Fourth Circuit Refuses to Enforce Arbitration Clause for Lack of Mutuality, Allowing Class Action to Go Forward

The Fourth Circuit has held, in Noohi v. Toll Brothers, that an arbitration clause in a contract between home buyers and a real estate development company is unenforceable because the clause lacked mutuality of consideration under governing Maryland law. (The clause lacked mutuality because it forced the home buyers but not the development company to submit disputes to arbitration.) After coming to its Maryland law no-mutuality holding, the court of appeals rejected the defendants' argument that the Maryland's no-mutality rule is preempted by the Federal Arbitration Act. The ruling has the effect of allowing the plaintiffs' class action to go forward in court. Worth a look.