car from Easterns. We agree with sister circuits,

which have concluded that reliance upon funds from a foreign

source in a transaction is sufficient to implicate the FAA. See,

e.g., Jenkins v. First Am. Cash Advance of Georgia, 400 F.3d

868, 874-75 (11th Cir. 2005) ("payday loan" completed by a

Georgia consumer in the Georgia office of loan company

involved interstate commerce where the funds were approved

and disbursed by a national bank based in South Dakota).

Therefore, the FAA applies.

Our conclusion is bolstered by two additional factors. First,

we have held that the FAA does not impose a burden upon the

party invoking the FAA to put forth specific evidence proving

the interstate nature of the transaction. Maxum, 779 F.2d at

978 n.4 ("Where . . . the party seeking arbitration alleges that

the transaction is within the scope of the [FAA], and the party

opposing application of the [FAA] does not come forward

with evidence to rebut jurisdiction under the federal statute,

we do not read into the [FAA] a requirement of further proof

by the party invoking the federal law."). Santander has made

the requisite initial showing, which Rota-McLarty has failed

ROTA-MCLARTY v. SANTANDER CONSUMER USA 7
to rebut. Indeed, she admits "the interstate nature of the transaction embodied in the RISC . . . should be hardly controversial," Appellee’s Br. at 9, and we agree.7

Second, in deciding to apply the FAA, we need not identify

any specific effect upon interstate commerce, so long as "in

the aggregate the economic activity in question would represent ‘a general practice . . . subject to federal control.’" Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56-57 (2003)

(citation omitted). We agree with Santander that "the broad

impact of consumer automobile lending on the national economy" is evident. Appellant’s Br. at 28; cf. Citizen’s Bank, 539

U.S. at 58 ("[W]ere there any residual doubt about the magnitude of the impact on interstate commerce caused by the particular economic transactions in which the parties were

engaged, that doubt would dissipate upon consideration of the

‘general practice’ those transactions represent. No elaborate

explanation is needed to make evident the broad impact of

commercial lending on the national economy or Congress’s

power to regulate that activity pursuant to the Commerce

Clause." (internal citation omitted)).

7Rota-McLarty contends that because the Buyer’s Order contains a

Maryland choice-of-law provision, Maryland law must govern the arbitration provision as well. See J.A. 17 ("This Agreement shall be governed

and controlled in accordance with the laws of the State of Maryland.")

Rota-McLarty’s argument misunderstands several points of law. Unquestionably, a contract’s general choice-of-law provision does not displace

federal arbitration law if the contract involves interstate commerce. See

Porter v. Hayden Co. v. Century Indem. Co., 136 F.3d 380, 382 (4th Cir.

1998) ("The Supreme Court has . . . squarely rejected the argument that

a federal court should read a contract’s general choice-of-law provision as

invoking state law of arbitrability and displacing federal arbitration law.");

Maxum, 779 F.2d at 978. Thus, while the general choice-of-law provision

invokes Maryland substantive law for issues of contract interpretation—including the validity, enforceability, or revocability of the arbitration agreement—and for Rota-McLarty’s consumer protection claims, it is

irrelevant to the decision whether the FAA applies. 

8 ROTA-MCLARTY v. SANTANDER CONSUMER USA
For these reasons, we find that the underlying transaction

relates to interstate commerce, and that the district court erred

in declining to apply the FAA. We are thus assured that federal law supplies not only our procedural framework, but also

the substantive law regarding arbitration. Preston v. Ferrer,

552 U.S. 346, 349 (2008).

2.

We next address the narrower issue of whether Santander’s

motion adequately invoked §§ 3 or 4 of the FAA so as to

create appellate jurisdiction under the statute’s exception to

the final judgment rule. Guided by our precedent in Wheeling,

we find that it did.

Consonant with the approach taken by our sister circuits,

Wheeling held that the proper inquiry focuses on substance

rather than nomenclature. 683 F.3d at 586. In other words, we

look to whether a motion evidences a clear intention to seek

enforcement of an arbitration clause rather than on whether it

adhered to a specific form or explicitly referenced §§ 3 or 4.

Id. Of course, "[t]he first, simplest, and surest way to guarantee appellate jurisdiction under § 16(a) is to caption the

motion in the district court as one brought under FAA §§ 3 or

4." Id. (quoting Conrad v. Phone Directories Co., 585 F.3d

1376, 1385 (10th Cir. 2009)). But requiring such a caption

"would violate the spirit of notice pleading embodied in our

Federal Rules of Civil Procedure." Conrad, 585 F.3d at 1385.

Instead, we

look beyond the caption to the essential attributes of

the motion itself. The goal of this inquiry is to determine whether it is plainly apparent from the four

corners of the motion that the movant seeks only the

relief provided for in the FAA, rather than any other

judicially-provided remedy.

Id.

ROTA-MCLARTY v. SANTANDER CONSUMER USA 9
Specifically, in examining the four corners of the motion,

our focus is on the relief requested. If the essence of the

requested relief "‘is that the issues presented be decided

exclusively by an arbitrator and not by any court,’" the denial

of that motion is appealable under § 16. Wheeling, 683 F.3d

at 585 (citation omitted). If, however, the requested relief

would be "‘a judicial remedy that is inconsistent with the

position that the issues involved may be decided only by the

arbitrator,’" then the motion should no longer be viewed as

"proceeding exclusively under the FAA," and interlocutory

review under § 16 is not proper. Id. (citation omitted).

Guided by Wheeling, we conclude the denial of Santander’s

motion is immediately appealable. Although the caption—"motion to compel arbitration and stay proceedings"—does not specifically reference §§ 3 or 4, it clearly

invokes the relief provided in those sections. Further, Santander’s memorandum in support of that motion asks the court to

"grant Santander’s motion, compel non-class arbitration of

Rota-McLarty’s claims, and stay all other aspects of this

action pending further order of the Court." J.A. 95. It does

not, by contrast, request any "‘judicial remedy that is inconsistent with the position that the issues involved may be

decided only by the arbitrator.’" Wheeling, 683 F.3d at 586

(citation omitted). Rota-McLarty has not pointed to any

authority other than the FAA upon which Santander could

have intended to rely in seeking to compel arbitration and stay

litigation, much less shown how the relief Santander sought

is inconsistent with the position that Rota-McLarty’s claims

must be decided by an arbitrator.

For these reasons, we find that the four corners of Santander’s motion make it abundantly clear Santander sought

enforcement of the arbitration agreement. Denial of that

motion is therefore immediately appealable.

B.

Turning now to the substantive issues on appeal, we examine whether a valid arbitration agreement exists between the

10 ROTA-MCLARTY v. SANTANDER CONSUMER USA
parties, and, if so, whether Santander was in default of its

right to enforce that agreement.

1.

The question of whether an enforceable arbitration agreement exists between Rota-McLarty and Santander is a matter

of contract interpretation governed by state law, which we

review de novo. FindWhere Holdings, Inc. v. Sys. Env’t

Optimization, LLC, 626 F.3d 752, 755 (4th Cir. 2010).

We must first determine whether Santander, as an assignee

only to the RISC, which contains an integration clause providing that it is the complete agreement between the parties, and

not the Buyer’s Order, which includes the arbitration language, could invoke arbitration. Relying on Maryland cases

instructing courts to look to the intent of the parties to determine the preclusive effect of an integration clause, the district

court found that the circumstances surrounding the transaction

here indicated that the parties did not intend the RISC to be

a final and complete integration of their agreement. Rather,

they intended that the two agreements should be interpreted

together. Further, the court concluded that Rota-McLarty’s

claims fell within the scope of the arbitration provision. RotaMcLarty challenges both conclusions. We consider each in

turn.

a.

With respect to the integration clause, Rota-McLarty essentially repeats her arguments before the district court.8

 She

8Rota-McLarty does advance a novel theory in support of integration on

appeal, premised on Md. Code Regs. § 11.12.01.15, which provides that

"every vehicle sales contract or agreement shall be evidenced by an instrument in writing containing all of the agreements of the parties." See

Appellee’s Br. at 19. She seems to argue that the regulation requires one

document by itself to constitute the parties’ agreement, and thus we must

read the Buyer’s Order alone. Even if this argument is not waived, RotaMcLarty fails to provide any authority for her interpretation of the cited

regulation, nor for the proposition that this regulation supplants an entire

established body of Maryland law governing contract interpretation. 

ROTA-MCLARTY v. SANTANDER CONSUMER USA 11
relies heavily on Hartford Accident & Indem. Co. v. Scarlett

Harbor Assocs., Ltd., 695 A.2d 153 (Md. 1997), which she

asserts "cannot be distinguished on any principled basis" from

the instant matter. Appellee’s Br. at 17. In that case, the court

examined two contracts. The first, between a condominium

developer and a construction contractor, contained an arbitration provision, while the second, the contractor’s performance

bond with a bonding company, did not. The court declined to

allow the bonding company to enforce the arbitration provision contained in the construction contract, even though the

bond incorporated that contract by reference. Hartford, 695

A.2d at 155.

We disagree with Rota-McLarty that the circumstances in

that case mirror those in the case at hand. Far from indistinguishable, Hartford is inapposite because Santander does not

rely on language in the RISC, but instead points to language

in the Buyer’s Order itself, which states that it applies to the

assignee of the RISC, including several times in the arbitration provision.9

 Thus, we do not have the same concerns as

the court in Hartford that the parties did not intend the arbitration provision, specifically, to govern their agreement.

The facts in this case support the district court’s finding

that the Buyer’s Order and RISC were made as part of a single transaction, and should be interpreted together under

Maryland law. See Shoreham Developers, Inc. v. Randolph

Hills, Inc., 235 A.2d 735, 739 (Md. 1967) (explaining that the

coverage of an integration clause is a matter of interpretation,

and does not "exclude reading the instruments together

[where] the parties did not intend the sales contract standing

9For example, the arbitration provision states: "The parties understand

that they have a right or opportunity to litigate disputes through a Court,

but that they prefer to resolve their disputes through arbitration, except

that the Dealer (or the Assignee of any Retail Installment Sales Contract)

may proceed with Court action in the event the Purchaser fails to pay any

sums due under the Agreement." J.A. 18. 

12 ROTA-MCLARTY v. SANTANDER CONSUMER USA
by itself to be a final and complete integration of the agreed

upon terms"); Jaguar Land Rover North America, LLC v.

Manhattan Imported Cars, Inc., 738 F. Supp. 2d 640, 648 (D.

Md. 2010) ("Whether an agreement is integrated and the

effect of an integration clause are preliminary questions of

interpretation determined by the court." (citing Shoreham)),

aff’d, 477 Fed. App’x 84 (4th Cir. 2012). The Buyer’s Order,

which is expressly "conditioned upon approval of [the] retail

installment sale contract," J.A. 132, and defines the "Agreement" collectively with other documents made in connection

with the Buyer’s Order, is insufficient on its own to "explain

the full extent of the parties’ obligations," Jaguar Land Rover,

738 F. Supp. 2d at 649. For these reasons, we find RotaMcLarty has failed to establish that the RISC’s integration

clause prevents reading both contracts together as a single

agreement.

b.

Rota-McLarty’s second argument, that Santander should

not be able to enforce the arbitration agreement because it

contains a carve-out for assignees of the RISC, is similarly

unconvincing.10 The flaw in her interpretation of the arbitration clause becomes evident when the carve-out is viewed in

the context of the arbitration clause:

A Dispute is any question as to whether something

must be arbitrated, as well as . . . any purely monetary claim greater than $1,000 in the aggregate,

whether contract, tort, or other, arising from (1) the

negotiation of and terms of the Buyer’s Order, (2)

any service contract or Insurance product, or (3) any

10Rota-McLarty also argues that the carve-out renders the promise illusory and thus that the agreement is unenforceable for lack of mutuality.

However, because we ultimately reject her interpretation of the carve-out,

we need not address her mutuality argument, which depends upon reading

the clause to exempt Santander from arbitration. 

ROTA-MCLARTY v. SANTANDER CONSUMER USA 13
retail installment sale contract or lease (but this arbitration provision does not apply to and shall not be

binding on any assignee thereof).

J.A. 18 (enumeration added). Basic principles of contract

interpretation instruct us to look first to the plain meaning of

the contract’s terms, and also to give meaning to each word

used and avoid constructions that render language meaningless, superfluous, or contradictory. See DIRECTV, Inc. v. Mattingly, 829 A.2d 626, 637 (Md. 2003).

Here, the parenthetical phrase that constitutes the carve-out

follows, and modifies, a list of three types of monetary claims

that are subject to arbitration. The parenthetical exempts the

forced arbitration of any "purely monetary claim greater than

$1,000" by an assignee of that claim. It does not pertain to

assignees of the RISC in particular; rather, it indicates that a

person to whom an otherwise-qualifying monetary claim has

been assigned cannot enforce arbitration. Santander is not the

assignee of any monetary claim, but instead is the assignee of

the entire agreement embodied in the RISC. The interpretation advanced by Rota-McLarty not only ignores the structure

of the sentence containing the carve-out, but it also operates

at odds with the remainder of the arbitration provision, which

contemplates the binding nature of the agreement on Santander by equating the "Dealer" and the "assignee of any [RISC]"

in several places. See, e.g., J.A. 18 ("[A]ll disputes . . . shall

be resolved by binding arbitration by one arbitrator located in

the Dealer’s area in the state of Maryland selected by the

Dealer (or the assignee of any [RISC]) with the consent of the

Purchaser."). We thus find nothing in the language of the arbitration provision to indicate it was not intended to be enforceable by Santander as assignee of the RISC.

2.

Finally, we examine the district court’s finding that Santander waived its right to enforce the arbitration agreement. We

14 ROTA-MCLARTY v. SANTANDER CONSUMER USA
review the district court’s decision to deny Santander’s arbitration request de novo, with deference to its underlying factual findings, Forrester v. Penn Lyon Homes, Inc., 553 F.3d

340, 342 (4th Cir. 2009), and conclude that the court made

several errors.

Applying Maryland arbitration law, the district court found

that whether a party has waived its right to arbitrate depends

on "the extent of its participation in judicial proceedings,

including whether an answer has been filed; whether there

was a legitimate reason for the participation; and whether the

delay in seeking arbitration prejudiced the other party." J.A.

137. Additionally, the court proclaimed that the "‘belated

insistence on arbitration [that] has all the markings of a simple

strategic decision’ is improper." Id. (quoting Abramson v.

Wildman, 964 A.2d 703, 710 (Md. Ct. Spec. App. 2009)). The

district court then concluded that Santander had waived its

right to arbitrate for four reasons: (1) Santander’s delay in

moving to compel arbitration; (2) Santander’s participation in

"discovery about Rota-McLarty’s allegations of hidden

finance charges, which included exchanging hundreds of

pages of documents, serving and responding to interrogatories, and taking Rota-McLarty’s deposition on all allegations," J.A. 138; (3) Santander’s strategic decision based on

its fear that class discovery would have been compelled prior

to Stolt-Nielsen "is not a legitimate reason for engaging in litigation rather than immediately seeking arbitration," id.; and

(4) Santander’s failure to rebut Rota-McLarty’s contention

that Santander had delayed in order to use litigation to "fully

evaluate [Rota-McLarty’s] case," id. We must reject the district court’s reliance on each of these findings, for the reasons

that follow.

As a threshold matter, we note the district court erred by

applying the wrong law. Under the FAA, a party may lose its

right to compel arbitration if it "is in default in proceeding

with such arbitration." 9 U.S.C. § 3. This principle of "default" is akin to waiver, but not identical. Unlike some waiver

ROTA-MCLARTY v. SANTANDER CONSUMER USA 15
doctrines, "the circumstances giving rise to a statutory default

are limited and, in light of the federal policy favoring arbitration, are not to be lightly inferred," Maxum, 779 F.2d at 981,

and the party opposing arbitration bears a heavy burden to

prove default, Am. Recovery Corp. v. Computerized Thermal

Imaging, Inc., 96 F.3d 88, 95 (4th Cir. 1996).11

Generally, a litigant defaults on its right to invoke the FAA

where it "‘so substantially utiliz[es] the litigation machinery

that to subsequently permit arbitration would prejudice the

party opposing the stay.’" Forrester, 553 F.3d at 343 (citation

omitted). "Where a party fails to demand arbitration during

pretrial proceedings, and, in the meantime, engages in pretrial

activity inconsistent with an intent to arbitrate, the party later

opposing a motion to compel arbitration may more easily

show that its position has been compromised, i.e., prejudiced." Fraser v. Merrill Lynch Pierce, Fenner & Smith, Inc.,

817 F.2d 250, 252 (4th Cir. 1987) (internal quotation marks

omitted). The dispositive determination is whether the opposing party has suffered actual prejudice. Microstrategy, Inc. v.

Lauricia, 268 F.3d at 249 (citing Fraser, 817 F.2d at 252); see

also Patten Grading & Paving, Inc. v. Skanska USA Bldg.,

Inc., 380 F.3d 200, 205 (4th Cir. 2004). Two factors specifically inform our inquiry into actual prejudice: (1) the amount

of the delay; and (2) the extent of the moving party’s trialoriented activity. Microstrategy, 268 F.3d at 249. Notably, the

moving party’s reason for delay is not relevant to the default

inquiry under our precedent.12 We consider each of the two

factors in turn.

11Accordingly, we employ our recent approach of substituting the term

"default" for the term "waiver" in the FAA context, in order "to achieve

uniformity and prevent confusion." Wheeling, 683 F.3d at 586 n.3. 

12We are not unsympathetic to Rota-McLarty’s position that parties

should not be allowed to game the system and delay seeking arbitration

to see how things go in federal court and thereby get "a second bite at the

apple." In re Mirant Corp., 613 F.3d 584, 590 (5th Cir. 2010). As some

of our sister circuits have pointed out in cases cited by Rota-McLarty,

16 ROTA-MCLARTY v. SANTANDER CONSUMER USA
a.

First, in comparison to our decisions considering the issue,

the length of delay in this case was relatively short. At most,

Santander waited six and a half months—from the date RotaMcLarty filed her complaint in state court—to file its motion

to compel arbitration and stay proceedings in federal court.13

We have previously held that a delay of several months, without more, is insufficient to demonstrate the opposing party

there are many reasons to favor the earliest possible selection of forum,

including efficiency, preservation of judicial resources, and fairness. See,

e.g., Cabinetree of Wisconsin v. Kraftmaid Cabinetry, Inc., 50 F.3d 388,

391 (8th Cir. 1995) (noting that a party’s desire to "weigh its options" in

deciding whether to seek to compel arbitration while the litigation goes on

is "the worst possible reason for delay" and amounts to "want[ing] to play

heads I win, tails you lose"); Fisher v. A.G. Becker Paribas, Inc., 791 F.2d

691, 694 (9th Cir. 1986) (default may be established if the opposing party

can show: "(1) knowledge of an existing right to compel arbitration; (2)

acts inconsistent with that existing right; and (3) prejudice to the party

opposing arbitration resulting from such inconsistent acts"). However, in

keeping with the strong policy in favor of arbitration established by the

FAA, the Fourth Circuit has not expanded the default analysis to include

consideration of a party’s knowledge or motive. And, even under such a

test, Rota-McLarty has failed to establish Santander was attempting to

game the system, such as by seeking arbitration after the district court’s

unfavorable disposition of a motion or discovery dispute. 

13In its reply brief, Santander calculated its delay in seeking arbitration

as "approximately six month[s]," Reply Br. at 20, but at oral argument

urged us not to "start the clock" until the date it received the district

court’s decision applying Stolt-Nielsen to consumer transactions. We

reject that late-asserted proposition as unsupported by Fourth Circuit precedent. See Forrester, 553 F.3d at 343 (delay in seeking arbitration began

when the moving party was on notice of facts that should have made it

aware the opposing party intended to rely on a theory placing its claim

within the scope of the arbitration agreement); Patten, 380 F.3d at 205

(using date moving party became aware of arbitration clause as starting

point); Fraser, 817 F.2d at 252 (declining to excuse part of delay based

on moving party’s argument that "a motion to compel would have been

futile" prior to a change in the law); Maxum, 779 F.2d at 982 (calculating

delay starting from the filing of the operative second amended complaint).

ROTA-MCLARTY v. SANTANDER CONSUMER USA 17
suffered actual prejudice. See, e.g., Patten, 380 F.3d at 205

(no prejudice inherent in four-month delay); Maxum, 779 F.2d

at 982 (same, with three-month delay); cf. Forrester, 553 F.3d

at 343-44 (default proper where litigation had proceeded for

over two years before the moving party sought arbitration);

Fraser, 817 F.2d at 252-53 (same, with four-year delay).

Here, nothing in the record supports a finding that RotaMcLarty was prejudiced by the length of the delay itself. Her

general assertion that she "committed substantial resources to

the case on the premise that the Court would have an opportunity to rule on a motion for class certification," Appellee’s Br.

at 29, is both unsubstantiated and unconvincing. Although

incurring significant expense as a result of extended litigation

can be part of actual prejudice, such cases usually involve

resources expended specifically in response to motions filed

by the party who later seeks arbitration. See, e.g., Fraser, 817

F.2d at 252 (prejudice found in part because opposing party

"had to respond to a number of potentially damaging motions,

including a motion for partial summary judgment and three

motions to dismiss.") And where, as here, Rota-McLarty has

provided no evidentiary support for her claimed "significant

expense," this argument fails entirely. Patten, 380 F.3d at 208

(declining to base prejudice on costs incurred where the

opposing party failed to adequately prove the expense). Consequently, we conclude the district court erred to the extent it

based its determination of default on the length of delay.14

b.

The second factor in our prejudice inquiry looks to the

nature and extent of Santander’s litigation activities. Here,

14The district court described the length of Santander’s delay as "six

months after Rota-McLarty sued, and five months after filing an answer."

J.A. 137. Thus, it was not the district court’s factual finding that was erroneous, but instead its legal conclusion that the length of delay weighed in

favor of finding prejudice. 

18 ROTA-MCLARTY v. SANTANDER CONSUMER USA
Santander "utilized the litigation machinery" in a

few—mostly minimal—ways: it removed the complaint to

federal court, filed an answer, proposed a bifurcated discovery

plan, took Rota-McLarty’s deposition on both phase one and

phase two issues, and waited for clarity in the law in order to

avoid class arbitration. No dispositive motions were filed.15

For her part, Rota-McLarty engaged in some discovery as

well, which resulted in Easterns’s production of a document

that Rota-McLarty styles as a smoking gun proving her claim

of an undisclosed finance charge. Rota-McLarty asserts these

activities support a finding of prejudice because Santander

proposed a two-phase plan that limited her discovery rights,

while ignoring those limitations itself by taking her deposition

on both phases, and exploiting pre-trial discovery not available in arbitration.

Like the district court, Rota-McLarty fails to tether her discussion of Santander’s litigation activities to any actual prejudice. She does not explain how either her deposition or the

document produced by Easterns would be to Santander’s

advantage, or unavailable, in arbitration. Neither the district

court nor Rota-McLarty specified what aspect of RotaMcLarty’s litigation strategy was revealed,16 or what benefit

Santander has gained through litigation at Rota-McLarty’s

expense, thereby prejudicing her. The mere participation in

discovery is not sufficient to indicate default. See Maxum, 779

F.2d at 982 (finding opposing party was not prejudiced by

moving party’s attendance at depositions, even though it may

have benefited for purposes of later arbitration proceeding,

and "declin[ing] to create a rule that would require a party

15Whether a party was required to respond to dispositive motions may

factor into our prejudice analysis, although we have "counsel[ed] against

adopting a bright line rule that the mere filing of a dispositive motion on

the merits is inherently prejudicial." Wheeling, 683 F.3d at 590. 

16The district court, still without explanation, went so far as to accept

Rota-McLarty’s apparently uncontested assertion that Santander had been

able "to fully evaluate her case." J.A. 138. 

ROTA-MCLARTY v. SANTANDER CONSUMER USA 19
seeking arbitration to avoid a finding of default by ignoring

court-ordered discovery deadlines"). Consequently, RotaMcLarty has failed to establish the prejudice necessary to justify finding Santander defaulted on its right to enforce the

arbitration agreement under the FAA. Rota-McLarty’s claims

should be sent to arbitration pursuant to the parties’ agreement.

IV.

For the foregoing reasons, the order of the district court is

REVERSED.

20 ROTA-MCLARTY v. SANTANDER CONSUMER USA