Chorley Enterprises, Inc. v. Dickey's Barbecue Restaurants, Inc.

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 14-1799

CHORLEY ENTERPRISES, INC., a Maryland Corporation; MATTHEW
CHORLEY; CARLA CHORLEY,

Plaintiffs - Appellees,

v.

DICKEY’S BARBECUE RESTAURANTS, INC., a Texas corporation;
ROLAND DICKEY, JR.; JERREL DENTON,

Defendants - Appellants.

-----------------------

JAMES STROTHER CROCKETT, JR.,

Court-Assigned Amicus Counsel.

No. 14-1800

JUSTIN TROUARD; JESSICA CHELTON,

Plaintiffs - Appellees,

v.

DICKEY’S BARBECUE RESTAURANTS, INC., a Texas corporation;
ROLAND DICKEY, JR.; JERREL DENTON,

Defendants - Appellants.

-----------------------
JAMES STROTHER CROCKETT, JR.,

Court-Assigned Amicus Counsel.

No. 14-1833

CHORLEY ENTERPRISES, INC., a Maryland Corporation; MATTHEW
CHORLEY; CARLA CHORLEY,

Plaintiffs - Appellants,

v.

DICKEY’S BARBECUE RESTAURANTS, INC., a Texas corporation;
ROLAND DICKEY, JR.; JERREL DENTON,

Defendants - Appellees.

-----------------------

JAMES STROTHER CROCKETT, JR.,

Court-Assigned Amicus Counsel.

No. 14-1834

JUSTIN TROUARD; JESSICA CHELTON,

Plaintiffs - Appellants,

v.

DICKEY’S BARBECUE RESTAURANTS, INC., a Texas corporation;
ROLAND DICKEY, JR.; JERREL DENTON,

Defendants - Appellees.

-----------------------

2
JAMES STROTHER CROCKETT, JR.,

Court-Assigned Amicus Counsel.

Appeals from the United States District Court for the District
of Maryland, at Baltimore and Greenbelt. Paul W. Grimm,
District Judge. (1:14-cv-01650-GLR; 8:14-cv-01703-PWG)

Argued: March 26, 2015 Decided: August 5, 2015

Before DIAZ, FLOYD, and THACKER, Circuit Judges.

Vacated and remanded by published opinion. Judge Floyd wrote
the opinion, in which Judge Diaz and Judge Thacker joined.

ARGUED: Roger Brian Kaplan, GREENBERG TRAURIG, LLP, Florham
Park, New Jersey, for Appellants/Cross-Appellees. Russell James
Gaspar, COHEN MOHR LLP, Washington, D.C., for Appellees/Cross-
Appellants. James Strother Crockett, Jr., SPILMAN, THOMAS &
BATTLE, PLLC, Charleston, West Virginia, as Court-Assigned
Amicus Counsel. ON BRIEF: Aaron Van Nostrand, GREENBERG
TRAURIG, LLP, Florham Park, New Jersey, for Appellants/Cross-
Appellees. Andrew K. Wible, C. Patteson Cardwell, IV, COHEN
MOHR LLP, Washington, D.C., for Appellees/Cross-Appellants.
Sarah B. Smith, SPILMAN, THOMAS & BATTLE, PLLC, Charleston, West
Virginia, for Amicus Curiae.

3
FLOYD, Circuit Judge:

This appeal arises from a franchise dispute. Dickey’s, a

national franchisor of quick-service barbeque restaurants,

claims several of its franchisees in Maryland breached their

franchise agreements by running their restaurants poorly. The

franchisees in turn claim that Dickey’s misrepresented start-up

and other costs in violation of Maryland franchise law, thus

never giving them a chance to succeed. At this stage in the

proceeding, however, we must decide only whether the parties’

claims should be arbitrated, as Dickey’s argues, or heard in

federal court in Maryland, as the franchisees contend.

This issue is governed by the parties’ franchise

agreements. On one hand, the agreements require arbitration of

all claims “arising out of or relating to” the agreements. J.A.

553. On the other hand, the agreements state that the

agreements “shall not require” the franchisees to waive their

“right to file a lawsuit alleging a cause of action arising

under Maryland Franchise Law in any court of competent

jurisdiction in the State of Maryland.” J.A. 555.

The district court held that these provisions create an

ambiguity that only a jury can resolve. In doing so, the

district court appeared to conclude that the agreements set up

an “either/or” scenario: either all the parties’ claims must go

forward in arbitration, or they must all proceed in federal

4
court. For the reasons set forth below, we will reverse. As a

matter of law, the clear and unambiguous language of these

provisions requires that the common law claims asserted by

Dickey’s must proceed in arbitration, while the franchisees’

Maryland Franchise Law claims must proceed in the Maryland

district court.

We recognize that requiring the parties to litigate in two

different forums may be inefficient, and could lead to

conflicting results. But this outcome is mandated by the

Federal Arbitration Act, which requires piecemeal litigation

where, as here, the agreements call for arbitration of some

claims, but not others. Accordingly, we reverse with

instructions to compel arbitration of the common law claims

only. We leave it to the district court’s discretion whether to

stay the franchisees’ Maryland Franchise Law claims pending

conclusion of the arbitration.

I.

Dickey’s Barbeque Restaurants, Inc. (Dickey’s), is a Texas-

based franchisor of quick-service restaurants specializing in

barbequed meats, with franchises operating throughout the United

5
States. 1 Both sets of plaintiffs in this collective appeal –

Justin Trouard and Jessica Chelton (“Trouard and Chelton”), and

Matthew and Carla Chorley and their company, Chorley

Enterprises, Inc. (“the Chorleys”) (collectively, the

“Franchisees”) – previously operated Dickey’s restaurants in

Maryland under franchise agreements signed in 2012. 2

A.

The Franchisees’ respective relationships with Dickey’s

soured shortly after they opened their restaurants.

According to Dickey’s, the Chorleys violated their

franchise agreement by, among other things, failing to pass

certain food safety inspections and receiving numerous customer

complaints. 3 As a result, Dickey’s sent several “notices of

operational deficiencies” to the Chorleys throughout 2013 and

early 2014. In response, the Chorleys asserted that Dickey’s

fraudulently misrepresented the operating costs and estimated

profits during negotiations for the franchise in violation of

1 For ease of reference, we refer to Dickey’s as the
“Franchisor” when using its possessive form.
2 The Chorleys also signed a development agreement granting

them the right to open an additional restaurant, but this
lawsuit was filed before they exercised that right.
3 Because this appeal turns on the terms of the parties’

agreements rather than the specifics of their allegations, we
provide only a high-level summary of the parties’ allegations
here.

6
the Maryland Franchise Registration and Disclosure Law, Md. Code

Bus. Reg. §§ 14-201 to 14-233 (2015) (the “Maryland Franchise

Law”).

Despite initially exploring whether the dispute could be

mediated, Dickey’s ultimately brought arbitration proceedings

against the Chorleys in Texas on May 1, 2014. In the

arbitration demand, Dickey’s asserted three common law claims.

Count I sought a declaratory order finding that the Chorleys

breached their franchise agreement; Count II sought a

declaratory order finding that the Chorleys breached their

development agreement; and Count III sought damages for the

Chorleys’ breach of both agreements.

The Chorleys then brought suit in federal court in

Maryland, seeking to enjoin the arbitration and asking the court

to declare the arbitration provisions unenforceable. The

Chorleys also brought affirmative claims for relief under the

Maryland Franchise Law against Dickey’s, its owner, and its

director of business development (collectively “Dickey’s” or the

“Franchisor”). Dickey’s in turn opposed the motion for

injunctive relief, and also filed a cross-motion to compel

arbitration of all the Chorleys’ claims. In the alternative,

Dickey’s sought to stay those claims pending arbitration.

Trouard and Chelton had a similar history with Dickey’s.

Dickey’s contends that Trouard and Chelton mismanaged their

7
restaurant, while Trouard and Chelton assert that Dickey’s

violated the Maryland Franchise Law by misrepresenting start-up

costs and estimated potential sales and profits. The parties

initially discussed mediating their dispute, but Dickey’s

ultimately filed arbitration in Texas, alleging breach-of-

contract and fraud claims. 4 Trouard and Chelton then filed suit

in Maryland, seeking to enjoin the arbitration and requesting

affirmative relief under the Maryland Franchise Law. Dickey’s

opposed the motion for injunctive relief, and again filed a

cross-motion to compel arbitration or, in the alternative, to

stay the action.

The district court consolidated the Franchisees’ lawsuits

for purposes of deciding these preliminary motions. The

arbitrations are currently being held in abeyance pending a

final decision on the motions for preliminary injunctions and

the cross-motions to compel arbitration.

B.

Both below and here on appeal, the parties’ arguments hinge

on the interplay between two provisions in the Franchisees’

virtually identical franchise agreements: (i) the dispute

4
In its fraud claim, Dickey’s alleges that Trouard and
Chelton falsified sales reports in an effort to misrepresent
their restaurant’s financial performance.

8
resolution provisions in Article 27 and (ii) the Maryland-

specific provisions in Article 29.

Article 27, which contains the “Arbitration Clause,”

requires the parties to first mediate their claims before

proceeding to arbitration. If mediation fails to resolve the

disputes within 90 days after the mediator has been appointed,

either party is entitled to seek arbitration at the office of

the American Arbitration Association located nearest to the

Franchisor’s corporate headquarters in Plano, Texas. In the

Arbitration Clause, the parties also agreed to arbitrate “all

disputes, controversies, claims, causes of action and/or alleged

breaches or failures to perform arising out of or relating to

this Agreement (and attachments) or the relationship created by

this Agreement.” J.A. 553. 5

Notwithstanding this Arbitration Clause, the agreements

also provide that the “STATE SPECIFIC PROVISIONS” in Article 29

“CONTROL.” J.A. 555. And Article 29.1, the “Inconsistent

Provisions Clause,” provides that Maryland law “shall govern and

control any contrary or inconsistent provisions” of the

agreement, and that any such inconsistent provisions are

“modified and amended” so that they comply with Maryland law.

Id. Finally, Article 29.2(4), the “Maryland Clause,” states

5The Chorleys’ development agreement contains a virtually
identical arbitration clause. Id. at 585.

9
that the “provisions of this Agreement shall not require you to

waive your right to file a lawsuit alleging a cause of action

arising under Maryland Franchise Law in any court of competent

jurisdiction in the State of Maryland.” Id. 6

The Maryland Clause is similar (but not identical) to

Section 02.02.08.16(L)(3) of the Code of Maryland Regulations

(the “Regulation”). Under the Regulation, a franchisor violates

the Maryland Franchise Law if it requires a franchisee to

“[w]aive the franchisee’s right to file a lawsuit alleging a

cause of action arising under the Maryland Franchise Law in any

court of competent jurisdiction in this State.” Md. Code Regs.

02.02.08.16(L)(3) (2015).

C.

During the district court proceedings, the parties

presented opposing interpretations of these clauses. The

6 Similarly, a “Maryland Addendum” to the Chorleys’
development agreement provides:

Any provision of this Agreement which
designates jurisdiction or venue outside of
the State of Maryland or requires you to
agree to jurisdiction or venue in a forum
outside of the State of Maryland is void
with respect to any claim arising under the
Maryland Franchise Registration and
Disclosure Law.

J.A. 597.

10
Franchisees claimed that the Maryland Clause fundamentally

conflicts with the Arbitration Clause, thus rendering the

Arbitration Clause void such that all of the parties’ claims

must proceed in the district court. Dickey’s took a different

view, arguing that the Maryland Clause is consistent with the

Arbitration Clause because the Maryland Clause merely preserves

the Franchisees’ right to bring a claim under the Maryland

Franchise Law in either arbitration or in court. Alternatively,

assuming the Franchisees’ interpretation was correct, Dickey’s

argued that the Federal Arbitration Act, (FAA), 9 U.S.C. § 1 et

seq., would preempt the Maryland Clause as an invalid

prohibition on arbitration.

The district court concluded that both parties’ readings of

the Arbitration and Maryland Clauses were plausible, thus

rendering the agreements ambiguous. The district court noted

that under the Franchisor’s interpretation, the “Arbitration

Clause could function in harmony with the Maryland Clause.”

J.A. 32. The court also recognized that under the Franchisees’

“view, the Maryland Clause . . . control[s], and [its] language

refers to litigation only, not arbitration.” Id. Faced with

these conflicting interpretations, the court reasoned that a

jury must determine exactly which claims, if any, the parties

11
agreed to arbitrate. 7 Thus, the district court denied the

parties’ respective motions without prejudice and ordered a jury

trial on the meaning of the franchise agreements. 8

Dickey’s then timely appealed the denial of its motions to

compel, and the Franchisees cross-appealed from the denial of

their motions for preliminary injunctive relief.

II.

Before we can address the merits, we must determine whether

we have jurisdiction over these appeals. We ordinarily review

only final decisions from the district courts. Rota-McLarty v.

Santander Consumer USA, Inc., 700 F.3d 690, 696 (4th Cir. 2012).

And there is no dispute that the order at issue is not final.

Thus, we typically would not have jurisdiction over the parties’

interlocutory appeals, absent an exception to the final order

doctrine.

7 Because the jury could have ultimately agreed with the
Franchisor’s interpretation of the respective clauses, the
district court did not reach the Franchisor’s alternative
argument that the FAA preempts the Maryland Clause.
8 Although the district court also held that the Chorleys’

development agreement was similarly ambiguous “as to whether
[the Chorleys] agreed to litigate Maryland Franchise Act claims
as opposed to arbitrate them,” the court concluded that the
Maryland Addendum was unambiguous with respect to venue. Thus,
assuming a jury found arbitration appropriate under that
agreement, the district court held that any such arbitration
must take place in Maryland, not Texas.

12
 A.

Section 16 of the FAA provides just such an exception. 9

U.S.C. § 16. 9 That section authorizes interlocutory appeals from

a district court’s refusal to either stay litigation pending

arbitration under Section 3 of the FAA or compel arbitration

under Section 4 of the FAA. 9 U.S.C. § 16(a)(1); see Dillon v.

BMO Harris Bank, N.A., 787 F.3d 707, 713 (4th Cir. 2015)

(stating that under Section 16, “an order that favors litigation

over arbitration is immediately appealable, even if

interlocutory in nature” (ellipsis omitted)). It is undisputed

that the Franchisor’s motions to compel expressly sought to

enforce the Arbitration Clause under Sections 3 and 4 of the

FAA. The district court’s order also expressly denied the

motions. Thus, on the surface at least, this Court appears to

have jurisdiction under 9 U.S.C. § 16(a)(1).

The Court-appointed amicus disagrees, arguing that this

matter is not as straightforward as it seems. The amicus

reasons that Section 16(a)(1) applies only when a district court

makes a final decision as to whether any or all of the claims

between the parties must proceed to arbitration. Because the

district court reserved a final ruling on the motions until

after a jury trial, the amicus contends the order is not

9
The parties agree that the Arbitration Clause is governed
by the FAA.

13
immediately appealable. In essence, the amicus believes an

interlocutory appeal under Section 16 is always premature if a

district court orders a jury trial under Section 4 before

deciding a motion to compel.

Although we appreciate the amicus’s views, this

interpretation is contrary to the FAA’s plain language. Section

16(a)(1)(b) provides for interlocutory appeals of orders denying

arbitration without stating whether those orders must be final.

A separate subsection, Section 16(a)(3), provides for

interlocutory review of any “final decision with respect to an

arbitration.” 9 U.S.C. § 16(a)(3). If Section 16(a)(1)(b)

applies only to final orders, as the amicus contends, Congress

would have said as much, as it did in Section 16(a)(3). See

Sandvik AB v. Advent Int’l Corp., 220 F.3d 99, 102-03 (3d Cir.

2000) (finding it significant “that Congress decided to use the

word ‘final’ in one part of the statute, but declined to do so

in the section that declares that orders denying motions to

compel arbitration are indeed appealable”). Congress did not do

so, of course, because grafting a finality requirement onto

Section 16(a)(1)(b) would read that section out of the statute

by making it redundant with Section 16(a)(3). See id.

The amicus’s interpretation would also frustrate the very

purpose of Section 16. As we have previously recognized,

Congress created appellate jurisdiction over non-final orders

14
denying motions to compel arbitration “to effectuate a strong

policy favoring arbitration.” Rota-McLarty, 700 F.3d at 696

(quotation omitted). Refusing to hear an appeal until after a

jury trial would not further this policy. That is especially

true where, as here, the arbitration agreements can be construed

on their face as a matter of law, thereby making a jury trial

unnecessary.

In short, the district court expressly “denied” the motions

to compel arbitration “without prejudice.” J.A. 35. As we have

previously held, and we reiterate again today, that is “all that

is necessary to grant us appellate jurisdiction in this case.”

Snowden v. Checkpoint Check Cashing, 290 F.3d 631, 636 (4th Cir.

2002); see also Quilloin v. Tenet HealthSystem Phila., Inc., 673

F.3d 221, 228 (3d Cir. 2012) (“[T]here can be no doubt that we

have the authority to review an appeal from the District Court's

order denying a motion to compel arbitration, irrespective of

the fact that the order was denied without prejudice.”). 10

10The amicus contends a different result is warranted under
Chase v. Sidney Frank Importing Co., Inc., 133 F.3d 913, 1998 WL
3609 (4th Cir. 1998) (per curiam). In that unpublished opinion,
we concluded that an appeal was not ripe for review when the
district court denied a motion to compel upon determining that
additional factual development was necessary to decide the
defendant’s claim that the arbitration clause had been
fraudulently induced. Amicus’s reliance on Chase is misplaced
for several reasons. Unlike in Chase, no further factual issues
remain here – the Arbitration Clause may be construed as a
matter of law. Additionally, Chase – which as an unpublished
(Continued)
15
 B.

The Franchisees also contend we have jurisdiction to hear

their cross-appeal under 28 U.S.C. § 1292(a)(1), which

authorizes interlocutory appeals of orders “refusing . . .

injunctions.” We are not so sure. The Franchisees fail to

address Section 16(b)(4) of the FAA, which expressly prohibits

immediate review of interlocutory orders refusing to enjoin

arbitration. 9 U.S.C. § 16(b)(4). Several of our sister

circuits have concluded that Section 16(b)(4) trumps 28 U.S.C.

§ 1292(a)(1), thus precluding immediate review of such orders.

See Accenture LLP v. Spreng, 647 F.3d 72, 74-75 (2d Cir. 2011)

(collecting cases). Section 16(b)(4) may also preclude us from

exercising pendant appellate jurisdiction over the Franchisees’

cross-appeal under Swint v. Chambers County Commission, 514 U.S.

35, 50-51 (1995) (suggesting that appellate courts may exercise

jurisdiction over non-appealable issues that are “inextricably

intertwined” with a question that is the proper subject of an

immediate appeal).

We decline to decide these issues, however, because

resolution of the Franchisor’s appeal will necessarily decide

decision is not binding on this Court – appears to have been
wrongly decided, and is against the weight of published
authority holding that all orders denying motions to compel
arbitration are immediately appealable under the FAA.

16
the issue presented by the Franchisees’ cross-appeal: whether

arbitration may proceed in Texas. Indeed, the appeal and cross-

appeal present two sides of the same coin: the Franchisor’s

appeal asserts that all the parties’ claims should be arbitrated

in Texas; the Franchisees’ cross-appeal seeks to enjoin the

arbitrations in Texas. We need not step out on a jurisdictional

limb as to the Franchisees’ cross-appeal when deciding the

Franchisor’s appeal – which we clearly have jurisdiction over –

will resolve all the issues raised by the parties. Accordingly,

we dismiss the cross-appeal as moot.

III.

A.

Having concluded that we have jurisdiction over the

Franchisor’s appeal, we turn to the merits of the parties’

contentions. The central issue before us is whether the

district court properly refused to compel arbitration after

concluding that the Maryland Clause renders the Arbitration

Clause ambiguous. We review this issue de novo. Noohi v. Toll

Bros., Inc., 708 F.3d 599, 605 (4th Cir. 2013). “We also review

de novo questions of state contract law concerning the validity

of the parties’ arbitration agreement.” Muriithi v. Shuttle

Express, Inc., 712 F.3d 173, 178 (4th Cir. 2013).

17
 As background, Section 2 of the FAA, its “primary

substantive provision,” Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24 (1983), makes agreements to

arbitrate “valid, irrevocable, and enforceable, save upon such

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

contract.” 9 U.S.C. § 2. Sections 3 and 4 in turn “provide[]

two parallel devices for enforcing an arbitration agreement: a

stay of litigation in any case raising a dispute referable to

arbitration, 9 U.S.C. § 3, and an affirmative order to engage in

arbitration, § 4.” Moses H. Cone, 460 U.S. at 22.

We will compel arbitration under Section 4 if: (i) the

parties have entered into a valid agreement to arbitrate, and

(ii) the dispute in question falls within the scope of the

arbitration agreement. Muriithi, 712 F.3d at 179 (citation

omitted). “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.” Id. If we conclude that the parties intended to

arbitrate a dispute, we must enforce that agreement according to

its terms. CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669

(2012). At the same time, it is well-settled that a “party

cannot be required to submit to arbitration any dispute which he

has not agreed to so submit.” Levin v. Alms & Assocs., Inc.,

634 F.3d 260, 266 (4th Cir. 2011) (quotation omitted).

18
 B.

In determining the parties’ intent, we apply ordinary state

law principles governing the formation of contracts. First

Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).

And under applicable Maryland Law, 11 we may “construe an

ambiguous contract if there is no factual dispute in the

evidence.” Pacific Indem. Co. v. Interstate Fire & Cas. Co.,

488 A.2d 486, 489 (Md. 1985); see also Sierra Club v. Dominion

Cove Point LNG, L.P., 216 Md. App. 322, 334 (Md. Ct. Spec. App.

2014) (stating that “the mere fact that the parties disagree as

to the meaning does not necessarily render [a contract]

ambiguous” when it could only have one meaning as a matter of

law). In the proceedings below, neither party disputed any

facts: they simply offered conflicting interpretations of the

relevant agreements. Notwithstanding the district court’s

decision to hold a jury trial then, this is precisely the type

of issue we can decide as a matter of law.

11Although the “Governing Law” provisions state that the
franchise agreements “shall be governed by and construed in
accordance with the laws of the State of Texas,” J.A. 553, the
parties agree that Maryland law applies. The district court
also applied Maryland law in its order, and both parties cite to
Maryland law on appeal. Accordingly, we will also apply
Maryland law here. Cf. Cargill, Inc. v. Charles Kowsky Res.,
Inc., 949 F.2d 51, 55 (2d Cir. 1991) (finding waiver of
Massachusetts choice of law provision when both parties relied
on New York law before district court and on appeal).

19
 The district court concluded that Section 4 of the FAA

requires a jury trial whenever the parties present conflicting

interpretations of an agreement. The right to a jury trial

under Section 4 of the FAA, however, is not automatic. Rather,

the party seeking a jury trial must make an unequivocal denial

that an arbitration agreement exists — and must also show

sufficient facts in support. Oppenheimer & Co., Inc. v.

Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995); see also Manning v.

Energy Conversion Devices, Inc., 833 F.2d 1096, 1103 (2d Cir.

1987). 12

Not just any factual dispute will do. Rather, the party

requesting a jury trial under Section 4 must provide sufficient

evidence in support of its claims such that a reasonable jury

could return a favorable verdict under applicable law. This

standard is akin to the burden on summary judgment. See

Oppenheimer, 56 F.3d at 358 (comparing Fed. R. Civ. P. 56(c),

(e) to the level of sufficient evidentiary facts needed for jury

trial under 9 U.S.C. § 4). In other words, to obtain a jury

12
Although we have not previously addressed the standard
for obtaining a jury trial under Section 4, we find the Second
Circuit’s approach persuasive and so expressly adopt it here.
Cf. Glass v. Kidder Peabody & Co., 114 F.3d 446, 456 (4th Cir.
1997) (recognizing that the Second Circuit’s decisions are
“preeminent in arbitration law.”).

20
trial, the parties must show genuine issues of material fact

regarding the existence of an agreement to arbitrate. 13

Here, the Franchisees requested a jury trial, but did not

dispute any material facts. Accordingly, the Franchisees are

not entitled to a jury trial under Section 4 of the FAA.

Rather, we will decide whether the parties intended to arbitrate

their disputes as a matter of law based on the plain language of

the agreements.

C.

1.

We first consider whether the parties intended to arbitrate

the Franchisor’s common law claims. This question is governed

by the Arbitration Clause, Ford v. Antwerpen Motorcars, ___ A.3d

___, No. 68, 2015 WL 3937607, at * 3 (Md. July 13, 2015), which

indicates that the Franchisees agreed to arbitrate “all

disputes, controversies, claims, causes of action and/or alleged

breaches or failures to perform arising out of or relating to

13The policy behind the FAA supports this standard. If
parties could request and receive jury trials merely by
advancing conflicting interpretations of contractual language
without any supporting extrinsic evidence, it would frustrate
the very policies that the FAA is meant to promote – the swift
and inexpensive alternative resolution of disputes outside of
the judicial forum.

21
this Agreement (and attachments) or the relationship created by

this Agreement.” J.A. 553.

The Franchisor’s breach of contract claims clearly “arise

out of or relate to” the Franchise Agreements, and thus fall

squarely within the Arbitration Clause. See Am. Recovery Corp.

v. Computerized Thermal Imaging, 96 F.3d 88, 93 (4th Cir. 1996);

see also Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.

395, 398 (1967) (labeling as “broad” a clause that required

arbitration of “any controversy or claim arising out of or

relating to this Agreement”). Similarly, the Franchisor’s claim

that Trouard and Chelton fraudulently falsified sales reports

falls within the scope of the Arbitration Clause because that

claim arises directly from the franchise relationship created by

the agreement. See Long v. Silver, 248 F.3d 309, 318 (4th Cir.

2001) (holding that fraud claims must be arbitrated when a

“significant relationship” exists between those claims and the

contract in which the arbitration clause is contained). By the

agreements’ plain language then, it seems clear that the

Franchisees have agreed to arbitrate the Franchisor’s common law

claims.

2.

The Franchisees make several unavailing arguments to avoid

this result. First, the Franchisees contend that Dickey’s

22
cannot arbitrate its dispute because it failed to first seek

mediation as required by Article 27 of the franchise agreements.

According to the Franchisees, mediation is a condition precedent

to invoking the arbitration provision, and so the motions to

compel should be denied for this reason alone.

As the Supreme Court has recently re-affirmed, however,

arbitrators – not courts – must decide whether a condition

precedent to arbitrability has been fulfilled. BG Group PLC v.

Republic of Arg., 134 S. Ct. 1198, 1207-08 (2014); see also

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 85-6 (2002).14

Accordingly, the Franchisees’ argument must be decided by the

arbitrator, not the court. Should the arbitrator decide that

the Franchisees have no duty to arbitrate because Dickey’s

failed to satisfy the mediation condition precedent, the parties

may then seek relief in court under the FAA. See 9 U.S.C. §§ 9-

14Several circuits, including our own in an unpublished
opinion, have refused to compel arbitration when the requesting
party failed to comply with a precondition to arbitration. See
Perdue Farms Inc. v. Design Build Contracting Corp., 263 F.
App’x 380, 383 (4th Cir. 2008) (“Where a condition precedent to
arbitration is not fulfilled, a party to a contract does not
have a right to arbitration.”); HIM Portland LLC v. Devito
Builders Inc., 317 F.3d 41, 44 (1st Cir. 2003) (refusing to
compel arbitration because “[u]nder the plain language of the
contract, the arbitration provision of the agreement is not
triggered until one of the parties requests mediation”);
Kemiron-Atl. Inc. v. Aguakem Int’l Inc., 290 F.3d 1287, 1291
(11th Cir. 2002) (same). All of these cases either predate,
conflict with, or do not consider Howsam and BG Group, however,
and thus do not control here.

23
11 (providing procedure for parties to seek confirmation,

vacatur, or correction of an arbitration decision). But that

possibility is irrelevant at this stage in the proceeding.

3.

The Franchisees next argue that Article 29 “trumps” or

“voids” the Arbitration Clause in its entirety. In support,

they point to language in the agreements stating that the

Maryland Clause applies “notwithstanding anything in th[e]

Agreement in the contrary.” J.A. 555. We disagree. At least

as to the common law claims, the Arbitration Clause is not

contrary to the Maryland Clause. Indeed, the common law claims

do not implicate the Maryland Clause in the first instance,

because that Clause only applies to claims “aris[ing] under

Maryland Franchise law,” and the Franchisor’s claims clearly do

not arise under that Law. J.A. 555. Read together then, the

Arbitration and Maryland Clauses demonstrate that the parties

agreed to arbitrate all disputes except for the narrow carve-out

for Maryland Franchise Law claims as set forth in the Maryland

Clause. 15

15
A similar analysis applies to the Chorleys’ development
agreement. The Maryland Addendum in the development agreement
only requires Maryland venue for “any claim arising under the
Maryland Franchise Registration and Disclosure Law.” J.A. 597.
The Franchisor’s breach of contract claims do not arise under
(Continued)
24
 The Franchisees seek to conjure a conflict between the

Maryland Clause and the Arbitration Clause by asserting that

they will be forced to raise their Maryland Franchise Law claims

as affirmative defenses in the arbitration. According to the

Franchisees, a ruling in arbitration on their affirmative

defenses under the Maryland Franchise Law could hypothetically

have preclusive effect on the Maryland district court

proceedings as to those claims. As the argument goes, such a

ruling would effectively negate their right to bring suit in

Maryland court under the Maryland Clause.

We reject this reasoning. As an initial matter, the

Maryland Clause only states that the Franchisees have a right to

“file a lawsuit” bringing Maryland Franchise Law claims in

Maryland court; it does not say the Franchisees also have a

right to bring all “affirmative defenses” based on the Maryland

Franchise Law in court. By its plain language then, the

Maryland Clause does not apply to the Franchisees’ affirmative

defenses. And as set forth above, where the Maryland Clause is

not implicated, the Arbitration Clause controls.

that law. Accordingly, to the extent those claims are based on
the development agreement, they may be arbitrated in Texas.
Conversely, the Chorleys’ Maryland Franchise Law claims under
the development agreement may go forward in Maryland court,
because the Maryland Addendum states that the Arbitration Clause
is “void” as to those claims.

25
 Moreover, the FAA requires the exact piecemeal litigation

the Franchisees seek to avoid here, notwithstanding the

potential for conflicting results. KPMG LLP v. Cocchi, 132 S.

Ct. 23, 26 (2011) (per curiam) (“[W]hen a complaint contains

both arbitrable and nonarbitrable claims, the Act requires

courts to compel arbitration of pendent arbitrable claims when

one of the parties files a motion to compel, even where the

result would be the possibly inefficient maintenance of separate

proceedings in different forums.”); see also In re Cotton Yarn

Antitrust Litig., 505 F.3d 274, 285 (4th Cir. 2007) (“[F]ederal

law requires piecemeal resolution when necessary to give effect

to an arbitration agreement.”). Accordingly, we will not

determine the preclusive effect of a hypothetical award at this

stage.

We note that if the parties had wanted to avoid potentially

conflicting results – and thorny questions regarding the

preclusive effect of a potential award 16 – they could have agreed

16
Arbitration awards generally have the same preclusive
effect as court orders, but only to the extent the parties agree
that the issues could be decided in arbitration. Cf. Dean
Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 222 (1985) (“[I]t
is far from certain that arbitration proceedings will have any
preclusive effect on the litigation of nonarbitrable federal
claims.”). As explained below, the Franchisees did not agree to
arbitrate their Maryland Franchise Law claims. Thus, even if
the arbitrator rejects the Franchisees’ affirmative defenses,
that ruling arguably may not preclude the district court from
reaching a contrary result on the Maryland Franchise Law claims.
(Continued)
26
on a single forum for all their claims. But they did not. We

will not rewrite their agreements to save them from their own

self-imposed, inefficient arbitration procedures. Accordingly,

we reverse with instructions for the district court to compel

arbitration of the common law claims.

D.

Whether the parties also agreed to arbitrate the

Franchisees’ Maryland Franchise Law claims is another matter.

1.

Unlike the Franchisor’s common law claims, the Franchisees’

claims directly implicate the Maryland Clause. Again, that

Clause states that nothing in the agreements shall “require you

to waive your right to file a lawsuit alleging a cause of action

arising under Maryland Franchise Law in any court of competent

jurisdiction in the State of Maryland.” J.A. 555. Reading the

Arbitration Clause as mandating arbitration of the Franchisees’

Maryland Franchise Law claims would necessarily “require” them

to “waive” their right to file such claims in a “court of

competent jurisdiction in the State of Maryland.” By its plain

For the reasons set forth above, however, we will not decide
this hypothetical question here.

27
language then, the Maryland Clause conflicts with the

Arbitration Clause as to the Franchisees’ Maryland Franchise Law

claims. And because the Maryland Clause applies

“notwithstanding anything in th[e] Agreement in the contrary,”

id., we conclude that it trumps the more general Arbitration

Clause as to Maryland Franchise Law claims, thus allowing the

Franchisees to file those claims in Maryland court.

2.

Dickey’s disagrees, asserting that the Maryland Clause does

not mean what it says. In its view, the Maryland Clause merely

preserves the Franchisees’ right to pursue a claim – in court or

in an arbitration – under the Maryland Franchise Law. In

support, Dickey’s cites three cases purportedly holding that

“words such as ‘lawsuit,’ ‘sue’ and ‘court’ do not negate [an]

arbitration provision, but merely preserve[] the right of a

franchisee to pursue a claim – in court or in arbitration –

under Maryland Franchise Law.” App. Br. at 32 (citing Holmes v.

Coverall N. Am., 649 A.2d 365 (Md. 1994); Zaks v. TES

Franchising, No. 3:01CV2266JBA, 2004 WL 1553611 (D. Conn. July

9, 2004); and CompuCredit, 132 S. Ct. at 669). Its reliance on

these cases is misplaced. As set forth below, none of these

cases addresses language even remotely similar to the Maryland

Clause.

28
 First, Holmes is readily distinguishable because it held

only that the Maryland Franchise Law neither prohibits

arbitration nor requires Franchise Law claims to be brought in

Maryland. 649 A.2d at 368. 17 But the text of the Maryland

Clause controls here, not the text of the Maryland Franchise

Law. And the two are fundamentally different. Unlike the

Maryland Franchise Law, the Maryland Clause does not merely use

the words “sue” and “court” in creating a cause of action. 18

Instead, it expressly states that the “provisions of the

Agreement,” including the Arbitration Clause, “shall not

require” the Franchisees to waive their “right to file a lawsuit

alleging a cause of action arising under the Maryland Franchise

Law in any court of competent jurisdiction in this State.” J.A.

555.

In short, Holmes establishes that the Maryland Franchise

Law grants franchisees a right to sue for violations of that

Law, but does not say where that suit must take place; whereas

17
Although Holmes addressed a predecessor version of the
Maryland Franchise Law, the differences between it and the
current version are minor and do not impact the analysis here.
18 The Maryland Franchise Law’s “Civil Liability” section

grants a franchisee the right to “sue” under the Law to “recover
damages sustained by the grant of the franchise,” but does not
state whether that suit must be brought in arbitration or in
court. Md. Code Bus. Reg. § 14-227(b). It also states that a
“court may order the person who sells or grants a franchise to:
(1) rescind the franchise; and (2) make restitution to the
person who buys or is granted a franchise.” Id. § 14-227(c)
(emphasis added).

29
the Maryland Clause goes one step further and expressly grants

franchisees a right to file that suit in Maryland. Accordingly,

neither Holmes nor the Maryland Franchise Law shed any light on

the meaning of the Maryland Clause.

Dickey’s next cites Zaks for the proposition that the

Maryland Franchise Law does not prohibit arbitration. In doing

so, Dickey’s again conflates the Maryland Franchise Law with the

Maryland Clause. Zaks is also inapposite because, unlike here,

the parties there executed an addendum to their agreement

expressly stating that the arbitration provision overrode any

provision permitting suit in Maryland. Zaks, 2004 WL 1553611,

at *2 (“Notwithstanding anything to the contrary in the

Franchise Agreement to which this Addendum is attached, the

following terms and conditions shall control: . . . The

Franchise Agreement requires binding arbitration.”). The

opposite is true here: to the extent they conflict, the Maryland

Clause controls “notwithstanding” the Arbitration Clause. J.A.

555.

Dickey’s also contends that Compucredit, 132 S. Ct. at 669

construed language similar to that in the Maryland Clause.

According to Dickey’s, the Supreme Court held that statutory

language purportedly prohibiting “the waiver” of “the right to

sue” in “court actions” only established a private right of

30
action that could be brought in either arbitration or court.

App. Br. at 36. Dickey’s overstates Compucredit’s holding.

In Compucredit, the Supreme Court considered whether a

federal statute – the Credit Repair Organizations Act (CROA), 15

U.S.C. §1679 et seq. – precludes arbitration of claims alleging

violations of that statute. The plaintiffs contended that “the

right to sue” language in the CROA’s disclosure provision, 15

U.S.C. § 1679c(a), created a right to sue in court, not

arbitration. The Supreme Court disagreed, but not because, as

Dickey’s contends, that language could be read to permit

arbitration. Instead, the Court held that the disclosure

provision was entirely irrelevant because it does not “provide[]

consumers with a right to bring an action in a court of law,”

but rather provides only “the right to receive the [disclosure]

statement, which is meant to describe the consumer protections

that the law elsewhere provides.” 132 S. Ct. at 669-70. In

contrast, the Maryland Clause does not merely provide notice of

rights that are provided elsewhere; rather, as a contractual

commitment, it expressly creates the right itself. 19

19Upon concluding that § 1679c(a) was irrelevant, the Court
then turned to the CROA’s civil liability provision, § 1679g,
which creates a private cause of action for violations of the
statute. § 1679g uses terms like “action,” “class action,” and
“court” in describing the cause of action. The Supreme Court
concluded that this language only established a private right of
action that could be brought in either arbitration or court.
(Continued)
31
 If anything, Compucredit supports the Franchisees’ position

that the parties were free to select a Maryland court forum,

notwithstanding the default position that Maryland Franchise Law

claims can be brought in arbitration:

[J]ust as the contemplated availability of
all judicial forums may be reduced to a
single forum by contractual specification,
so also can the contemplated availability of
judicial action be limited to judicial
action compelling or reviewing initial
arbitral adjudication. The parties remain
free to specify such matters, so long as the
guarantee of [the CROA’s civil liability
provision]--the guarantee of the legal power
to impose liability--is preserved.

132 S. Ct. at 671 (emphasis in original). In the same way,

here, Dickey’s and the Franchisees were free under the Maryland

Franchise Law to arbitrate or litigate claims arising under the

Law. But, by agreeing to the Maryland Clause, the parties

expressly chose to litigate those claims in Maryland (while

arbitrating all other claims in Texas). This choice is wholly

consistent with Compucredit, which expressly notes that parties

remain free to agree to forum-selection clauses, notwithstanding

This holding is analogous to Holmes – both the CROA and the
Maryland Franchise Law use words like “court” and “action” in
describing their respective private statutory causes of action.
In contrast to the CROA and the Maryland Franchise Law, however,
the Maryland Clause goes further and expressly states that
Franchisees have the right to file a suit in “any court of
competent jurisdiction in this State.” Both the Maryland
Franchise Law and the CROA lack this specific forum-selection
language. Accordingly, Compucredit does not control this case.

32
civil liability provisions using words such as “court” and

“action.”

Finally, Dickey’s argues that the Regulation does not

prohibit arbitration, and therefore the Maryland Clause must not

either. Again, we disagree. Although some of the language in

the Clause tracks the Regulation, they are not identical. Both

the Regulation and the Clause consist of a single sentence, but

they differ in one fundamental respect: they contain different

subjects. In the Regulation, the subject is the franchisor: it

is the franchisor who may not require the franchisee to waive

their litigation rights. But in the Clause, the subject is the

agreement itself: the “provisions of the agreement” cannot be

read to require that franchisees waive their litigation rights.

This distinction matters. As the district court held, when

the subject is the “franchisor” as in the Regulation, the

Franchisees remain free to agree to arbitrate Maryland Franchise

Law claims – the Regulation only prohibits forced or involuntary

waivers. 20 But when the subject is the “provisions of the

20
The district court made the distinction between voluntary
and involuntary waivers in an effort to read the Regulation as
consistent with the Maryland Franchise Law as required by
Maryland administrative law principles. See J.A. 28 (citing
Lussier v. Md. Racing Comm’n, 684 A.2d 804 (Md. 1996)). The
district court made this distinction in the context of rejecting
the Franchisees’ argument that the Arbitration Clause conflicted
with the Inconsistent Provisions Clause. The Franchisees do not
rely on the Inconsistent Provisions Clause on appeal, however,
(Continued)
33
agreement” as in the Maryland Clause, the parties have already

reached an agreement as to arbitration. And here, that

agreement consists of both the Maryland and Arbitration Clauses,

which demonstrate that the parties intended to arbitrate all

claims except for Maryland Franchise Law claims.

Put differently, under the district court’s interpretation

of the Regulation, the Franchisees were free to waive their

right to file suit in Maryland, as long as that waiver were

voluntary. But the Maryland Clause demonstrates that the

Franchisees did not agree to waive that right in the first

instance, at least as to their Franchise Law claims. Rather,

both parties agreed to litigate those claims in Maryland.

Accordingly, we will not compel arbitration of the Franchisees’

Maryland Franchise Law claims.

3.

Alternatively, Dickey’s contends that if the Maryland

Clause does prohibit arbitration of the Franchisees’ claims,

then the Clause is preempted by the FAA. The district court did

not reach this issue because it referred the threshold

arbitrability question to a jury. Because we have decided this

so we need not determine whether the district court’s
distinction between voluntary and involuntary waivers was
correct.

34
question in the Franchisees’ favor as a matter of law, we will

address this alternative preemption argument here.

It is well established that the FAA “pre-empts application

of state laws which render arbitration agreements

unenforceable.” Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S.

468, 472 (1989). Thus, where “state law prohibits outright the

arbitration of a . . . claim . . . [t]he conflicting rule is

displaced by the FAA.” Marmet Health Care Ctr., Inc. v. Brown,

132 S. Ct. 1201, 1203-1204 (2012) (citing AT&T Mobility LLC v.

Concepcion, 131 S. Ct. 1740, 1747 (2011)); Saturn Distr. Corp.

v. Williams, 905 F.2d 719, 722 (4th Cir. 1990).

Our decision in Saturn is particularly instructive.

There, Saturn — an automobile distributor — brought an action

for declaratory and injunctive relief, claiming that the FAA

preempted a Virginia statute prohibiting arbitration of claims

arising out of auto dealership agreements. 905 F.2d at 721.

Saturn submitted its dealer agreement to the Virginia

Commissioner of the Department of Motor Vehicles, but the

Commissioner refused to approve it in light of its arbitration

clause. We concluded that the Virginia statute plainly

conflicted with the FAA and was thus preempted. Id. at 722.

Unlike in Saturn, however, the Maryland Clause is not a

state law prohibiting arbitration. Rather, it is a contractual

provision prohibiting arbitration. And it is generally well-

35
settled that when a “party to a contract voluntarily assumes an

obligation to proceed under certain state laws, traditional

preemption doctrine does not apply to shield a party from

liability for breach of that agreement.” Epps v. JP Morgan

Chase Bank, N.A., 675 F.3d 315, 326 (4th Cir. 2012) (citing Am.

Airlines v. Wolens, 513 U.S. 219, 228 (1995)); see also Coll.

Loan Corp. v. SLM Corp., 396 F.3d 588, 598 (4th Cir. 2005)

(where parties to an agreement voluntarily assume federal

standards in their bargained-for private contract, a party’s

argument that enforcement of the agreement is preempted by that

federal law “boils down to a contention that it was free to

enter into a contract that invoked a federal standard as the

indicator of compliance, then to proceed to breach its duties

thereunder and to shield its breach by pleading preemption.

. . . [F]ederal supremacy does not mandate such a result.”). 21

21Dickey’s contends that these cases establish that “state-
mandated contract provisions are preempted if they contravene
federal law.” App. Br. at 51. None of these cases actually
held as much. Instead, they held only that parties cannot
incorporate state law in their agreements, and then later seek
to shield themselves from that law by pleading preemption. They
did not address the inverse scenario — that is, whether state-
imposed contractual commitments are preempted. The Franchisor’s
citation to Wells Fargo Home Mortg., Inc. v. Neal, 922 A.2d 538
(Md. 2007), is particularly misplaced, because that decision
does not even address preemption. Rather, it decided only
whether a borrower could bring a breach of contract claim based
on a lender’s purported failure to comply with federal
regulations allegedly incorporated in the borrower’s deed of
trust. And even if Neal did support the Franchisor’s argument,
(Continued)
36
As the Third Circuit recently recognized, these cases have a

“salutary ‘you’ve made your own bed, now lie in it’” quality.

Del. & Hudson Ry. Co. v. Knoedler Mfrs., Inc., 781 F.3d 656,

667-68 (3d Cir. 2015).

Although none of these cases address FAA preemption, their

reasoning applies equally here. FAA preemption prevents states

from carving out wholesale exceptions to arbitration. See

Concepcion, 131 S. Ct. at 1747. It does not prevent private

parties from agreeing to litigate, rather than arbitrate,

specific claims. Again, the parties were free under Maryland

Franchise Law to either arbitrate or litigate the Franchisees’

claims. See Holmes, 649 A.2d at 368; see also Muriithi, 712

F.3d at 179 (compelling arbitration of Maryland Franchise Law

claims). As set forth in the Maryland Clause, they agreed to

litigate the Maryland Franchise Law claims in Maryland. Nothing

in the FAA preempts or prohibits the parties from making that

choice.

Dickey’s argues this law does not apply because it did not

voluntarily include the Maryland Clause in the agreements.

Rather, Dickey’s asserts that both Maryland law and the Maryland

Commissioner of Securities forced it to include the Clause in

preemption is a matter of federal not state law, and so Neal
does not control here.

37
the agreements as a condition precedent to doing business in

Maryland. 22 We disagree. Dickey’s was not forced to do

anything. If Dickey’s did not want to include the Maryland

Clause, it had several options. It could have simply declined

to do business in Maryland. Or, like the dealer in Saturn, it

could have filed a declaratory action challenging the Maryland

Commissioner of Securities’ position before including the

Maryland Clause in its agreements. See Saturn, 905 F.2d at 721;

see also Sec. Indus. Assoc. v. Connolly, 883 F.2d 1114 (1st Cir.

1989) (finding that FAA preempted state law which was required

to be incorporated in contracts, but only where challengers sued

for a declaratory order before incorporating the provision in

their contracts).

Dickey’s did neither, however. Instead, it chose to add

the Maryland Clauses to its agreements so that it could reap the

benefits of conducting its franchise business in Maryland. It

then waited nearly two years after including the Maryland Clause

in its franchise agreements before challenging the state’s

purported required inclusion of them. Simply put, Dickey’s had

22 In support, Dickey’s cites a declaration executed by the
attorney who drafted the franchise agreements. Neither the
declaration nor the parties’ briefing cites the applicable law
mandating inclusion of the Maryland Clause in the agreements,
and our research has not revealed any such law. The parties
also dispute whether the declaration constitutes inadmissible
hearsay. Because we conclude the declaration is irrelevant in
the first instance, we need not address these issues.

38
multiple options other than agreeing to the Maryland Clause. In

this scenario, we are comfortable holding Dickey’s to the terms

of the agreements.

IV.

Finally, Dickey’s requests that we stay the Franchisees’

Maryland Franchise Law claims in the district court pending

conclusion of the arbitration on its common law claims. The

district court did not decide this issue because it did not

decide whether arbitration should proceed at all. Whether to

grant such a stay is a matter within the district court’s

discretion, Am. Recovery Corp., 96 F.3d at 97, so we leave it to

the district court to decide this matter in the first instance

on remand.

V.

For the foregoing reasons, we vacate the district court’s

order and remand for further proceedings.

VACATED AND REMANDED

39