Court Opinion

ID: 2968927
Source: CourtListenerOpinion
Date Created: 2015-09-22 08:13:14.550333+00
Date Added: 2024-06-11T13:14:32.737299
License: Public Domain

Certiorari dismissed, September 26, 2013

                         PUBLISHED

UNITED STATES COURT OF APPEALS
              FOR THE FOURTH CIRCUIT

MEHDI NOOHI, individually and on         
behalf of all others similarly
situated; SOHEYLA BOLOURI,
individually and on behalf of all
others similarly situated,
                 Plaintiffs-Appellees,
                  v.
TOLL BROS., INC., for itself and all             No. 12-1261
others similarly situated; TOLL
LAND CORP. NO. 43, for itself and
all others similarly situated; TOLL
MD V LIMITED PARTNERSHIP, for
itself and all others similarly
situated,
              Defendants-Appellants.
                                         
        Appeal from the United States District Court
         for the District of Maryland, at Baltimore.
             Richard D. Bennett, District Judge.
                   (1:11-cv-00585-RDB)

                  Argued: December 4, 2012

                 Decided: February 26, 2013

    Before KING, SHEDD, and DAVIS, Circuit Judges.

Affirmed by published opinion. Judge Davis wrote the opin-
ion, in which Judge King and Judge Shedd joined.
2                  NOOHI v. TOLL BROS., INC.
                         COUNSEL

ARGUED: Quincy Montgomery Crawford, III, DLA PIPER
US LLP, Baltimore, Maryland, for Appellants. Tillman Fin-
ley, MARINO LAW PLLC, Washington, D.C., for Appellees.
ON BRIEF: James D. Mathias, DLA PIPER US LLP, Balti-
more, Maryland, for Appellants. Daniel Marino, MARINO
LAW PLLC, Washington, D.C., for Appellees.

                          OPINION

DAVIS, Circuit Judge:

   In this putative class action, prospective luxury home buy-
ers allege that a real estate development company unlawfully
refused to return deposits when the prospective buyers could
not obtain mortgage financing. The named Plaintiffs-
Appellees are Mehdi Noohi and Soheyla Bolouri
("Plaintiffs"), a husband and wife; Defendants-Appellants are
Toll Bros., Inc., a real estate development company, and sev-
eral of its subsidiaries (collectively, "Toll Brothers"). Plain-
tiffs contracted with a subsidiary of Toll Bros., Inc., for the
construction of a luxury home in Maryland. The Agreement
of Sale ("the Agreement") required that Plaintiffs seek
approval of a mortgage, and included an arbitration provision.
Though Plaintiffs received a "Mortgage Loan Commitment"
letter from at least one lender that was later rescinded, and
though several other of their mortgage applications were all
denied, Toll Brothers sought to keep $77,008 in Plaintiffs’
deposits.

   Plaintiffs sued Toll Brothers individually and on behalf of
a class of other prospective buyers who allegedly lost deposits
to Toll Brothers in a similar manner. The district court denied
Toll Brothers’ motion to dismiss or stay the suit pending arbi-
tration, finding that the Agreement’s arbitration provision
                   NOOHI v. TOLL BROS., INC.                 3
lacked mutuality of consideration under Maryland law
because it required only the buyer—but not the seller—to
submit disputes to arbitration. Toll Brothers appealed.

  For the reasons that follow, we hold that this appeal is
properly before us under 9 U.S.C. § 16(a), and that the Agree-
ment’s arbitration provision is unenforceable for lack of
mutual consideration under Maryland law.

                              I.

   We begin by setting out the facts Plaintiffs have alleged,
which we take as true for purposes of this appeal, see Hill v.
Peoplesoft USA, Inc., 412 F.3d 540, 543 (4th Cir. 2005),
although "the decision to deny [a] motion for stay and to com-
pel arbitration is reviewed de novo," Patten Grading & Pav-
ing, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200, 204 (4th
Cir. 2004) (citing MicroStrategy, Inc. v. Lauricia, 268 F.3d
244, 250 (4th Cir. 2001)). See also Johnson v. Circuit City
Stores, 148 F.3d 373, 377 (4th Cir. 1998).

                              A.

   Toll Brothers, a publicly traded real estate development
company, sells luxury residences in a number of states,
including Maryland. One of Toll Brothers’ subsidiaries, TBI
Mortgage Company ("TBI Mortgage"), provides mortgage
banking primarily to buyers of Toll Brothers homes. Other
subsidiaries contract with individual home buyers for the pur-
chase of newly constructed or planned homes. One such sub-
sidiary, Toll Land Corp. No. 43, is the General Partner in Toll
MD V Limited Partnership, with whom Plaintiffs contracted
to purchase a home.

   On February 17, 2008, Plaintiffs made an "initial reserva-
tion deposit" of $5,000. On February 24, 2008, they entered
into the Agreement with Toll MD V to purchase a precon-
struction home in Glenelg, Maryland, for $1,006,975. Plain-
4                      NOOHI v. TOLL BROS., INC.
tiffs made an additional deposit of $45,348 and later deposited
another $26,660. By February 28, 2008, the deposit total had
reached $77,008.

   The Agreement contained a number of relevant provisions.
Section 2 of the Agreement provided that Toll Brothers would
hold the deposit until it was either refunded or forfeited by
Plaintiffs. Section 4 dealt with mortgage application obliga-
tions, and directed Plaintiffs to complete the mortgage
approval process within 60 days. In order to do so, Plaintiffs
agreed to make a good-faith, "truthful and complete applica-
tion to TBI Mortgage and any other lender of [their] choos-
ing," accept a loan commitment, and comply with all terms
imposed by the lender. Compl. ¶ 35; J.A. 49.1 Plaintiffs
agreed "to be responsible for and bear the risk of meeting all
terms and conditions" of the loan commitment, and the
Agreement further provided that "the termination or expira-
tion of the mortgage commitment after it is received, for any
reason, shall not release [them] of [their] obligations under the
Agreement." J.A. 49. If Plaintiffs were not approved for a
mortgage after 60 days, Toll Brothers could either extend the
mortgage application period in order to submit a mortgage
request on behalf of Plaintiffs, or declare the Agreement "null
and void" and refund Plaintiffs their deposit. Compl. ¶ 36;
J.A. 49. Section 13 of the Agreement comprised an arbitration
provision, and Plaintiffs initialed under each of its paragraphs.

  Plaintiffs applied to TBI Mortgage on February 25, 2008,
but their application was rejected. On Toll Brothers’ recom-
mendation, Plaintiffs then applied for a mortgage with First
Preferred Financial, Inc., which provided them with a "Mort-
gage Loan Commitment" letter for $906,275 on April 24,
2008. Though Plaintiffs accepted the letter, First Preferred
Financial informed Plaintiffs on June 13, 2008, that it could
no longer provide them with financing in light of a recent
    1
    Citations to the "J.A." refer to the Joint Appendix filed by the parties
in this appeal.
                   NOOHI v. TOLL BROS., INC.                   5
Maryland law prohibiting "stated income" loans. Plaintiffs
also sought to secure a mortgage from GMAC, but were
unsuccessful.

   On July 24, 2008, Plaintiffs sent a letter to Toll Brothers,
informing them that they were unable to secure a mortgage,
and demanding a refund of their deposit pursuant to the
Agreement of Sale. On August 21, 2008, Toll Brothers
responded to Plaintiffs by asserting that the First Preferred
Financial commitment letter, although now terminated, had
satisfied the mortgage contingency and Plaintiffs were still
obligated to perform under the Agreement. The response fur-
ther stated that Toll Brothers would retain Plaintiffs’ deposit
if they did not submit additional mortgage applications and
proceed to closing. Specifically, the letter suggested that
Plaintiffs contact APEX Funding Group.

   On August 27, 2008, Plaintiffs wrote to Toll Brothers, stat-
ing that they would continue to work to receive a mortgage.
On September 22, 2008, APEX Funding Group gave Plain-
tiffs a loan commitment letter but then declined to approve
them for a mortgage. Plaintiffs also sought mortgage approv-
als from other lenders, but were unable to secure financing.

   Plaintiffs further allege that Toll Brothers has neither begun
construction on the lot in question, nor incurred expenses
toward the construction of the home. Plaintiffs claim that
because Toll Brothers refused to refund their deposits after
the failure of their repeated good-faith attempts to secure a
mortgage, Toll Brothers breached the Agreement.

                               B.

   Plaintiffs sued, filing a class action complaint against Toll
Brothers on March 3, 2011, on behalf of themselves and home
buyers around the country who they alleged lost their deposits
in a similar manner. Federal jurisdiction was founded on the
Class Action Fairness Act; the complaint asserted an amount
6                  NOOHI v. TOLL BROS., INC.
in controversy of over $5 million, and at least one member of
the putative class is a citizen of a different state from one of
the defendants. See 28 U.S.C. § 1332(d)(2). The complaint
contained four causes of action: (1) breach of contract; (2)
breach of the duty of good faith and fair dealing; (3) unjust
enrichment; and (4) unfair and deceptive trade practices, in
violation of Md. Code Ann., Commercial Law § 13-301 et
seq.

   Toll Brothers filed a motion to dismiss or stay Plaintiffs’
complaint pending arbitration based on the Agreement’s arbi-
tration provision, Section 13. After a hearing, the district court
issued an order and memorandum opinion denying the
motion. See Noohi v. Toll Bros., Inc., 2012 WL 273891 (D.
Md. Jan. 30, 2012). The court noted that state contract forma-
tion law determines the validity of arbitration agreements, and
that under Maryland law as articulated in Cheek v. United
Healthcare of Mid-Atlantic, Inc., 835 A.2d 656 (Md. 2003),
an arbitration provision is treated as a severable contract that
must be supported by adequate consideration. After determin-
ing that the arbitration provision required only Plaintiffs—but
not Toll Brothers—to submit disputes to arbitration, the court
relied on Cheek to hold that Section 13 of the Agreement was
unenforceable for lack of consideration. The court did not,
however, address the possibility that the rule set forth in
Cheek was preempted under AT&T Mobility LLC v. Concep-
cion, 131 S. Ct. 1740 (2011), which held that the Federal
Arbitration Act ("FAA") preempted California’s judicial rule
regarding the unconscionability of class arbitration waivers in
consumer contracts. Toll Brothers appealed.

                               II.

   Plaintiffs first argue that we lack jurisdiction over this
interlocutory appeal from the district court’s denial of Toll
Brothers’ motion to dismiss or stay pending arbitration.

  As we recently reiterated, "[c]ourts of appeal ordinarily
may review only final decisions of district courts." Rota-
                   NOOHI v. TOLL BROS., INC.                   7
McLarty v. Santander Consumer USA, Inc., 700 F.3d 690,
696 (4th Cir. 2012). See also 28 U.S.C. § 1291. "Although [a]
district court’s order denying [a] motion to compel arbitration
and stay proceedings is not a final decision, we may neverthe-
less exercise appellate jurisdiction if the order falls within an
exception to the final judgment rule established by the FAA."
Rota-McLarty, 700 F.3d at 696.

   Under the FAA, courts must stay any suit "referable to arbi-
tration" under an arbitration agreement, where the court has
determined that the agreement so provides, and one of the
parties has sought to stay the action. 9 U.S.C. § 3. Under 9
U.S.C. § 16(a)(1)(A), an "appeal may be taken from" an order
"refusing a stay of any action under" 9 U.S.C. § 3. In short,
a party may appeal the denial of a motion to stay an action
concerning a matter that a written agreement has committed
to arbitration. See Green Tree Fin. Corp.-Ala. v. Randolph,
531 U.S. 79, 86 (2000) (holding that § 16(a)(3) "preserves
immediate appeal of any ‘final decision with respect to an
arbitration,’ regardless of whether the decision is favorable or
hostile to arbitration"). See also Am. Cas. Co. of Reading, Pa.
v. L-J, Inc., 35 F.3d 133, 135 (4th Cir. 1994) (abrogated on
other grounds by Green Tree, 531 U.S. at 89).

   Plaintiffs acknowledge the above principles but argue that
because Toll Brothers’ motion was primarily a motion to dis-
miss, and a motion to dismiss is not an appealable "final deci-
sion," § 16(a)(1)(A) is inapplicable. In other words, according
to Plaintiffs, for Toll Brothers’ motion to be immediately
appealable, the motion must seek only a stay.

   This overly formal argument fails for at least two reasons.
First, Toll Brothers moved "to dismiss or stay," not simply to
dismiss. See Defs.’ Mem. in Supp. of Mot. to Dismiss or Stay
Pls.’ Compl. Pending Arbitration at 1 (hereinafter, "Defs.’
Mot. to Dismiss or Stay") (emphasis added); J.A. 35. The
motion’s conclusion specifically requested that the court "dis-
miss, or in the alternative stay, Plaintiffs’ Complaint pending
8                          NOOHI v. TOLL BROS., INC.
arbitration between Plaintiffs and Defendants." Defs.’ Mot. to
Dismiss or Stay at 11; J.A. 45. As noted above, under
§ 16(a)(1)(A), a party may appeal the denial of a motion to
stay federal proceedings pending arbitration; at least to the
extent that an appeal concerns the denial of a motion to stay,
the fact that the motion also seeks dismissal does not affect
its appealability.

   Second, in assessing whether a motion adequately invoked
the FAA, "the proper inquiry focuses on substance rather than
nomenclature." Rota-McLarty, 700 F.3d at 698. Thus, "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. Though Toll Brothers never sought to have the district
court compel arbitration, its entire brief focused on the
enforceability of the arbitration provision. Toll Brothers thus
indicated a "clear intention to seek enforcement" of that provi-
sion.2
    2
    In Choice Hotels International, Inc. v. BSR Tropicana Resort, Inc., 252
F.3d 707, 709-10 (4th Cir. 2001), we held that "[n]otwithstanding the
terms of § 3, . . . dismissal is a proper remedy when all of the issues pre-
sented in a lawsuit are arbitrable." In Hooters of America, Inc. v. Phillips,
173 F.3d 933, 937 (4th Cir. 1999), however, we had previously noted that
"[w]hen a valid agreement to arbitrate exists between the parties and cov-
ers the matter in dispute, the FAA commands the federal courts to stay any
ongoing judicial proceedings, 9 U.S.C. § 3, and to compel arbitration, id.
§ 4." As we recently pointed out, "[t]here may be some tension between
our decision in Hooters—indicating that a stay is required when the arbi-
tration agreement ‘covers the matter in dispute’—and Choice Hotels—
sanctioning dismissal ‘when all of the issues presented . . . are arbitrable.’"
Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355, 376 n.18 (4th Cir.
2012). In Aggarao, we went on to note that this potential tension mirrors
a circuit split:
        Our sister circuits are divided on whether a district court has dis-
        cretion to dismiss rather than stay an action subject to arbitration.
        Compare Cont’l Cas. Co. v. Am. Nat’l Ins. Co., 417 F.3d 727,
        732 n.7 (7th Cir. 2005) ("[T]he proper course of action when a
        party seeks to invoke an arbitration clause is to stay the proceed-
                      NOOHI v. TOLL BROS., INC.                            9
  This Court therefore has jurisdiction over the instant
appeal.

                                    III.

  We next examine whether the district court correctly held
that the arbitration provision in Section 13 of the Agreement
was unenforceable for lack of mutual consideration under
Cheek.

   Toll Brothers makes the following arguments in support of
its view that the court erred in so holding: (1) the arbitration
provision was supported by the consideration underlying the
Agreement as a whole; (2) the arbitration provision binds both
parties to arbitration, and the district court failed to resolve
ambiguities in favor of arbitration when it held otherwise; (3)
Cheek is distinguishable on its facts; and (4) Cheek is incon-
sistent with the Supreme Court’s holding in Concepcion
because it singles out arbitration provisions by imposing on
them a requirement inapplicable to other contract provisions.

   Plaintiffs make the following arguments in support of the
district court’s holding: (1) under Maryland law, mutual con-
sideration must exist in the arbitration provision itself; (2) the
arbitration provision here unambiguously binds only Plain-
tiffs, leaving no ambiguities to interpret in favor of arbitra-

    ings pending arbitration rather than to dismiss outright."), with
    Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th
    Cir. 1992) ("The weight of authority clearly supports dismissal of
    the case when all of the issues raised in the district court must be
    submitted to arbitration.").
Aggarao, 675 F.3d at 376 n.18. In Aggarao, however, we "need[ed] not
resolve this disagreement" because the issues raised by the plaintiff were
not all subject to arbitration, and thus dismissal was inappropriate. Id.
Similarly here, Toll Brothers’ motion was appealable irrespective of
Choice Hotels for the reasons discussed above. We therefore again decline
to "resolve this disagreement."
10                 NOOHI v. TOLL BROS., INC.
tion; (3) Cheek’s facts do not render it distinguishable; and (4)
neither Concepcion nor other recent Supreme Court cases
abrogate Cheek’s requirement that an arbitration provision
contain mutual consideration. We think Plaintiffs have the
more persuasive arguments.

                               A.

   "We review de novo a district court’s determination on
arbitrability of a civil action." Aggarao v. MOL Ship Mgmt.
Co., Ltd., 675 F.3d 355, 365 (4th Cir. 2012). "At the same
time, we give due regard to the federal policy favoring arbi-
tration and resolve ‘any doubts concerning the scope of arbi-
trable issues . . . in favor of arbitration.’" Hill v. Peoplesoft
USA, Inc., 412 F.3d 540, 543 (4th Cir. 2005) (quoting Moses
H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24–25 (1983).

   Section 2 of the FAA, its "primary substantive provision,"
Moses H. Cone Mem’l Hosp., 460 U.S. at 24, makes agree-
ments to arbitrate "valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revoca-
tion of any contract," 9 U.S.C. § 2.

     Section 2 is a congressional declaration of a liberal
     federal policy favoring arbitration agreements, not-
     withstanding any state substantive or procedural pol-
     icies to the contrary. The effect of the section is to
     create a body of federal substantive law of arbitra-
     bility, applicable to any arbitration agreement within
     the coverage of the Act.

Moses H. Cone Mem’l Hosp., 460 U.S. at 24. Under this fed-
eral substantive law, "courts must place arbitration agree-
ments on an equal footing with other contracts, and enforce
them according to their terms." Concepcion, 131 S. Ct. at
1745 (internal citations omitted).
                   NOOHI v. TOLL BROS., INC.                  11
   However, § 2 also permits arbitration agreements to be
declared unenforceable "upon such grounds as exist at law or
in equity for the revocation of any contract." 9 U.S.C. § 2.
"This saving clause permits agreements to arbitrate to be
invalidated by ‘generally applicable contract defenses, such as
fraud, duress, or unconscionability,’ but not by defenses that
apply only to arbitration or that derive their meaning from the
fact that an agreement to arbitrate is at issue." Concepcion,
131 S. Ct. at 1746 (citation omitted).

  Applying the above framework, the Supreme Court has

    held that parties may agree to limit the issues subject
    to arbitration, Mitsubishi Motors Corp. v. Soler
    Chrysler–Plymouth, Inc., 473 U.S. 614, 628 (1985),
    to arbitrate according to specific rules, [Volt Info.
    Sciences, Inc. v. Bd. of Trustees of Leland Stanford
    Junior Univ., 489 U.S. 468, 479 (1989)], and to limit
    with whom a party will arbitrate its disputes, [Stolt-
    Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct.
    1758, 1773 (2010)].

Concepcion, 131 S. Ct. at 1748-49 (emphasis in original). In
Concepcion, the Supreme Court further prohibited courts
from altering otherwise valid arbitration agreements by apply-
ing the doctrine of unconscionability to eliminate a term bar-
ring classwide procedures. Id. at 1750-53.

   The Maryland case at the center of this appeal is Cheek v.
United Healthcare of Mid-Atlantic, Inc., 835 A.2d 656 (Md.
2003). In Cheek, the plaintiff was presented with an offer of
employment conditioned on acceptance of the employer’s
arbitration policy. Id. at 657-58. That policy left to the
employer the unilateral right to "alter, amend, modify, or
revoke the [p]olicy at its sole and absolute discretion at any
time with or without notice." Id. at 658. The plaintiff accepted
the offer of employment on the employer’s terms, but was ter-
minated about seven months later. Id. He then filed suit in
12                 NOOHI v. TOLL BROS., INC.
Maryland state court, alleging a number of state-law viola-
tions. Id. at 659. The employer filed a "Motion to Dismiss
and/or Compel Arbitration and Stay" the suit, which the trial
court granted. Id. The Court of Appeals of Maryland (which
granted certiorari prior to any proceedings in the intermediate
appellate court) agreed with the plaintiff’s argument that the
employer’s unfettered discretion to change the arbitration
agreement rendered its promise to arbitrate illusory, and that
the agreement was therefore unenforceable for lack of consid-
eration. Id. In reaching that conclusion, the court viewed the
arbitration agreement as severable from the underlying
employment relationship, and limited its assessment of con-
sideration to the four corners of the agreement itself. Id. at
665.

                              B.

                              1.

   Toll Brothers’ first argument is that the arbitration provi-
sion in the Agreement is enforceable because it was supported
by the consideration underlying the Agreement as a whole. To
assess that argument, we must first determine what law
applies. "The Supreme Court has directed that we ‘apply ordi-
nary state-law principles that govern the formation of con-
tracts’" when assessing whether the parties agreed to arbitrate
a matter. Hill, 412 F.3d at 543 (quoting First Options of Chi-
cago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). See also
Rota-McLarty, 700 F.3d at 699 ("The question of whether an
enforceable arbitration agreement exists . . . is a matter of
contract interpretation governed by state law, which we
review de novo."). Maryland generally follows the "lex loci
contractus" principle, under which "the law of the jurisdiction
where the contract was made controls its validity and con-
struction." Kramer v. Bally’s Park Place, Inc., 535 A.2d 466,
467 (Md. 1988). The Agreement was executed in Maryland
between Toll Brothers’ Maryland subsidiary—Toll MD V
Limited Partnership—and Plaintiffs, who resided in Maryland
                   NOOHI v. TOLL BROS., INC.                  13
at the time it was executed. The Agreement also references
numerous provisions of Maryland law. For example, Section
17 references the "Maryland Homeowners Association Act,"
Section 19 references "Section 8-402.2 of the Real Property
Article of the Annotated Code of Maryland," and Section 20
references "§ 17-404 of the Business Occupations and Profes-
sions Article of the Annotated Code of Maryland." J.A. 52-53.
We therefore look to Maryland law.

   As already discussed, that law was set forth in Cheek.
There, after a thorough analysis discussing cases that reached
conflicting conclusions, Maryland’s highest court specifically
rejected the notion that consideration for an underlying con-
tract can serve as consideration for an arbitration provision
within that contract. See Cheek, 835 A.2d at 667 ("We dis-
agree with cases from other jurisdictions that determine that
consideration for an underlying contract also can serve as
consideration for an arbitration agreement within the contract,
even when the arbitration agreement is drafted so that one
party is absolutely bound to arbitrate all disputes, but the
other party has the sole discretion to amend, modify, or com-
pletely revok[e] the arbitration agreement at any time and for
any reason."). The court reasoned that to do otherwise would
require "straying into the prohibited morass of the merits of
the claims" by looking to the parties’ obligations (and their
potential breach) underlying the lawsuit itself. Id. at 665. That
merits inquiry "could eclipse the role of the arbitrator, should
a valid agreement exist, and therefore run afoul of strong Fed-
eral and Maryland policies favoring arbitration as a viable
method of dispute resolution." Id. at 668. In other words,
where it is asserted that a dispute is bound to arbitration, the
role of courts is limited to determining the enforceability of
an arbitration provision; "straying" into areas outside that pro-
vision is an impermissible encroachment on the arbitrator’s
authority. Cf. Prima Paint Corp. v. Flood & Conklin Mfg.
Co., 388 U.S. 395, 403-04 (1967) (holding that courts may
adjudicate claims of "fraud in the inducement of the arbitra-
tion clause itself—an issue which goes to the ‘making’ of the
14                    NOOHI v. TOLL BROS., INC.
agreement to arbitrate"—but may not "consider claims of
fraud in the inducement of the contract generally").

   There are two published Fourth Circuit cases that cite
Cheek. The first is Hill v. Peoplesoft USA, Inc., 412 F.3d 540
(4th Cir. 2005).3 In Hill, this Court examined the enforceabil-
ity of an arbitration agreement under Maryland law. There, an
employee suing her employer had previously signed a sepa-
rate arbitration agreement consisting of a six-page document
detailing both parties’ arbitration obligations. Id. at 542. We
noted that under Maryland law, a court examining "whether
an arbitration agreement is a valid contract" is limited to "the
language of the arbitration agreement itself." Id. at 543.
Because the arbitration agreement was a separate contract,
however, we did not confront the specific issue of what to do
when an arbitration agreement is contained within a larger
contract. Rather, we held that the district court erred in look-
ing outside the arbitration agreement to an "internal dispute
solution" program that the employer reserved the right to
change without notice; because the arbitration agreement
itself clearly bound both parties to arbitration, it was sup-
ported by adequate consideration. Id. at 543-44.

   The second Fourth Circuit case that cites Cheek is Dan
Ryan Builders, Inc. v. Nelson, 682 F.3d 327 (4th Cir. 2012),
a case involving facts strikingly similar to those Plaintiffs
have alleged here. In Dan Ryan Builders, the defendant
builder constructed a new home in West Virginia for the
plaintiff buyer. The contract contained an arbitration provi-
sion purportedly binding both parties, but giving the builder
"the right to seek arbitration or to file an action for damages
if [the buyer] ‘fail[ed] to settle on the Property within the time
required under [the] Agreement.’" Id. at 327 (emphasis in
original, first alteration added). The buyer sued, arguing "that
  3
   Inexplicably, Toll Brothers fails to cite Hill in either its opening or
reply brief. Given the fact that Hill is one of only two published Fourth
Circuit cases to cite Cheek, this failure is glaring.
                      NOOHI v. TOLL BROS., INC.                         15
the arbitration provision was unenforceable as a matter of law
because it was not supported by mutual consideration, not-
withstanding the fact that the contract as a whole was sup-
ported by adequate consideration." Id. at 328. The district
court agreed and dismissed the builder’s motion to compel
arbitration. Id. Because "the parties’ contract [was] governed
by West Virginia law," and there was no West Virginia law
directly controlling, this Court certified the following question
to the West Virginia Supreme Court of Appeals: "Does West
Virginia law require that an arbitration provision, which
appears as a single clause in a multi-clause contract, itself be
supported by mutual consideration when the contract as a
whole is supported by adequate consideration?" Id. at 327.4
Relevant here, however, is this Court’s assumption that state
law was controlling on the issue of whether the consideration
underlying the contract could support an arbitration provision.5
See also infra pp. 22-23 & n.7.

  In the face of clear Maryland law that consideration for an
arbitration provision must be in the provision itself, Toll
Brothers argues that we may look outside that provision. Its
arguments are not persuasive. First, Toll Brothers cites a
  4
     The West Virginia court later answered this question in the negative,
holding that "West Virginia’s law of contract formation only requires that
a contract as a whole be supported by adequate consideration." Dan Ryan
Builders, Inc. v. Nelson, No. 12-0592, ___ S.E.2d ___, 2012 WL 5834590,
at *2 (W. Va. Nov. 15, 2012). The West Virginia court also noted, how-
ever, that mutuality of obligation may be considered as a factor in uncons-
cionability analysis. Id. at *7. In light of the West Virginia court’s
conclusions, the Dan Ryan Builders Court recently vacated the district
court’s holding as to mutuality, and remanded for further proceedings as
to unconscionability. Dan Ryan Builders, Inc. v. Nelson, No. 11-1215,
2013 WL 323284 (4th Cir. Jan. 29, 2013).
   5
     Dan Ryan Builders also discussed the unpublished case of Howard v.
King’s Crossing, Inc., 264 F. App’x 345 (4th Cir. 2008) (per curiam),
which Plaintiffs cite and the district court relied on. Of course, Howard
was an unpublished—and therefore nonprecedential—opinion, and noth-
ing the Dan Ryan Builders Court said about it (and nothing we might say
about it here) would elevate its holding to binding precedent.
16                 NOOHI v. TOLL BROS., INC.
string of cases that it claims have rejected challenges to arbi-
tration clauses on mutuality grounds where the underlying
contract is supported by adequate consideration. But, as Plain-
tiffs point out, all of those cases are based on the law of states
other than Maryland. Because the relevant inquiry depends on
Maryland law, cases based on the law of other states are inap-
posite.

   Second, Toll Brothers cites an unpublished district court
opinion from New Jersey, Arakelian v. N.C. Country Club
Estates Limited Partnership, 2009 WL 4981479 (D.N.J. Dec.
18, 2009), that enforced an arbitration provision contained in
an agreement with Toll Brothers similar to the provision at
issue here. Not only does Arakelian apply North Carolina law,
however, but it does not even examine the issue of consider-
ation, instead focusing its analysis on the plaintiffs’ uncons-
cionability argument and which Toll Brothers subsidiaries
were bound by the arbitration provision. 2009 WL 4981479,
at *7-*13. The reasoning in that case is similarly inapposite.

   In short, we apply Maryland law to determine the validity
of the arbitration provision in the Agreement. Under Mary-
land law as articulated in Cheek, an arbitration provision must
be supported by consideration independent of the contract
underlying it, namely, mutual obligation. Under Maryland
law, therefore, the validity of the arbitration provision in the
Agreement drafted and employed by Toll Brothers must sat-
isfy that requirement, an issue to which we now turn.

                                2.

   Toll Brothers’ first fallback argument is that the arbitration
provision is supported by consideration within the provision
itself because it binds both parties to arbitration. Plaintiffs
argue, and the district court held, that the clause binds only
Plaintiffs. The arbitration provision reads as follows:

     13. ARBITRATION: Buyer, on behalf of Buyer, and
     all permanent residents on the Premises, including
              NOOHI v. TOLL BROS., INC.                   17
minor children, hereby agree that any and all dis-
putes with Seller, Seller’s parent company or their
subsidiaries or affiliates arising out of the Premises,
this Agreement, the Home Warranty, any other
agreements, communications or dealings involving
Buyer, or the construction or condition of the Prem-
ises including, but not limited to, disputes concern-
ing breach of contract, express and implied
warranties, personal injuries and/or illness, mold
related claims, representations and/or omissions by
Seller, on-site and off-site conditions and all other
torts and statutory causes of action ("Claims") shall
be resolved by binding arbitration in accordance
with the rules and procedures of Construction Arbi-
tration Services, Inc. ("CAS") or its successor or an
equivalent organization mutually agreed upon by the
parties. If CAS is unable to arbitrate a particular
claim, then that claim shall be resolved by binding
arbitration pursuant to the Construction Rules of
Arbitration of the American Arbitration Association
or its successor or an equivalent organization mutu-
ally agreed upon by the parties. In addition, Buyer
agrees that Buyer may not initiate any arbitration
proceeding for any Claim(s) unless and until Buyer
has first given Seller specific written notice of each
claim (at 250 Gibraltar Road, Horsham, PA 19044,
Attn: Warranty Dispute Resolution) and given Seller
a reasonable opportunity after such notice to cure
any default, including the repair of the Premises in
accordance with the Home Warranty. The provisions
of this paragraph shall be governed by the provisions
of the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq.
and shall survive settlement.

BUYER HEREBY WAIVES THE RIGHT TO A
PROCEEDING IN A COURT OF LAW
(INCLUDING WITHOUT LIMITATION A
TRIAL BY JURY) FOR ANY CLAIMS OR
18                  NOOHI v. TOLL BROS., INC.
     COUNTERCLAIMS BROUGHT PURSUANT
     TO THIS AGREEMENT. THE PROVISIONS
     OF THIS SECTION SHALL SURVIVE SET-
     TLEMENT.

J.A. 51 (emphasis in original). In the district court’s view, this
provision is "quite simply one-sided and onerous" because it

     mandates that buyers, or in this case Plaintiffs, prom-
     ise to (1) submit all disputes against seller to binding
     arbitration, (2) notify Defendants of each claim
     before they initiate arbitration proceedings, (3) give
     Defendants a reasonable opportunity to cure the
     default, and (4) waive the right to proceed in a court
     of law. . . . Conversely, Defendants do not make any
     promises to Plaintiffs in this provision. The clause
     does not state "Buyer and Seller," or even "the par-
     ties" and thus does not impose any obligations on the
     Defendants. It only refers to "Buyers" and their obli-
     gations.

Noohi, 2012 WL 273891, at *6.

   Toll Brothers disagrees with the district court’s interpreta-
tion of the provision. In Toll Brothers’ view, the provision

     provides that "Buyer . . . hereby agree[s] that any
     and all disputes with Seller . . . shall be resolved by
     binding arbitration[.]" The arbitration provision does
     not apply only to "Buyer’s disputes" or disputes
     "against Seller." Rather, it applies to "any and all
     disputes" and disputes "with Seller." The Agreement
     of Sale does not state that disputes initiated by Seller
     will be in a court of law or that disputes raised by
     Seller will be treated differently. It states that "any
     and all disputes with Seller" will be resolved in arbi-
     tration. When Seller signed the Agreement of Sale,
     it agreed to be bound by this provision.
                       NOOHI v. TOLL BROS., INC.                         19
Toll Brothers’ Br. 13 (alterations in original; citation to J.A.
omitted).

   We agree with the district court that the provision binds
only Plaintiffs to arbitration, and thus lacks mutuality of con-
sideration. First, as Plaintiffs point out, all the subject and
verb pairings relate to the buyer’s obligations (i.e., buyer
agrees, buyer waives, etc.); nowhere does the provision state
that "Buyer and Seller agree," or the passive "it is agreed."
Second, the provision adds additional procedures that only the
buyer must perform prior to initiating arbitration, such as giv-
ing the seller written notice of each claim and an opportunity
to cure any default. Third, all the types of claims given as
examples in the provision are claims that the buyer would
bring against the seller. Fourth, the capitalized, bolded para-
graph at the end of the provision states that only the buyer,
but not the seller, waives the right to a court proceeding "FOR
ANY CLAIMS OR COUNTERCLAIMS BROUGHT PURSU-
ANT TO THIS AGREEMENT." J.A. 51 (emphasis added).
This provision "expressly contemplat[es] that [court] claims
could be brought by Seller (which would be a necessary pre-
requisite to Buyer’s assertion of a counterclaim) but that even
in such an event, and even though Seller may bring the claim
in court, Buyer may not assert any counterclaim in that
forum." Pls.’ Br. 27. These interpretive guides, rooted as they
are in reasonable and longstanding grammatical, linguistic
and "plain language" principles, make clear that the provision
did not bind Toll Brothers to arbitration.

   Because the arbitration provision unambiguously binds
only the buyer, there is no ambiguity to interpret by applica-
tion of a presumption in favor of arbitration.6
   6
     Even if there were an ambiguity, however, the presumption in favor of
arbitration does not apply to questions of an arbitration provision’s valid-
ity, rather than its scope. Granite Rock Co. v. Int’l Brotherhood of Team-
sters, 130 S. Ct. 2847, 2857-58 (2010) (explaining that the presumption
in favor of arbitrability does not apply where there are questions as to the
enforceability of the arbitration agreement). See also Gove v. Career Sys.
Dev. Corp., 689 F.3d 1, 6 n. 2 (1st Cir. 2012) ("However, this presumption
of arbitrability applies only to the scope of an arbitration agreement, not
its validity.").
20                 NOOHI v. TOLL BROS., INC.
                               3.

   Toll Brothers’ second fallback argument attempts to distin-
guish Cheek on its facts, pointing out that the arbitration pro-
vision in Cheek was illusory because one party could revoke
its promise to arbitrate at any time, whereas the issue here is
whether one party has bound itself at all. This argument war-
rants little discussion, as the distinction Toll Brothers draws
is one without a difference; the point is that in both cases, the
"agreement" is illusory and lacks consideration. Similarly,
Toll Brothers’ reliance on Holloman v. Circuit City Stores,
Inc., 894 A.2d 547 (Md. 2006), does not further its argument.
That case held that the Cheek rule did not apply where an
arbitration agreement permitted one party to modify the
agreement on 30 days’ notice, among various other restric-
tions on altering the agreement. Id. at 592. Unlike in Hollo-
man, the issue here is the same as in Cheek—whether the
arbitration agreement is supported by any consideration at all.

                               4.

   Toll Brothers’ final fallback argument is that the Cheek rule
is preempted by the FAA.

   The Supremacy Clause provides, in relevant part, that "the
Laws of the United States . . . shall be the supreme Law of
the Land." U.S. Const. art. VI, cl. 2. A state law that "stands
as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress" is preempted by the
Supremacy Clause. Hines v. Davidowitz, 312 U.S. 52, 67
(1941). See also Concepcion, 131 S. Ct. at 1753.

   In Concepcion, 131 S. Ct. at 1740, the Court held that the
FAA preempted California’s judicial rule (known as the Dis-
cover Bank rule) regarding the unconscionability of class arbi-
tration waivers in consumer contracts. Under the Discover
Bank rule, class waivers in consumer arbitration agreements
were deemed unconscionable if (1) the waiver was in an adhe-
                   NOOHI v. TOLL BROS., INC.                  21
sion contract, (2) disputes between the parties would likely
have involved small amounts of damages, and (3) the party
with inferior bargaining power alleged a deliberate scheme to
defraud. Id. at 1746. In concluding that the FAA preempted
that rule, the Court’s analysis focused on the ways in which
classwide procedures interfere with the informality of
arbitration—one of its chief benefits—as well as on the
increased risks to defendants. Id. at 1751-52.

   But the Cheek rule neither increases formality nor risks to
defendants; it merely requires that for an arbitration provision
to be valid, both parties bind themselves to it. The primary
concerns underlying Concepcion are therefore inapplicable
here.

   It is true that the Court in Concepcion was also concerned
with ensuring, in general terms, that arbitration agreements
are enforceable as written, including "with whom a party will
arbitrate its disputes." Id. at 1748-49 (quoting Stolt-Nielsen
S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1773 (2010)
(emphasis in original)). But both Concepcion and Stolt-
Nielsen involved issues of classwide arbitration; when the
Court stated that parties may specify "with whom" they
choose to arbitrate, the point was that they may, under the
FAA, choose to arbitrate with an individual rather than a
class. The Supreme Court has never held that the FAA pre-
empts state law rules requiring that arbitration provisions
themselves contain consideration (i.e., that they not be illu-
sory), and it would require a substantial extension of existing
precedent to do so here.

  Perhaps, Toll Brothers’ strongest contention is that the
Cheek rule "imposes a requirement on arbitration clauses
(mutuality within the clause itself) that does not apply to other
contract clauses." Reply Br. 4. This contention properly gives
us pause. The Supreme Court has long held that "[c]ourts may
not . . . invalidate arbitration agreements under state laws
applicable only to arbitration provisions." Doctor’s Asso-
22                 NOOHI v. TOLL BROS., INC.
ciates, Inc. v. Casarotto, 517 U.S. 681, 687 (1996) (emphasis
in original). The Court has explained that "[b]y enacting § 2,
. . . Congress precluded States from singling out arbitration
provisions for suspect status, requiring instead that such pro-
visions be placed ‘upon the same footing as other contracts.’"
Id. (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 511
(1974)).

   In a basic sense, the Cheek rule does single out an arbitra-
tion provision in a larger contract, and assess whether that
provision binds both parties to arbitrate at least some claims.
But on closer inspection, we are persuaded that all Cheek does
is treat an arbitration provision like any stand-alone contract,
requiring consideration. Lack of consideration is clearly a
generally applicable contract defense. The Cheek rule does
not bar the arbitration of entire categories of claims. See Mar-
met Health Care Ctr., Inc. v. Brown, 132 S. Ct. 1201 (2012)
(per curiam) (holding that West Virginia’s prohibition against
predispute agreements to arbitrate personal-injury or
wrongful-death claims against nursing homes was preempted
by the FAA). Nor does it ignore an arbitration provision to
gauge the enforceability of a different provision within the
same contract. See Nitro-Lift Technologies, L.L.C. v. Howard,
133 S. Ct. 500 (2012) (per curiam) (reversing, as inconsistent
with the FAA, the Oklahoma Supreme Court’s invalidation of
a noncompetition agreement on public policy grounds, where
that agreement contained a valid arbitration clause).

   Moreover, we are not persuaded that Cheek disfavors arbi-
tration; Cheek can just as readily be viewed as encouraging
arbitration by requiring that both parties to an arbitration
agreement bind themselves to arbitrate at least some catego-
ries of claims.

   In any event, this Court has recognized Cheek’s vitality as
recently as this year, noting that "[u]nder Maryland contract
law, an arbitration provision must contain a mutually coexten-
sive exchange of promises to arbitrate, regardless whether the
                       NOOHI v. TOLL BROS., INC.                            23
contract as a whole is supported by adequate consideration."
Dan Ryan Builders, 682 F.3d at 329-30 (citing Cheek, 835
A.2d at 665).7 In Hill, a 2005 case, this Court applied Cheek
to uphold an arbitration agreement, holding that the agree-
ment itself bound both parties to at least some claims, and it
was error to look outside the agreement to invalidate it. 412
F.3d at 543-44. Neither case questioned whether Cheek was
preempted by longstanding Supreme Court precedent.

                                      C.

   We note here the gravity of the issue presented. Toll Broth-
ers asks us to overturn a decision of the high court of one of
the 50 states—relying on our Constitution’s Supremacy
  7
    Indeed, we may be bound by circuit precedent to reject Toll Brothers’
preemption contention. In Dan Ryan Builders, the homebuilder-appellant
argued vigorously to this Court that a rule such as Maryland’s mutuality
of obligation requirement for arbitration provisions in a multi-provision
contract was flatly preempted under the FAA. See, e.g., Dan Ryan Build-
ers’ Reply Br. 1 ("It Is Irrelevant Whether State Law Would Require
Mutuality of Obligation in an Arbitration Provision Contained Within a
Larger Contract Which Is Supported by Mutual Consideration. Federal
Law Imposes No Such Requirement and Preempts Conflicting State
Law."). Accordingly, the Dan Ryan Builders Court clearly had before it
for consideration the question of whether mutuality of obligation was the
kind of state law principle that survives the preemptive force of the FAA.
This Court effectively rejected the preemption argument by addressing
Marmet, determining that it was not controlling, and thereafter certifying
to the Supreme Court of Appeals of West Virginia the question of whether
West Virginia requires mutuality of obligation in an arbitration provision
that is a part of a larger contract. See Dan Ryan Builders, 682 F.3d at 328-
30. "A federal court’s certification of a question of state law to that state’s
highest court is appropriate when the federal tribunal is required to address
a novel issue of local law which is determinative in the case before it."
Grattan v. Bd. of Sch. Commissioners of Baltimore City, 805 F.2d 1160,
1164 (4th Cir. 1986) (emphasis added; citation omitted). In short, had the
Dan Ryan Builders panel perceived any merit in the homebuilder-
appellant’s preemption contention, it would not have certified the question
of the arbitration provision’s enforceability to the Supreme Court of
Appeals of West Virginia—particularly not in a case in federal court on
the basis of diversity jurisdiction.
24                     NOOHI v. TOLL BROS., INC.
Clause—despite the fact that the United States Supreme Court
has never held that Congress, in enacting the FAA, intended
to preempt states from requiring mutual consideration in an
arbitration provision. This we decline to do. The Supreme
Court may eventually hold that the FAA preempts such a rule,
but doing so now would require an extension of existing
precedent—and abrogation of our own. We also note that Toll
Brothers could easily have avoided this serious constitutional
question—one implicating federalism and state sovereignty,
as well as the constitutional right to a jury trial—by adding
just a few words to the arbitration provision,8 binding itself to
arbitration in the way it now contends it intended all along.9
See supra p. 16-19 (describing Toll Brothers’ "first fallback
argument").

                                    IV.

   For the reasons set forth, we conclude that this Court has
jurisdiction over Toll Brothers’ appeal, and that the district
court correctly held that the arbitration provision was unen-
forceable for lack of mutual consideration. The judgment of
the district court is therefore

                                                            AFFIRMED.

  8
     Further, the Agreement’s numerous references to Maryland law refute
Toll Brothers’ counsel’s assertion at oral argument that, in his understand-
ing, "the contract is in fact a uniform contract" all over the country. Toll
Brothers clearly took into account some Maryland law when drafting the
Agreement; it simply neglected to take into account other Maryland law,
as articulated in Cheek, by including consideration within the arbitration
provision.
   9
     Because we conclude that the arbitration provision in the Agreement
lacks validity under Maryland law, we do not reach Plaintiffs’ alternative
arguments.