Court Opinion

ID: 1025038
Source: CourtListenerOpinion
Date Created: 2013-07-05 06:43:25.337407+00
Date Added: 2024-06-11T09:17:59.174816
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 06-1969

MONIQUE P. HOWARD,

                                                Plaintiff - Appellee,

          versus

KING’S CROSSING, INCORPORATED; ROSEPARK, LLC;
ERIC FEDEWA,

                                             Defendants - Appellants,

          and

COUNCIL OF UNIT OWNERS OF       KING’S   CROSSING
CONDOMINIUM, INCORPORATED,

                                                            Defendant.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Alexander Williams, Jr., District Judge.
(8:04-cv-02966-AW)

Submitted:   January 14, 2008             Decided:   February 19, 2008

Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and Liam
O’GRADY, United States District Judge for the Eastern District of
Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.
Neil S. Hyman, SELZER, GURVITCH, RABIN & OBECNY, CHTD., Bethesda,
Maryland, for Appellants. Cheryl Chapman Henderson, College Park,
Maryland, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

      Monique      Howard    brought     this     action   under     Maryland    law,

alleging various contract and tort claims arising from her purchase

of a condominium from King’s Crossing, Inc. (“King’s”). Defendants

King’s; Rosepark, LLC; and Eric Fedewa (collectively “Defendants”)

removed the case to federal court and moved to dismiss or to stay

based on the arbitration clause contained in the condominium’s

sales agreement.         The district court denied the motion, concluding

that the arbitration clause failed for want of consideration and

for unconscionability, and Defendants now appeal.1                      Finding no

error, we affirm.

      Defendants first contend that the district court erred by

considering the validity of the arbitration clause rather than by

leaving this question to the arbitrator.               Defendants’ argument is

foreclosed    by    the     Supreme     Court’s    decision     in   Buckeye    Check

Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006).                  There, the Court

held that challenges to the validity of a contract as a whole must

be   considered     in    the   first    instance    by    an   arbitrator,     while

challenges to an arbitration clause or agreement can be considered

by the courts. Id. at 449. Although Howard’s complaint challenges

the validity of the sales agreement as a whole, her response to

Defendants’ motion to dismiss/stay asserts that the arbitration

      1
      The district court’s order is immediately appealable under 9
U.S.C. § 16.

                                           3
clause is invalid for reasons distinct from those raised in the

complaint. The issue before the district court, therefore, was the

validity of the arbitration clause, and under Buckeye the court was

empowered to determine this issue in the first instance.

     Defendants     next   argue   that   the   district   court   erred    by

concluding   that    the   arbitration     clause   failed   for    want    of

consideration     and   for   unconscionability.       Again,      case    law

forecloses Defendants’ position.          We summarized the applicable

Maryland law in Hill v. Peoplesoft USA, Inc., 412 F.3d 540, 543

(4th Cir. 2005), as follows:

     Because this case involves the question of whether the
     Arbitration Agreement was a valid contract, we turn to
     Maryland law. . . . Under Maryland law, to be binding and
     enforceable, an arbitration agreement must be a valid
     contract. Cheek v. United Healthcare of Mid-Atlantic,
     Inc., 835 A.2d 656, 661 (Md. 2003). . . . [T]o be binding
     and enforceable, a contract must be supported by
     consideration.     Id. at 661.       A “promise becomes
     consideration   for another     promise   only  when   it
     constitutes a binding obligation.” Id. Unlike a binding
     obligation, an “‘illusory promise’ appears to be a
     promise, but it does not actually bind or obligate the
     promisor to anything.” Id. at 662. Because an illusory
     promise is not binding on the promisor, an illusory
     promise cannot constitute consideration. Id.

In Hill, we found that both parties had promised to arbitrate all

of their disputes except for a few enumerated exceptions.                   We

therefore concluded that the arbitration agreement was supported by

mutual consideration in the form of binding mutual promises to

arbitrate.   In contrast, in Cheek, the Maryland Court of Appeals

examined an arbitration agreement in which both parties promised to

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arbitrate their disputes but in which one party reserved the right

to modify or revoke the agreement at any time.              The Cheek court

held that the right to modify or revoke the arbitration agreement

rendered the party’s promise to arbitrate illusory; and because

there was no valid promise, the arbitration agreement failed for

want of consideration.

     We believe the arbitration clause in this case similarly

fails.     In the sales agreement, Howard agreed to arbitrate her

disputes against Defendants and to waive any right to proceed in a

court of law. Defendants, on the other hand, made no corresponding

promise.     Rather,   they   reserved   the   right   to    seek   specific

performance of the agreement in any court of competent jurisdiction

and/or to sue Howard for damages.        Defendants’ “promise” is not

merely illusory, it is nonexistent.       Under Cheek, the arbitration

clause clearly fails for want of mutual consideration.2

     Accordingly, we affirm the denial of Defendants’ motion to

dismiss/stay. We dispense with oral argument because the facts and

legal contentions are adequately presented in the materials before

the court and argument would not aid the decisional process.

                                                                    AFFIRMED

     2
      We do not reach the question of whether the arbitration
clause is unconscionable.

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