PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SAMUEL D. MURIITHI, 

Plaintiff-Appellee,

and

KEVIN A. GADSON; OKIERIETA O.

ENAJEKPO,

Plaintiffs,

v.

SHUTTLE EXPRESS, INC.,  No. 11-1445

Defendant-Appellant,

and

SUPERSHUTTLE INTERNATIONAL, INC.;

SHUTTLE EXPRESS CORPORATION;

VEOLIA TRANSPORTATION,

INCORPORATED; VEOLIA

ENVIRONMENT SA,

Defendants. 

Appeal from the United States District Court

for the District of Maryland, at Greenbelt.

Alexander Williams, Jr., District Judge.

(8:10-cv-01057-AW)

Argued: January 29, 2013

Decided: April 1, 2013

Before DAVIS and KEENAN, Circuit Judges, and

John A. GIBNEY, Jr., United States District Judge for the

Eastern District of Virginia, sitting by designation.
Vacated and remanded by published opinion. Judge Keenan

wrote the opinion, in which Judge Davis and Judge Gibney

joined.

COUNSEL

ARGUED: Christopher A. Parlo, MORGAN LEWIS &

BOCKIUS, LLP, New York, New York, for Appellant. John

Michael Singleton, Sr., Lutherville, Maryland, for Appellee.

ON BRIEF: Russell R. Bruch, MORGAN LEWIS & BOCKIUS, LLP, Washington, D.C.; Melissa C. Rodriguez, MORGAN LEWIS & BOCKIUS, LLP, New York, New York, for

Appellant. 

OPINION

BARBARA MILANO KEENAN, Circuit Judge:

In this appeal, we consider the enforceability of an arbitration clause included in a franchise agreement between the

plaintiff, Samuel Muriithi, and the defendant, Shuttle Express,

Inc. The district court refused to compel arbitration based on

three provisions in the franchise agreement that the court

found were unconscionable: (1) a class action waiver; (2) a

requirement that the parties "split" arbitration fees; and (3) a

one-year limitations period for asserting claims arising under

the franchise agreement. Upon our review, we conclude that

the Supreme Court’s recent decision in AT&T Mobility LLC

v. Concepcion, 131 S. Ct. 1740 (2011), requires reversal of

the district court’s holding that the class action waiver was an

unconscionable contract provision. We further conclude that

the district court erred in holding that the other two challenged provisions also rendered the arbitration clause unconscionable. Accordingly, we vacate the district court’s

2 MURIITHI v. SHUTTLE EXPRESS, INC.
judgment and remand the case for entry of an order compelling arbitration of Muriithi’s claims.

I.

Samuel Muriithi was a driver for Shuttle Express, a passenger shuttle service, who provided transportation for passengers to and from the Baltimore–Washington International

Thurgood Marshall Airport. Muriithi alleges that Shuttle

Express misled him concerning the compensation he would

receive, inducing him to sign a Unit Franchise Agreement

with Shuttle Express in April 2007 (the Franchise Agreement). Muriithi also alleges that Shuttle Express improperly

classified him in the Franchise Agreement as an "independent

contractor" or "franchisee," rather than as an "employee," and

that, as a result, he is entitled to overtime pay and to compensation of at least the prevailing minimum wage required under

federal law. 

Asserting these grounds for relief, Muriithi initiated a collective action against Shuttle Express under the Fair Labor

Standards Act (FLSA), 29 U.S.C. §§ 201 through 219.1 In his

complaint, Muriithi also raised various Maryland state law

claims on behalf of all members of a purported class. Shuttle

Express moved to dismiss the complaint under Rule 12(b)(6)

of the Federal Rules of Civil Procedure, or to compel arbitration under the Federal Arbitration Act (FAA), 9 U.S.C. § 4.

The Franchise Agreement contains an arbitration clause,

which states in material part: 

1

Initially, Muriithi’s complaint included two other named plaintiffs,

who later withdrew from the case. Muriithi named several other corporate

entities as defendants, which were dismissed in a ruling not challenged on

appeal. Thus, the only remaining parties in the case are Muriithi and Shuttle Express. 

MURIITHI v. SHUTTLE EXPRESS, INC. 3
ARBITRATION; ATTORNEY’S FEES

Except as provided below, any controversy arising

out of this Agreement shall be submitted to the

American Arbitration Association at its offices in or

nearest to Baltimore, Maryland, for final and binding

arbitration in accordance with its commercial rules

and procedures which are in effect at the time the

arbitration is filed. The parties shall bear their own

costs including without limitation attorney’s fees,

and shall each bear one-half (1/2) of the fees and

costs of the arbitrator.

. . .

The parties acknowledge that their relationship is

unique and that there are and will be differences

from the relationships [Shuttle Express] may have

with other franchisees or licensees. Therefore, any

arbitration, suit, action or other legal proceeding

shall be conducted and resolved on an individual

basis only and not on a class-wide, multiple plaintiff,

consolidated or similar basis.

(individually, the fee-splitting clause and the class action

waiver; in its entirety, the Arbitration Clause). 

Also relevant to this appeal is the one-year limitations provision included in the Franchise Agreement, which states as

follows: 

STATUTE OF LIMITATIONS

The parties hereby acknowledge and agree that any

arbitration, suit, action or other proceeding relating

to this Agreement must be brought within one (1)

year after the occurrence of the act or omission that

4 MURIITHI v. SHUTTLE EXPRESS, INC.
is the subject of the arbitration, suit, action or other

legal proceeding. 

(the one-year limitations provision).2

In considering Shuttle Express’ motion to compel arbitration, the district court first addressed the issue whether Muriithi’s claims fall within the scope of the Arbitration Clause.

The court held that Muriithi’s FLSA and Maryland law claims

"arise out of" the Franchise Agreement and, thus, fall within

the scope of disputes covered by the parties’ agreement to

arbitrate. The court further concluded, however, that the Arbitration Clause is unenforceable based on three provisions in

the Franchise Agreement that the court found were unconscionable.

First, under the fee-splitting provision, the district court

found that the costs of arbitration would be "so prohibitively

expensive as to deter arbitration" at Muriithi’s request. Second, the district court held that the class action waiver and the

fee-splitting provision operate together to "prevent [Muriithi]

from fully vindicating [his] statutory rights." The court also

found that if "class actions are prohibited by the [Franchise

Agreement], the realistic alternative would be that no individual suits are brought given that the costs of each individual

arbitration has the potential to exceed any recovery." 

Third, the district court concluded that the one-year limitations provision governing all claims arising out of the Franchise Agreement also "operates to prevent [Muriithi] from

vindicating [his] statutory rights," because the FLSA affords

him at least a two-year period in which to assert his claims.

29 U.S.C. § 255(a). The district court thus determined that

2Pursuant to a choice of law clause, the parties agreed that Delaware

law governs all matters relating to the Agreement. There do not appear to

be any contested issues of state law in this appeal. Moreover, our analysis

in this case is based on controlling principles of federal law. 

MURIITHI v. SHUTTLE EXPRESS, INC. 5
because the Arbitration Clause was "so permeated by substantively unconscionable provisions," it could not be remedied

by severing the unconscionable parts. Accordingly, the court

denied Shuttle Express’ motion to compel arbitration.3 Shuttle

Express timely filed a notice of appeal. 

II.

We have jurisdiction over this appeal pursuant to 9 U.S.C.

§ 16(a)(1)(B), which authorizes an appeal from a district

court’s denial of a petition to compel arbitration brought

under Section 4 of the FAA. Shuttle Express challenges the

district court’s order refusing to compel arbitration, contending that: (1) under the Supreme Court’s holding in AT&T

Mobility LLC v. Concepcion, the class action waiver is not

unconscionable; (2) Muriithi failed to establish that he will

incur "prohibitive" arbitration costs under the fee-splitting

provision; and (3) the district court erred in holding as part of

the motion to compel arbitration that the one-year limitations

provision is unconscionable.4

A.

Upon petition of a party to an arbitration agreement, a district court may compel arbitration to enforce the parties’

agreement to arbitrate their disputes. 9 U.S.C. § 4; RotaMcLarty v. Santander Consumer USA, Inc., 700 F.3d 690,

696 n.5 (4th Cir. 2012). We review de novo a district court’s

denial of a motion to compel arbitration. Sydnor v. Conesco

Fin. Servicing Corp., 252 F.3d 302, 304-05 (4th Cir. 2001).

We also review de novo questions of state contract law concerning the validity of the parties’ arbitration agreement.

Rota-McLarty, 700 F.3d at 699. 

3The district court made several other rulings regarding Shuttle Express’

Rule 12(b)(6) motion that are not relevant to this appeal. 

4We note that the district court resolved the question regarding the

enforceability of the class action waiver without the benefit of Concepcion, which was issued after the district court entered its order. 

6 MURIITHI v. SHUTTLE EXPRESS, INC.
Section 2 of the FAA provides that arbitration agreements

"shall be valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the revocation of any

contract."5 9 U.S.C. § 2. We apply ordinary state law principles governing the formation of contracts, including principles

concerning the "validity, revocability, or enforceability of

contracts generally." Hill v. Peoplesoft USA, Inc., 412 F.3d

540, 543 (4th Cir. 2005) (quoting Perry v. Thomas, 482 U.S.

483, 493 n.9 (1987)). We also apply the federal substantive

law of arbitrability, which governs all arbitration agreements

encompassed by the FAA. Id. (citing Moses H. Cone Mem’l

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).

B.

A court may compel arbitration of a particular dispute only

when the parties have agreed to arbitrate their disputes and the

scope of the parties’ agreement permits resolution of the dispute at issue. United Steelworkers of Am. v. Warrior & Gulf

Navigation Co., 363 U.S. 574, 582 (1960); see also UBS Fin.

Servs., Inc. v. Carilion Clinic, 706 F.3d 319, 324 n.2 (4th Cir.

2013). The issue whether a dispute is arbitrable presents primarily a question of contract interpretation, requiring that we

give effect to the parties’ intentions as expressed in their

agreement. Wachovia Bank, N.A. v. Schmidt, 445 F.3d 762,

767 (4th Cir. 2006). Any uncertainty regarding the scope of

arbitrable issues agreed to by the parties must be resolved in

5Congress enacted the FAA to "reverse the longstanding judicial hostility to arbitration agreements." Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20, 24 (1991); see also Am. Gen. Life & Acc. Ins. Co. v. Wood,

429 F.3d 83, 87 (4th Cir. 2005) (the FAA was "a response to hostility of

American courts to the enforcement of arbitration agreements") (citation

omitted). To effectuate that legislative purpose, Section 2 is the "primary

substantive provision" of the FAA, Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), and "Section 2 embodies the

national policy favoring arbitration and places arbitration agreements on

equal footing with all other contracts," Buckeye Check Cashing, Inc. v.

Cardegna, 546 U.S. 440, 443 (2006). 

MURIITHI v. SHUTTLE EXPRESS, INC. 7
favor of arbitration. Moses H. Cone, 460 U.S. at 24-25; see

also Hill, 412 F.3d at 543.

In the Franchise Agreement, the parties agreed that "any

controversy arising out of this [a]greement shall be submitted

to" arbitration. Muriithi’s claims under the FLSA and the

Maryland Wage and Hour Law, Md. Lab. & Empl. Code

§§ 3-401 to 3-431, are based on his allegation that he improperly was classified as an "independent contractor" or "franchisee," rather than as an "employee." This dispute regarding his

classification derives from the language of the Franchise

Agreement, which in its section defining the "Relationship of

Parties" identifies Muriithi as "independent contractor,"

"franchisee," and "independent owner of [his] business."

Additionally, in his claim under the Maryland Franchise Registration and Disclosure Law, Md. Code Bus. Reg. §§ 14-201

to 14-233, Muriithi alleges that Shuttle Express failed to

inform him about the numerous costs and fees, which were set

forth in the Franchise Agreement. Therefore, although Muriithi’s claims are asserted under various provisions of federal

and state law, the claims plainly arise out of the Franchise

Agreement and fall within the scope of the Arbitration Clause.6

C.

We turn to address the enforceability of the class action

waiver. In its decision denying Shuttle Express’ motion to

compel arbitration, the district court identified the class action

waiver as one factor preventing Muriithi from fully vindicating his statutory rights. In the district court’s view, upon a

6The fact that Muriithi’s claims allege violations of federal and state

statutes, rather than breach of contract, does not affect the arbitrability of

those claims. See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79,

89 (2000) (stating that "we have recognized that federal statutory claims

can be appropriately resolved through arbitration, and we have enforced

agreements to arbitrate that involve such claims"); Adkins v. Labor Ready,

Inc., 303 F.3d 496, 506 (4th Cir. 2002) (FLSA claims "may properly be

resolved in mandatory arbitration proceedings"). 

8 MURIITHI v. SHUTTLE EXPRESS, INC.
prohibition of class actions, the only "realistic alternative

would be that no individual suits are brought given that the

costs of each arbitration has [sic] the potential to exceed any

recovery." 

Shuttle Express contends, among other things, that the district court’s refusal to enforce the class action waiver is "directly at odds" with the Supreme Court’s recent decision in

Concepcion, which held that "[r]equiring the availability of

classwide arbitration interferes with the fundamental attributes of arbitration and thus creates a scheme inconsistent

with the FAA." 131 S. Ct. at 1748. Thus, Shuttle Express

argues that the district court erred in holding that the class

action waiver rendered the Arbitration Clause unconscionable. 

In response, Muriithi argues that the holding in Concepcion

is inapposite because the law at issue in that case was based

on California state law, articulated in Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005), which held that class

action waivers in arbitration agreements are unconscionable.

Muriithi therefore contends that the decision in Concepcion is

limited in scope to the FAA’s preemption of state law on this

issue. We disagree with Muriithi’s arguments. 

The Supreme Court’s holding in Concepcion sweeps more

broadly than Muriithi suggests. In Concepcion, the Supreme

Court cautioned that the generally applicable contract defense

of unconscionability may not be applied in a manner that targets the existence of an agreement to arbitrate as the basis for

invalidating that agreement. 131 S. Ct. at 1746-47. Applying

that principle to the Discover Bank "rule" at issue, the Court

explained that state law cannot "stand as an obstacle to the

accomplishment of the FAA’s objectives," by interfering with

"the fundamental attributes of arbitration." 131 S. Ct. at 1748.

We recently discussed the holding in Concepcion in our

decision in Noohi v. Toll Bros., Inc., ___ F.3d ___, 2013 WL

MURIITHI v. SHUTTLE EXPRESS, INC. 9
680690, at *6 (4th Cir. Feb. 26, 2013).7

 We explained that the

holding "prohibited courts from altering otherwise valid arbitration agreements by applying the doctrine of unconscionability to eliminate a term barring classwide procedures." Id.

(citing Concepcion, 131 S. Ct. at 1750-53). Thus, contrary to

Muriithi’s contention, the Supreme Court’s holding was not

merely an assertion of federal preemption, but also plainly

prohibited application of the general contract defense of

unconscionability to invalidate an otherwise valid arbitration

agreement under these circumstances. The district court in the

present case, deciding the same issue of unconscionability

prior to Concepcion, reached the opposite conclusion.8

Accordingly, we conclude that the district court erred in holding that the class action waiver was unconscionable. 

7

In Noohi, we addressed the issue whether a Maryland rule, requiring

that an arbitration agreement be supported by mutual consideration irrespective whether the underlying contract was supported by mutual consideration, was preempted by the FAA. 2013 WL 680690, at *9, 11-12 (citing

Cheek v. United Healthcare of Mid-Atl., Inc., 835 A.2d 656 (Md. 2003)).

We held that the Maryland rule did not increase procedural formality or

risks to defendants, which were "primary concerns underlying Concepcion," nor did it involve, as in Concepcion, a state-law rule requiring class

arbitration. Id. at *11. We concluded that the Maryland rule was not preempted by the FAA. Id. at *12. 

8

In a case decided several years before Concepcion, we addressed a

related question whether Congress, in enacting the FLSA, provided a right

to class action relief that could not be waived. There, in Adkins v. Labor

Ready, Inc., 303 F.3d 496 (4th Cir. 2002), a plaintiff tried to avoid arbitration arguing that the arbitration clause, which included a class action

waiver, "foreclose[d] redress" of his federal statutory rights under the

FLSA. Id. at 502. We held that there was no indication "in the text, legislative history, or purpose of the FLSA that Congress intended to confer a

nonwaivable right to a class action under that statute." Id. at 503. Thus,

we concluded that the inability to pursue an FLSA claim as a member of

a class proceeding is by itself insufficient to override "the strong congressional preference for an arbitral forum." Id.

10 MURIITHI v. SHUTTLE EXPRESS, INC.
D.

We next consider the issue whether the district court erred

in holding that the fee-splitting provision imposed prohibitive

arbitration costs on Muriithi. Shuttle Express argues that

Muriithi did not meet his burden of showing prohibitive costs

under Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79

(2000), because he did not present sufficient evidence of: (1)

the cost of arbitration; (2) his ability to pay; and (3) the difference in cost between arbitration of his dispute and litigation.

See id. at 90-92. 

In response, Muriithi contends that the projected costs of

arbitrating his dispute render the Franchise Agreement unenforceable, because "it would always cost more to enforce the

agreement than to ignore clear violations" when a party’s

damages do not substantially exceed the expected cost of the

proceedings. We disagree with Muriithi’s arguments. 

In holding that the costs of arbitration in this case would be

prohibitive, the district court noted Muriithi’s argument that

the fees to the arbitrator, administration fees of the AAA, and

"various other fees," could reach a total cost of $5,600. Under

the fee-splitting provision, Muriithi would be required to bear

one-half of these expenses. 

The district court observed that Muriithi "project[s] that the

total amount of individual recovery will be far below potential

fees incurred in arbitration." Relying on information contained in Muriithi’s 2009 federal income tax return, the district court found that Muriithi had established that he was

unable to pay even the "conservative cost speculations" he

had presented regarding projected arbitration costs. Therefore,

the district court held that the fee-splitting provision rendered

the Arbitration Clause unconscionable. 

A fee-splitting provision can render an arbitration agreement unenforceable if, under the terms of the provision, an

MURIITHI v. SHUTTLE EXPRESS, INC. 11
aggrieved party must pay arbitration fees and costs "that are

so prohibitive as to effectively deny the employee access to

the arbitral forum." Bradford v. Rockwell Semiconductor Sys.,

Inc., 238 F.3d 549, 554 (4th Cir. 2001) (citing Green Tree,

531 U.S. at 90). We analyze issues regarding prohibitive arbitration costs on a case-by-case basis, focusing on a number of

factors that include the fees and costs of arbitration, the claimant’s ability to pay, the value of the claim, and the difference

in cost between arbitration and litigation. Id. at 556. However,

the party seeking to invalidate an arbitration agreement on

this basis bears the "substantial" burden of showing a likelihood of incurring prohibitive arbitration costs. In re Cotton

Yarn Antitrust Litig., 505 F.3d 274, 286-87 (4th Cir. 2007)

(citing Green Tree, 531 U.S. at 92). 

Under the holding in Green Tree, a party meeting this substantial evidentiary burden has established a basis for invalidation of an arbitration agreement. See Green Tree, 531 U.S.

at 90-92; Bradford, 238 F.3d at 554. Arbitration cannot be

compelled when arbitral costs are so high that they effectively

preclude a litigant from vindicating his federal statutory rights

in an arbitral forum. See Green Tree, 531 U.S. at 90 (quoting

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28

(1991)) (claims arising under a federal statute "may be arbitrated because ‘so long as the prospective litigant effectively

may vindicate [his or her] statutory cause of action in the arbitral forum, the statute serves its functions’"). Under Green

Tree, a party seeking to invalidate an arbitration agreement on

these grounds will not be permitted merely to allege the likelihood of incurring prohibitive arbitration costs, but must establish the likely existence of such costs with firm proof. In re

Cotton Yarn Antitrust Litig., 505 F.3d at 286-87; Adkins, 303

F.3d at 503; Bradford, 238 F.3d at 556. 

The Supreme Court’s decision in Concepcion does not alter

this longstanding principle. The Court’s holding there did not

mention, much less directly overrule, its prior opinion in

Green Tree. Moreover, the Court in Concepcion was not

12 MURIITHI v. SHUTTLE EXPRESS, INC.
required to address directly the issue of prohibitive arbitration

costs, because the arbitration agreement at issue contained

certain financial concessions on the part of AT&T, essentially

guaranteeing that aggrieved customers would be "made

whole." 131 S. Ct. at 1753. 

We will not readily infer that the Supreme Court impliedly

has overruled its own precedent. See Agostini v. Felton, 521

U.S. 203, 237 (1997) (when Supreme Court precedent has

"direct application in a case, yet appears to rest on reasons

rejected in some other line of decisions, [courts] should follow the case which directly controls, leaving to [the Supreme]

Court the prerogative of overturning its own decisions" (citation omitted)). Thus, we apply the principles from Green Tree

to the evidence before us. 

We conclude that Muriithi has not met his substantial burden under Green Tree of showing prohibitive arbitration

costs. Significantly, Muriithi has not established even "the

most basic element of this challenge," namely, the costs of

arbitration. Adkins, 303 F.3d at 503. Muriithi posited to the

district court that AAA arbitrator fees could range between

$800 and $2,200 per day. However, that estimate bears no

relation to the facts of the present case, because Muriithi’s

proffer regarding those fees apparently was based on rates

charged by three arbitrators who had provided fee estimates

in a wrongful discharge suit in the Virgin Islands. See Alexander v. Anthony Int’l, L.P., 341 F.3d 256, 261-62 (3d Cir.

2003). 

Muriithi cannot meet his burden of showing that he likely

will incur prohibitive arbitrator fees simply by showing the

fees that some arbitrators are charging somewhere. See Green

Tree, 531 U.S. at 90 n.6 (list of arbitrators’ fees "as reflected

in the opinions" of other courts provided an insufficient "basis

for concluding that [a claimant] would in fact have incurred

substantial costs in the event her claim went to arbitration").

Muriithi plainly did not offer evidence regarding the arbitraMURIITHI v. SHUTTLE EXPRESS, INC. 13
tor’s fees likely to be incurred in the resolution of the present

dispute, even though "[i]t was within his power to obtain this

information by simply investigating the option of arbitration

in the first place." Adkins, 303 F.3d at 503. 

Muriithi also has not provided evidence or argument about

the value of his claim, which is a critical factor in a "prohibitive costs" analysis. Id. (rejecting "prohibitive costs" challenge in part because the plaintiff failed to provide a basis

permitting "a serious estimation of how much money is at

stake for each individual plaintiff"). Evidence regarding the

value of Muriithi’s claim is necessary to determine the administrative fees of the AAA under the AAA’s rules. Therefore,

we conclude that Muriithi has not carried his burden of showing that he likely would incur prohibitive costs by participating in bilateral arbitration with Shuttle Express.9

See Green

Tree, 531 U.S. at 92. Although we would have reached this

conclusion under the guidance of Green Tree solely on the

basis of the lack of evidence before us, our conclusion further

is supported by Shuttle Express’ agreement, at oral argument

before this Court, to pay all arbitration costs if this case is

referred to arbitration.10

9Thus, we do not face the situation in which it has been shown that

enforcing a class action waiver effectively prevents a plaintiff from vindicating his statutory rights. Contrast In re Am. Express Merchants’ Litig.,

667 F.3d 204, 218 (2d Cir.), cert. granted, 133 S. Ct. 594 (2012). 

10Shuttle Express’ "eleventh hour" agreement to pay all arbitration costs

does not render entirely moot the issue of prohibitive costs. A party’s

agreement to pay all arbitration costs, when made in a timely manner such

as before a district court has ruled on the enforceability of the arbitration

clause, "moots" the issue and "foreclos[es] the possibility that [the opposing party] could endure any prohibitive costs in the arbitration process."

Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 557 (7th Cir. 2003); see

also Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 300 (5th Cir.

2004); Large v. Conesco Fin. Servicing Corp., 292 F.3d 49, 56-57 (1st

Cir. 2002). 

Here, however, before oral argument in this Court, Shuttle Express at

most held out the possibility that it would be willing to pay all arbitration

14 MURIITHI v. SHUTTLE EXPRESS, INC.
E.

Finally, we address the district court’s holding that the oneyear limitations provision in the Franchise Agreement also

rendered the Arbitration Clause unconscionable. The court

concluded that the one-year limitations provision was unconscionable because it unreasonably restricted Muriithi’s ability

to arbitrate "employment-related statutory claims," including

FLSA claims. 

Shuttle Express contends that the district court erred in

addressing this issue, because the one-year limitations provision is not included in the Arbitration Clause and, thus, any

challenge to this limitations provision must wait until the

entire contract is considered by the arbitrator. Muriithi does

not offer a response to this argument. 

We turn to consider the question whether this issue regarding the one-year limitations provision was properly decided

by the district court as part of its resolution of the motion to

compel. A party challenging the enforceability of an arbitration clause under Section 2 of the FAA must rely on grounds

that "relate specifically to the arbitration clause and not just

to the contract as a whole." Snowden v. CheckPoint Check

costs. Under these circumstances, it would be an extreme waste of

already-expended judicial and litigation resources to foreclose consideration of the prohibitive costs issue as moot now, simply because Shuttle

Express, after suffering an adverse ruling in the district court, made a lastminute concession to bolster its position in this Court. Cf. Friends of the

Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 191-92

(2000) (cautioning that finding a case moot in later stages of litigation

could be "more wasteful than frugal"). While such considerations do not

warrant retaining jurisdiction over a case "in which one or both of the parties plainly lack a continuing interest," such is not the case here. See id.

at 192. Despite Shuttle Express’ concession, the merits of the case

(whether Muriithi could effectively vindicate his rights under the Arbitration Clause) and the relief sought (whether this case proceeds in arbitration or litigation) are still very much in dispute. 

MURIITHI v. SHUTTLE EXPRESS, INC. 15
Cashing, 290 F.3d 631, 636 (4th Cir. 2002) (citation omitted).

Thus, a challenge specific to an arbitration clause is considered by the court in a motion to compel, while a challenge

relating to the entire contract is heard only after the merits of

a case have been referred to an arbitrator or have been

retained for decision by the court. See Hooters of Am., Inc. v.

Phillips, 173 F.3d 933, 938 (4th Cir. 1999) (in ruling on

motion to compel, courts consider challenges that "relate specifically to the arbitration clause and not just to the contract

as a whole"); Jeske v. Brooks, 875 F.2d 71, 75 (4th Cir. 1989)

("Because the alleged defects pertain to the entire contract,

rather than specifically to the arbitration clause, they are properly left to the arbitrator for resolution."). 

The one-year limitations provision is not referenced in the

Arbitration Clause, but is applicable generally to the Franchise Agreement. By its terms, the one-year limitations provision applies to "any arbitration, suit, action or other

proceeding relating to this Agreement. . . ." Moreover, the

language of this provision does not overlap in any substantive

manner with the language of the Arbitration Clause, such as

by directing the parties to a different forum depending on

when their claim was raised. Thus, the one-year limitations

provision discretely answers the question when any claim

under the Franchise Agreement must be brought, whereas the

Arbitration Clause is silent on that issue and instead addresses

the proper forum where such claims under the Franchise

Agreement must be brought. 

In view of its gatekeeping function, the scope of a motion

to compel arbitration is restricted to consideration of challenges specific to the arbitration clause. See Adkins, 303 F.3d

at 502; Jeske, 875 F.2d at 75. Thus, absent a contrary agreement by the parties, general contract defenses that are applicable to the entire contract, such as the present one-year

limitations provision, are reserved for the forum in which the

dispute ultimately will be resolved. See Adkins, 303 F.3d at

502; Jeske, 875 F.2d at 75; see also Kristian v. Comcast

16 MURIITHI v. SHUTTLE EXPRESS, INC.
Corp., 446 F.3d 25, 44 (1st Cir. 2006) (a "statute of limitations defense is an affirmative defense" that lies "squarely in

the purview of the arbitrator"). Accordingly, we hold that

because Muriithi’s challenge to the one-year limitations provision does not rely on any aspect of the Arbitration Clause,

but relates only to the general contract defense itself, the district court erred in holding the one-year limitations period

unconscionable as part of the court’s resolution of the motion

to compel. 

III.

In sum, we hold that the district court erred in concluding

that the class action waiver was unconscionable and rendered

the Arbitration Clause unenforceable on that ground. We further hold that the district court erred in holding that the feesplitting provision was unconscionable on the ground that its

application in Muriithi’s case will cause him to incur prohibitive arbitration costs. Finally, we hold that the district court

erred in ruling on the enforceability of the one-year limitations provision, because that issue is a question to be decided

by the arbitrator as part of the resolution of Muriithi’s claim.

For these reasons, we vacate the district court’s judgment,

and remand the case with instructions that the district court

enter an order compelling arbitration of Muriithi’s claims with

full costs of those arbitration proceedings to be paid by Shuttle Express pursuant to Shuttle Express’ agreement, in open

court, to pay such costs.

VACATED AND REMANDED 

MURIITHI v. SHUTTLE EXPRESS, INC. 17