 Patricia Snowden v. CHECKPOINT CHECK CASHING -- 2 of 11 -- that is cashed for a service fee with the…

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 PATRICIA SNOWDEN,
Plaintiff-Appellee,
and
KAREN DOWHITE; SHEILA DIANE
DOWHITE; LILISTYNE DOWHITE;
CYNTHIA POWELL; RENEE WINGO
ROBERTS; MICHAEL SMITH, SR.,
Plaintiffs,
No. 01-2149 v.
CHECKPOINT CHECK CASHING; ELITE
FINANCIAL SERVICES, INCORPORATED,
Defendants-Appellants,
and
UNKNOWN OTHER PERSONS AND
ENTITIES,
Defendants. 
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Andre M. Davis, District Judge.
(CA-00-1945-AMD)
Argued: February 26, 2002
Decided: May 15, 2002
Before NIEMEYER, Circuit Judge,
HAMILTON, Senior Circuit Judge, and
Raymond A. JACKSON, United States District Judge for the
Eastern District of Virginia, sitting by designation.

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Vacated and remanded by published opinion. Senior Judge Hamilton
wrote the opinion, in which Judge Niemeyer and Judge Jackson
joined.
COUNSEL
ARGUED: William Willis Carrier, III, TYDINGS & ROSENBERG,
L.L.P., Baltimore, Maryland, for Appellants. John Thomas Ward,
WARD, KERSHAW & MINTON, P.A., Baltimore, Maryland, for
Appellee. ON BRIEF: Ann M. Grillo, TYDINGS & ROSENBERG,
L.L.P., Baltimore, Maryland, for Appellants. Richard A. Fisher,
LOGAN, THOMPSON, MILLER, BILBO, THOMPSON &
FISHER, P.C., Cleveland, Tennessee, for Appellee.
OPINION
HAMILTON, Senior Circuit Judge:
In this interlocutory appeal, Elite Financial Services, Inc. (Elite)
challenges the district court’s denial of its motion to compel arbitra-
tion of, and stay proceedings with respect to, various federal and
Maryland state law claims lodged against it by Patricia Snowden
(Snowden), one of Elite’s deferred deposit transaction customers. For
reasons that follow, we vacate the district court’s order denying
Elite’s motion to compel arbitration and stay proceedings and remand
with instructions.
I.
During the period between June 12, 1999 and February 7, 2000,
Snowden, a Maryland citizen, engaged in twelve so-called "deferred
deposit" transactions at stores owned and operated by Elite.1 In a
deferred deposit transaction, a customer tenders a check to the store
1Elite operated the stores under the trade name "CheckPoint Check
Cashing" (CheckPoint).
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that is cashed for a service fee with the understanding that the check
will not be negotiated until some later, agreed upon time.
Of the twelve deferred deposit transactions in which Snowden
engaged, only the November 4, 1999 agreement memorializing the
sixth deferred deposit transaction contained an arbitration provision.
From this point forward, we will refer to this agreement in its entirety
as "the November 4, 1999 Agreement." Of relevance in the present
appeal, the November 4, 1999 Agreement provided that Snowden and
Elite (t/a CheckPoint) mutually agreed that either party had the right
to elect to resolve by binding arbitration:
[a]ny claim, dispute, or controversy (whether in contract,
tort, or otherwise, whether pre-existing, present or future,
and including statutory, common law, intentional tort, and
equitable claims) arising from or relating to this Agreement
or any check or instrument cashed by CheckPoint or fee
charged by CheckPoint either prior or subsequent to the date
of this Agreement . . . .
(J.A. 54). Pursuant to the November 4, 1999 Agreement, the parties
also mutually agreed that: (1) "[i]f arbitration is chosen, it will be con-
ducted with the American Arbitration Association (the "AAA") pur-
suant to the AAA’s Commercial Arbitration Rules"; (2) "THERE
SHALL BE NO AUTHORITY FOR ANY CLAIMS TO BE ARBI-
TRATED ON A CLASS ACTION BASIS"; (3) "AN ARBITRA-
TION CAN ONLY DECIDE CHECKPOINT[’]S OR YOUR CLAIM
AND MAY NOT CONSOLIDATE OR JOIN THE CLAIMS OF
OTHER PERSONS WHO MAY HAVE SIMILAR CLAIMS"; (4)
any "participatory arbitration hearing . . . will take place in the federal
judicial district" of Snowden’s residence; (5) Elite "will advance the
first $50 of the filing and hearing fees for any claim in connection
with the arbitration"; and (6) "[t]his arbitration agreement is made
pursuant to a transaction involving interstate commerce, and shall be
governed by the Federal Arbitration Act ("FAA"), 9 U.S.C. Sections
1-16." Id. From this point forward, we will refer to all of the language
in the November 4, 1999 Agreement pertaining to the subject of arbi-
tration as the "Arbitration Agreement."
The substantive provisions of the FAA that are relevant in the pres-
ent appeal are sections 2, 3, and 4. 9 U.S.C. §§ 2-4. Section 2 of the
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FAA provides that a written provision for arbitration "in any maritime
transaction or a contract evidencing a transaction involving commerce
. . . shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any con-
tract." 9 U.S.C. § 2. Section 3 of the FAA requires the federal district
court in which the action is brought, "upon any issue referable to arbi-
tration under an agreement in writing for such arbitration," to "stay
the trial of the action" pending arbitration once it is satisfied that the
issue is arbitrable under the agreement. Id. § 3. Finally, section 4
directs the federal district court to order arbitration once it is satisfied
that an agreement for arbitration has been made and has not been hon-
ored.
On June 26, 2000, Snowden, Karen Dowhite, Sheila Dowhite,
Lilistyne Dowhite, Cynthia Powell, Renee Roberts, and Michael
Smith, Sr. (collectively the Plaintiffs) filed a purported class action
suit in the United States District Court for the District of Maryland
against Elite.2 The essential allegations of the complaint are: (1) that
the Plaintiffs’ deferred deposit transactions with Elite were loans; and
(2) that the service fee charged by Elite for such transactions consti-
tuted interest. Based on these allegations, the Plaintiffs asserted vari-
ous state and federal claims, including but not limited to claims
2The Plaintiffs also named CheckPoint as a defendant. As previously
explained, CheckPoint is merely a trade name for Elite. As such, Check-
Point is not a separate legal entity capable of being sued. See Bauer v.
Pounds, 762 A.2d 499, 503 (Conn. App. Ct. 2000) ("It appears well set-
tled that the use of a fictitious or assumed business name does not create
a separate legal entity and that the designation d/b/a is merely descriptive
of the person or corporation who does business under some other
name.") (internal quotation marks, ellipses, and alterations omitted);
American Express Travel Related Servs. Co. v. Berlye, 414 S.E.2d 499,
501 (Ga. Ct. App. 1991) ("The use of d/b/a or ‘doing business as’ to
associate a tradename with the corporation using it does not create a legal
entity separate from the corporation but is merely descriptive of the cor-
poration."); 8 Fletcher Cyclopedia of the Law of Private Corporations
§ 3831 (revised ed. 1992 & Supp. 1999) ("[U]sing d/b/a or ‘doing busi-
ness as’ to associate an assumed or fictitious name with a corporation
does not, without more, create a separate legal entity different from the
corporation."). For purposes of this opinion, we treat Elite as the sole
defendant.
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alleging violation of the Truth in Lending Act (TILA), 15 U.S.C.
§§ 1601-93, violation of the Racketeer Influenced and Corrupt Orga-
nizations Act (RICO), 18 U.S.C. § 1962(c), violation of the Maryland
Consumer Protection Act, Md. Code Ann., Commercial Law II § 13-
408 (2000), and fraud under Maryland common law.
Elite subsequently moved to compel arbitration of all of Snowden’s
claims and to stay proceedings in the district court with respect to
those claims, or in the alternative, to dismiss all of Snowden’s claims
(Elite’s Motion to Compel Arbitration/Stay Proceedings).3 The dis-
trict court denied the motion without prejudice. In so doing, the dis-
trict court operated under the belief that the issue of the enforceability
of the Arbitration Agreement was inextricably intertwined with the
issue of Snowden’s suitability as a class representative. The district
court stated its intention to revisit its decision to deny Elite’s Motion
to Compel Arbitration/Stay Proceedings at the time that it decided
whether to certify the case as a class action.
Elite noted a timely appeal of the district court’s denial of its
Motion to Compel Arbitration/Stay Proceedings with respect to
Snowden’s claims. This is the appeal that is now before us.
II.
Although Snowden makes no challenge to our appellate jurisdic-
tion, the fact that the district court not only denied Elite’s Motion to
Compel Arbitration/Stay Proceedings without prejudice, but also
stated its intention to revisit the ruling at a later time triggered alarm
bells of a premature appeal for our consideration. Significantly, when
our appellate jurisdiction is in doubt, we must sua sponte raise and
address the matter. Lee v. Wetzel, 244 F.3d 370, 373 (5th Cir. 2001)
(federal appellate court must always be sure of its appellate jurisdic-
tion and, if there is doubt, must address the jurisdictional issue sua
sponte if necessary); Braswell Shipyards, Inc. v. Beazer East, Inc., 2
3According to the district court, of all of the Plaintiffs, only Snowden
had executed an agreement with Elite containing an arbitration provision.
Moreover, we note that Elite’s Motion to Compel Arbitration/Stay Pro-
ceedings did not seek to stay any proceedings with respect to any claims
by the other plaintiffs.
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F.3d 1331, 1336 (4th Cir. 1993) (federal appellate court is compelled
to raise sua sponte the issue of whether the district court properly cer-
tified for immediate appeal a judgment entered on less than all of par-
ties’ claims, and if certification was unwarranted, then appeal must be
dismissed).
Having considered the relevant statutory language, we are fully sat-
isfied that we possess appellate jurisdiction. Under 9 U.S.C.
§ 16(a)(1)(A)-(B), the FAA expressly permits an immediate appellate
challenge to a district court’s denial of a motion to compel arbitration
and stay proceedings pending the outcome of arbitration. Id. ("An
appeal may be taken from—(1) an order—(A) refusing a stay of any
action under section 3 of this title, (B) denying a petition under sec-
tion 4 of this title to order arbitration to proceed . . . ."); Brown &
Root, Inc. v. Breckenridge, 211 F.3d 194, 202 (4th Cir. 2000) (citing
9 U.S.C. § 16(a)(1)(B) and stating that § 16 "provides for immediate
appeal of an order denying a § 4 petition to compel arbitration").
Here, the record unequivocally reflects that the district court entered
an order denying Elite’s Motion to Compel Arbitration/Stay Proceed-
ings. Under the plain language of § 16(a)(1)(A)-(B) of the FAA, this
circumstance is all that is necessary to grant us appellate jurisdiction
in this case. We note that our sister circuits have reached the same
conclusion in materially similar situations. Sandvik AB v. Advent Int’l
Corp., 220 F.3d 99, 102-04 (3d Cir. 2000) (holding district court’s
order denying motion to compel arbitration was immediately appeal-
able under § 16(a) of the FAA, even though district court stated that
it would have to determine whether there was an actual agreement to
arbitrate); Koveleskie v. SPC Capital Markets, Inc., 167 F.3d 361, 363
(7th Cir. 1999) (holding that, despite the district court’s declaration
of a need for discovery before it could decide arbitration issue, there
was no doubt that motion to compel arbitration was denied, and was
thus immediately appealable under § 16(a) of the FAA). Having satis-
fied ourselves that we possess appellate jurisdiction, we now proceed
to consider the merits of Elite’s appeal.
III.
According to Elite, the Arbitration Agreement contractually obli-
gates Snowden to arbitrate all of her claims in the present action, and
the FAA required that the district court grant its Motion to Compel
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Arbitration/Stay Proceedings. In response, Snowden does not dispute
that the Arbitration Agreement falls within the scope of the FAA. Nor
does she dispute that her claims fall within the scope of the Arbitra-
tion Agreement. Rather, Snowden seeks to uphold the district court’s
denial of Elite’s Motion to Compel Arbitration/Stay Proceedings by
attacking the validity of the November 4, 1999 Agreement on two
grounds and by attacking the validity of the Arbitration Agreement on
three grounds.
Snowden first attacks the validity of the November 4, 1999 Agree-
ment on the ground that the deferred deposit transaction memorialized
by that agreement is void ab initio under Maryland law for imposition
of a usurious rate of interest. Snowden’s second attack on the validity
of the November 4, 1999 Agreement rests upon her allegation that
Maryland law required Elite to be state licensed as a money lender
(which she alleges it was not) in order to engage in deferred deposit
transactions. She argues that if the November 4, 1999 Agreement is
void ab initio for either or both of these grounds, then the Arbitration
Agreement, as part of the November 4, 1999 Agreement, is also void
ab initio.
Neither of these two grounds is a viable basis upon which this court
may affirm the district court’s denial of Elite’s Motion to Compel
Arbitration/Stay Proceedings. The law is well settled in this circuit
that, if a party seeks to avoid arbitration and/or a stay of federal court
proceedings pending the outcome of arbitration by challenging the
validity or enforceability of an arbitration provision on any grounds
that "exist at law or in equity for the revocation of any contract," 9
U.S.C. § 2, the grounds "must relate specifically to the arbitration
clause and not just to the contract as a whole." Hooters of Am., Inc.
v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999). See also Jeske v.
Brooks, 875 F.2d 71, 75 (4th Cir. 1989) (refusing to consider party’s
arguments that arbitration clause must be declared invalid on grounds
that customer’s agreement as a whole was invalid due to overreach-
ing, unconscionability, fraud, and lack of consideration, because the
alleged defects pertained to the entire contract, rather than specifically
to the arbitration clause).
This rule is derived from the Supreme Court’s opinion in Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). In
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Prima Paint, the Supreme Court held that a claim of fraud in the
inducement of the entire contract at issue was arbitrable under a broad
arbitration clause. Id. at 403-04. The Court held that section 4 of the
FAA, and by implication section 3 of the FAA, limits a federal court’s
jurisdiction to challenges to the arbitration clause itself:
Under § 4, with respect to a matter within the jurisdiction of
the federal courts save for the existence of an arbitration
clause, the federal court is instructed to order arbitration to
proceed once it is satisfied that "the making of the agree-
ment for arbitration or the failure to comply (with the arbi-
tration agreement) is not in issue." Accordingly, if the claim
is fraud in the inducement of the arbitration clause itself—
an issue which goes to the "making" of the agreement to
arbitrate—the federal court may proceed to adjudicate it.
But the statutory language does not permit the federal court
to consider claims of fraud in the inducement of the contract
generally . . . . We hold, therefore, that in passing upon a § 3
application for a stay while the parties arbitrate, a federal
court may consider only issues relating to the making and
performance of the agreement to arbitrate.
Id. at 403-04 (internal footnotes omitted). This holding in Prima Paint
has come to be known as the severability doctrine. See, e.g., Sandvik
AB, 220 F.3d at 105.
Notably, the severability doctrine has been held not to apply when
the party seeking to avoid arbitration contends that it never assented
in the first place to the contract containing the arbitration provision.
See, e.g., Sphere Drake Ins., Ltd. v. All Am. Ins. Co., 256 F.3d 587,
590-91 (7th Cir. 2001) (district court should determine whether signa-
tory had power to bind company to contract containing arbitration
agreement); Sandvik AB, 220 F.3d at 110 (district court should deter-
mine whether signatory had power to bind company to contract con-
taining arbitration agreement); Chastain v. Robinson-Humphrey Co.,
957 F.2d 851, 854 (11th Cir. 1992) (district court should determine
whether signatory had power to bind family member to contract con-
taining arbitration agreement). The federal appellate courts reaching
these holdings logically reasoned that if a party never assented to the
overall contract containing the arbitration provision, then the party
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never assented to the arbitration provision. Id. The question of
whether a valid agreement to arbitrate exists being an issue for the
district court, the district court is required to decide the assent issue
even though the issue goes to the making of the entire agreement.
Sphere Drake Ins., Ltd., 256 F.3d at 590-91; Sandvik AB, 220 F.3d at
107; Chastain, 957 F.2d at 854.
Here, Snowden’s allegations of usurious rates of interest and non-
licensure do not relate specifically to the Arbitration Agreement. Nei-
ther do they underlie a claim that Snowden failed to assent to the
terms of the November 4, 1999 Agreement. Therefore, they cannot
serve as a basis to uphold the district court’s denial of Elite’s Motion
to Compel Arbitration/Stay Proceedings.
We note that our conclusion is squarely in accord with the Sixth
Circuit’s recent and well-reasoned decision in Burden v. Check Into
Cash of Kentucky, LLC, 267 F.3d 483 (6th Cir. 2001). In that case,
the Sixth Circuit rejected the same void ab initio arguments that
Snowden presses in the present appeal. Specifically, the Sixth Circuit
held that the plaintiffs in that case (who had brought the action against
a check cashing company and its majority owner alleging violations
of federal and Kentucky law arising from deferred deposit transac-
tions almost identical to those at issue in the present case) could not
avoid arbitration by reason of their allegations that the customer
agreements containing the arbitration provisions were void ab initio
under Kentucky law for requiring usurious rates of interest and/or
because the defendant company did not hold a Kentucky license to
lend money.4 Id. at 489. In so doing, the Sixth Circuit first observed
that the plaintiffs’ allegations concerned the substance of the entire
customer agreements rather than their failure to assent to such agree-
ments or their own lack of signatory power. Id. at 490. Second, the
court observed a distinction between entering into a loan agreement
with an unlicenced lender and not assenting to a loan agreement at all.
Id. Based upon these observations, the court vacated the district
court’s denial of the defendants’ motion to compel arbitration and
remanded the case to the district court for consideration in the first
4The district court in Burden had denied the defendants’ motion to
compel arbitration solely on the ground that the plaintiffs had alleged
void ab initio contracts. Id. at 493.
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instance of the plaintiffs’ other allegations that specifically challenged
the enforceability of the arbitration provisions. Id. at 493. In sum,
Burden supports our conclusion that Snowden’s allegations of usuri-
ous rates of interest and non-licensure cannot serve as a basis to
uphold the district court’s denial of Elite’s Motion to Compel Arbitra-
tion/Stay Proceedings.
We next address Snowden’s allegations that pertain specifically to
the Arbitration Agreement. In this regard, Snowden first argues that
the Arbitration Agreement itself is unenforceable because it does not
include an express jury waiver provision. Without an express jury
waiver provision, Snowden reasons that she could not have know-
ingly and voluntarily waived her Seventh Amendment right to a jury
trial. Common sense dictates that we reject this argument. "[T]he loss
of the right to a jury trial is a necessary and fairly obvious conse-
quence of an agreement to arbitrate." Syndor v. Conseco Fin. Servs.
Corp., 252 F.3d 302, 307 (4th Cir. 2001) (internal quotation marks
omitted).
We also reject Snowden’s argument that the Arbitration Agreement
is unenforceable as unconscionable because without the class action
vehicle, she will be unable to maintain her legal representation given
the small amount of her individual damages. Snowden’s argument is
unfounded in light of: (1) the fact that attorney’s fees are recoverable
by a prevailing plaintiff in a TILA action, 15 U.S.C. § 1640(a)(3), and
a civil RICO action, 18 U.S.C. § 1962(c); and (2) the fact that,
although the Arbitration Agreement provides that each party shall
bear the expense of their respective attorneys’ fees regardless of
which party prevails in the arbitration, such provision expressly does
not apply if it is "inconsistent with the applicable law . . . ." (J.A. 54).
Johnson v. West Suburban Bank, 225 F.3d 366, 374 (3d Cir. 2000),
cert. denied sub nom. Johnson v. Tele-Cash, Inc., 531 U.S. 1145
(2001) ("Attorneys’ fees are recoverable under the TILA, see 15
U.S.C. § 1640(a)(3), and would therefore appear to be recoverable in
arbitration, as arbitrators possess the power to fashion the same relief
as courts.").
Finally, we reject as meritless Snowden’s unsupported argument
that forcing consumers like her to arbitrate consumer protection
claims against companies like Elite is against public policy relating
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to consumer protection. Congress enacted the FAA in 1925 in order
"to reverse the longstanding judicial hostility to arbitration agree-
ments that had existed at English common law and had been adopted
by American courts, and to place arbitration agreements upon the
same footing as other contracts." Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 24 (1991). Snowden has presented no authority
or evidence establishing that the arbitral forum contemplated by the
FAA and provided in the Arbitration Agreement is inconsistent with
public policy relating to consumer protection. Indeed, we have recog-
nized the arbitral forum specified by the Arbitration Agreement as
one provided by a reputable arbitration organization. Hooters, 173
F.3d at 939. We also note that the Arbitration Agreement places no
limitations upon the substantive remedies available to Snowden in
arbitration. In sum, we can discern no violation of public policy relat-
ing to consumer protection by requiring Snowden to resolve her
claims against Elite in the arbitral forum.
As there is no dispute that Snowden’s claims fall within the scope
of the Arbitration Agreement or that the Arbitration Agreement falls
within the scope of the FAA, and Snowden has failed to show suffi-
cient justification for this court to hold the Arbitration Agreement
unenforceable, we vacate the district court’s order denying Elite’s
Motion to Compel Arbitration/Stay Proceedings and remand with
instructions to grant the motion to the extent it seeks to compel arbi-
tration of Snowden’s claims and stay proceedings with respect thereto
pending the outcome of such arbitration.
VACATED AND REMANDED
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